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BILL AS INTRODUCED 2007-2008

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S.205

Introduced by Senator Cummings of Washington District

Referred to Committee on

Date:

Subject:  Health; insurance; safety net  

Statement of purpose:  This bill proposes to:  (1) eliminate the 15 percent cap on annual premium rate increases for safety net products; (2) eliminate safety net health coverage, either immediately or through a three‑year phase‑down governed by BISHCA; (3) eliminate the 20 percent cap on annual premium rate increases for nongroup products; (4) move sole proprietors from the small group market to the nongroup market; (5) allow Blue Cross Blue Shield of Vermont and HMOs to use risk classifications to charge rates for nongroup products that vary from the community rate by up to 20 percent; (6) limit enrollment in nongroup plans to an annual open enrollment period in November and December or within 30 to 60 days following loss of insurance under specified circumstances; and (7) impose a mandate for all individuals to have health insurance, effective 2010. 

AN ACT RELATING TO ELIMINATING SAFETY NET COVERAGE AND REFORMING THE NONGROUP HEALTH INSURANCE MARKET

It is hereby enacted by the General Assembly of the State of Vermont:

Sec. 1.  LEGISLATIVE PURPOSE AND INTENT

(a)  It is the intent of the general assembly that all Vermonters receive necessary health care that is affordable.  It is also the intent of the general assembly that the health care reform principles adopted in Sec. 1 of No. 191 of the Acts of the 2005 Adj. Sess. (2006) be given effect, including the principles that it is the policy of the state of Vermont to ensure universal access to and coverage for essential health care services for all Vermonters; that health care coverage needs to be comprehensive and continuous; and that the financing of health care in Vermont must be sufficient, equitable, fair, and sustainable. 

(b)  The general assembly finds that individuals who are not eligible for group‑based insurance or government programs are not able to obtain individual health insurance at affordable rates and with adequate coverage.  This situation is caused, in part, by the segmentation of the nongroup market that has developed over time.  The general assembly makes the following findings with respect to the nongroup market that exists today in Vermont: 

(1)  Many healthy individuals are able to put off purchasing insurance until they need significant medical care, usually without any significant consequence for the delay.  This ability to delay leads to adverse selection as well as gross inequities in relation to existing participants in that segment of the market. 

(2)  Some carriers are able to offer rates that are based on deviations from a pure community rate, thereby attracting younger, healthier individuals into their risk pools.

(3)  Some individuals are able to obtain insurance in the small group market as self‑employed “groups of one,” further segmenting the small group market, although these individuals do not reflect true group risk characteristics. 

(4)  A separately rated pool of individuals with artificial rate and form restrictions still exists from health care reform efforts in the early 1990s by virtue of the “safety net” created for the purpose of creating a soft landing for individuals who lost their insurance before universal access could be achieved.

(5)  Catamount Health will create a fifth private market segment when it is fully implemented.

(6)  This segmentation of the nongroup market has led to adverse selection which, in turn, has produced significant inequities among individuals in their abilities to obtain individual coverage, as well as the price and scope of that coverage.  As a result, the conventional nongroup market has effectively become a high‑risk pool which provides limited coverage at great cost and imposes significant inefficiencies on nongroup carriers, further raising their costs.  The general assembly finds that the segmentation of submarkets for individual health insurance is thus counterproductive in achieving the goal of universal access and leads to inconsistent burdens on insurers in those submarkets and irrational, inequitable treatment of individuals who seek coverage.

(c)  The general assembly desires to phase out submarket segmentation in the market for individual health insurance, to provide for consistent regulations in the market for individual health insurance, to encourage the uninsured to purchase and maintain individual health insurance, to provide coverage for individuals comparable to that found in other market segments, to provide assistance to those who cannot afford individual coverage, and to build on the Catamount Health plan enacted by the general assembly in No. 191 of the Acts of the 2005 Adj. Sess. (2006).

