Current through August, 2024
ATTACHMENT 1 WORKSHEET
A. DEFINITIONS
"COMMUNITY RATING" means a rating process that produces
average premium rates for a defined community of insureds in the State of
Vermont for the given policy period. The averaging process includes various
geographic rating areas, if any, within Vermont, ages and genders of the
Vermont insureds, industrial classifications within Vermont, if any, Vermont
claims experience, size of group within the small group definition, and
duration of coverage. Different community rates are appropriate for the
different insurance models which may be represented by indemnity coverage,
indemnity coverage with managed care, preferred provider organizations and any
other health insurance model as approved by the Commissioner.
"DEMOGRAPHIC RATING" means a rating process that adjusts the
community rate for a specific small group, based on that small group's
deviation from the average age and gender in the community rate.
"EXPERIENCE RATING" means a rating process that adjusts the
community rate for a specific small group, based on the deviation of the
group's own claim experience from the average claim experience in the community
rate. The definition recognizes that an experience rating formula for small
groups may give only partial credit to the group's own experience In any
experlence rating plan.
"GEOGRAPHIC AREA RATING" means a rating process that adjusts
the community rate for a specific small group, based on the deviation of the
claims experience in the area in which the group is located from the average
claims experience in the community rate.
"INDUSTRY RATING" means a rating process that adjusts the
community rate for a specific small group, based upon the deviation of the
experience of its industrial classification from the average experience in the
community rate.
"PRE-EXISTING CONDITION" means a condition that exists during
the twelve-month period before the effective date of coverage.
"DURATIONAL RATING" means a rating process that adjusts the
community rate for a specific small group, based on the group's deviation from
the average claims experience assumed in the community rate due to the period
of time the policy has been in force.
"TIER RATING" means a rating process that assigns small
groups to one of a series of rating tiers, based upon claims experience of the
group, or based upon one or a combination of demographic, industry, and
geographic rating factors.
"CREDIBILITY" means a measure of the degree of statistical
significance that can be assigned to the claims experience of a small group
when it is used as a basis for projecting a future rate.
"HEALTH INSURANCE TREND FACTOR" means a projection factor
that is an estimate of the unit cost increases and utilization increases that
are expected to be incurred in a health benefits plan. The estimate of unit
cost increases and utilization increases may include consideration of erosion
of deductibles, medical technology, general inflation and cost shifting.
"SMALL GROUP PLAN" means a Small Group Plan as defined in
Title
8 V.S.A., Section
4080a.
"SMALL EMPLOYER" means a Small Employer as defined in Title
8 V.S.A., Section
4080a.
"REGISTERED SMALL GROUP CARRIER" means a Small Group carrier
as defined in Title
8 V.S.A., Section
4080a.
B. COMMUNITY RATING METHODOLOGY
1. This community rating regulation applies
to registered small group carriers providing small group health plans to small
groups. For purposes of this regulation, Multiple Employer Trusts, Multiple
Employer Welfare Associations and other associations that are made up of a
collection of small groups are included (Section B9 refers to certain
conditions under which general associations may be excluded).