* * * Market Desegmentation and Rationalization * * *

Sec. 2.  8 V.S.A. § 4080c is amended to read:

§ 4080c.  HEALTH INSURANCE SAFETY NET

(a)  Upon payment of the required premium, the secretary of administration shall make health insurance available for the following:

(1)  Individuals in the nongroup market as of April 1, 1992 and individuals in the small group market as of July 1, 1992 who lose coverage for any of the following reasons:

(A)  Their insurer withdraws from the marketplace in Vermont.

(B)  Their insurer fails to register as of July 1, 1993 as a carrier qualified to provide nongroup insurance coverage.

(2)  Individuals in the group market who prior to December 31, 2007 are terminated, laid off, or otherwise separated from employment and who are not subsequently covered or eligible for coverage under another group health insurance plan.  Eligibility for coverage under this subdivision shall commence at the end of any health insurance continuation right provided by state or federal law.

(3)  Eligibility under subdivisions (1) and (2) of this subsection shall terminate on December 31, 2007.

(b)  Notwithstanding any provision of law to the contrary, coverage under this section shall be offered by nonprofit hospital and medical service corporations chartered in Vermont pursuant to chapters 123 and 125 of Title 8 at substantially similar terms and prices for the period beginning April 1, 1992 and ending when universal access is implemented by the general assembly on December 31, 2010.  The secretary may make coverage available under this section from any other insurer or health maintenance organization licensed to do business in Vermont.  The provisions of section 5115 of this title, relating to the duty of health maintenance organizations, shall not apply to coverage made available under this section.  No person may offer a health benefit plan or insurance policy under this section as a means of circumventing the requirements of section 4080b of this title, and the commissioner shall adopt, by rule, standards and a process to carry out the provisions of this prohibition.

(c)  The term “substantially similar terms” shall not be construed to prohibit policy terms which are different, but not less comprehensive in scope of coverage than those contained in policies previously covering individuals qualifying for coverage under this section.  “Substantially similar prices” mean prices which are identical to the costs paid by such individuals during the preceding year, adjusted by medical inflation costs not to exceed 15 percent to assure actuarially sound rates.  Any entity providing insurance under this section shall be entitled to rate adjustments of up to 15 percent per year on their risks covered under this health insurance safety net provided they have a loss ratio for such business of at least 80 percent; provided that the commissioner may grant an increase that exceeds 15 percent if the commissioner determines that the 15 percent limitation will have a substantial adverse effect on the financial safety and soundness of the insurer.  For the purposes of this section, “loss ratio” shall mean a comparison of earned premiums to losses incurred.

(d)  Any surplus income realized by a carrier through participation in the program established by this section shall be applied to reduce or mitigate increases in premiums paid by other nongroup policyholders.  As used in this subsection, “surplus income” means a carrier’s premium income, less the carrier’s claims paid and incurred and the carrier’s reasonable administrative costs of no more than eight percent.

(e)  The commissioner shall by rate authorization provide for the phased adjustment of the prices provided in subsection (c) of this section so that for policies or contracts renewing on or after January 1, 2011, rates under this section shall be identical to rates provided in other nongroup policies or contracts offered or issued to individuals, with attention to making such rate adjustment as smooth as practicable over the years 2008, 2009, and 2010.  A nongroup carrier required to offer safety net coverage may withdraw all safety net products for policies or contracts renewing on or after January 1, 2011.

(f)  The commissioner shall devise a plan for the reasonable phase out by December 31, 2010 of the separate safety net risk pool provided by this section and shall adopt a rule implementing such plan by October 1, 2007.  In the event the commissioner fails by October 1, 2007 to adopt such a rule, the individual mandate provided in 2 V.S.A. § 902a shall take effect as of December 31, 2007 and this section shall be repealed effective December 31, 2007.  Notwithstanding any other provision of law to the contrary, a nongroup carrier may then withdraw safety net products and rates for policies or contracts that would otherwise renew on or after January 1, 2008 and may offer nongroup products under section 4080b or 4080f of this title to affected individuals effective January 1, 2008.

(g)  This section is repealed as of December 31, 2010 except that such repeal shall not affect the rate authorizations required under subsection (e) of this section or the ability of a nongroup carrier to withdraw safety net rates and forms for policies and contracts renewing on or after January 1, 2011.

Sec. 3.  REPEAL

8 V.S.A. § 4080b(i) is repealed.

Sec. 4.  8 V.S.A. § 4079 is amended to read:

§ 4079.  GROUP INSURANCE POLICIES; DEFINITIONS

Group health insurance is hereby declared to be that form of health insurance covering one two or more persons, with or without their dependents, and issued upon the following basis:

* * *

Sec. 5.  8 V.S.A. § 4080a(a)(1) is amended to read:

§ 4080a.  SMALL GROUP HEALTH BENEFIT PLANS

(a)  Definitions.  As used in this section:

(1)  “Small employer” means an employer who, on at least 50 percent of its working days during the preceding calendar quarter, employs at least one two and no more than 50 employees.  The term includes self‑employed persons.  

Calculation of the number of employees of a small employer shall include self‑employed individuals but shall not include a part‑time employee who works less than 30 hours per week.  The provisions of this section shall continue to apply until the plan anniversary date following the date the employer no longer meets the requirements of this subdivision.

* * * Consistent Regulation * * *

Sec. 6.  8 V.S.A. § 4080b(h) is amended to read:

(h)(1)  A registered nongroup carrier shall use a community rating method acceptable to the commissioner for determining premiums for nongroup plans.  Except as provided in subdivision (2) of this subsection, the following risk classification factors are prohibited from use in rating individuals and their dependents:

(A)  demographic rating, including age and gender rating;

(B)  geographic area rating;

(C)  industry rating;

(D)  medical underwriting and screening;

(E)  experience rating;

(F)  tier rating; or

(G)  durational rating.

(2)(A)  The Notwithstanding any provision in sections 4516, 4588, and 5115 of this title, the commissioner shall, by rule, adopt standards and a process for permitting registered nongroup carriers to use one or more risk classifications in their community rating method, provided that the premium charged shall not deviate above or below the community rate filed by the carrier by more than 20 percent, and provided further that the commissioner’s rules may not permit any medical underwriting and screening and shall give due consideration to the need for affordability and accessibility of health insurance.  The commissioner in applying such rule shall not discriminate between or among nongroup carriers.

* * *

Sec. 7.  8 V.S.A. § 4516 is amended to read:

§ 4516.  ANNUAL REPORT TO COMMISSIONER

Annually, on or before March 15, a hospital service corporation shall file with the commissioner of banking, insurance, securities, and health care administration a statement sworn to by the president and treasurer of the corporation showing its condition on December 31.  The statement shall be in such form and contain such matters as the commissioner shall prescribe.  To qualify for the tax exemption set forth in section 4518 of this title, the statement shall include a certification that the hospital service corporation operates on a nonprofit basis for the purpose of providing an adequate hospital service plan to individuals of the state, both groups and nongroups, without discrimination based on age, gender, geographic area, industry, and medical history, except as allowed by subdivisions 4080a(h)(2)(B) and 4080b(h)(2)(B) 4080b(h)(2) of this title. 


Sec. 8.  8 V.S.A. § 4588 is amended to read:

§ 4588.  ANNUAL REPORT TO COMMISSIONER

Annually, on or before March 15, a medical service corporation shall file with the commissioner of banking, insurance, securities, and health care administration a statement sworn to by the president and treasurer of the corporation showing its condition on December 31, which shall be in such form and contain such matters as the commissioner shall prescribe.  To qualify for the tax exemption set forth in section 4590 of this title, the statement shall include a certification that the medical service corporation operates on a nonprofit basis for the purpose of providing an adequate medical service plan to individuals of the state, both groups and nongroups, without discrimination based on age, gender, geographic area, industry, and medical history, except as allowed by subdivisions 4080a(h)(2)(B) and 4080b(h)(2)(B) 4080b(h)(2) of this title. 

Sec. 9.  8 V.S.A. § 5115 is amended to read:

§ 5115.  DUTY OF NONPROFIT HEALTH MAINTENANCE ORGANIZATIONS

Any nonprofit health maintenance organization subject to this chapter shall offer nongroup plans to individuals in accordance with section 4080b of this title without discrimination based on age, gender, industry, and medical history, except as allowed by subdivisions 4080a(h)(2)(B) and 4080b(h)(2)(B) 4080b(h)(2) of this title. 

* * * Special and Open Enrollment Periods for Nongroup Plans * * *

Sec. 10.  8 V.S.A. § 4080b(d) is amended to read:

(d)(1)  A registered nongroup carrier shall guarantee acceptance of any individual for any nongroup plan offered by the carrier.  A registered nongroup carrier shall also guarantee acceptance of each dependent of such individual for any nongroup plan it offers.

(2)(A)  Registered nongroup carriers shall hold an open enrollment period for uninsured resident individuals each year between November 15 and December 31.  Registered nongroup carriers may, but are not required to, hold other open enrollment periods.  Registered nongroup carriers are not otherwise required to accept and enroll individuals except as provided in subdivision (B) of this subdivision (2).

(B)  Registered nongroup carriers are required to accept and enroll individuals whose health insurance coverage has ceased because of the death of the primary insured, termination of employment, divorce or legal separation of the covered employee from the employee’s spouse, or a dependent child ceasing to be a dependent child under the generally applicable requirements of the policy.  Such individuals shall be eligible to enroll in nongroup plans within 60 days of the termination of prior coverage if the prior coverage ceased as the result of death, and in all other cases within 30 days after the termination of prior coverage, prior coverage to include any health insurance continuation right exercised under state or federal law. 

(3)  Notwithstanding subdivision (1) of this subsection, a health maintenance organization shall not be required to cover:

(A)  an individual who is not physically located in the health maintenance organization’s approved service area; or

(B)  an individual residing within the health maintenance organization’s approved service area for which the health maintenance organization:

(i)  is not providing coverage; and

(ii)  reasonably anticipates, and demonstrates to the satisfaction of the commissioner, that it will not have the capacity within its network of providers to deliver adequate service because of its existing contract obligations, including contract obligations subject to the provisions of this section and any other group contract obligations.


* * * Universal Coverage and Affordability in Nongroup Plans * * *

Sec. 11.  2 V.S.A. § 902a is added to read:

§ 902a.  HEALTH INSURANCE REQUIREMENT

(a)  Subject to subdivision (b)(3) of this section, if less than 96 percent of Vermonters have health insurance by January 1, 2010, each individual shall be required as of January 1, 2011 to have health insurance.

(b)  The commission shall, on or before January 1, 2010 and in consultation with the commissioner of the department of banking, insurance, securities, and health care administration, draft proposed legislation giving effect to subsection (a) of this section, which shall include:

(1)  methods of enforcement, providing proof of insurance to individuals, and any other criteria necessary for the requirement to be effective in achieving universal health care coverage;

(2)  specific provisions for affordability, and the commission shall consider direct assistance, state reinsurance, voucher systems, premium subsidies, and other possible assistance mechanisms; 

(3)  specific provisions for funding, and the commission shall consider the use of some portion of premium taxes paid by health insurers who do not offer individual health insurance;

(4)  provisions for penalties in lieu of enrollment applicable to those who choose not to be insured and for the use of the monies received from such penalties to increase the affordability of insurance.

Sec. 12.  Effective Date. 

This act shall take effect on passage except that Secs. 4 and 5 shall take effect on December 31, 2010.



Published by:

The Vermont General Assembly
115 State Street
Montpelier, Vermont


www.leg.state.vt.us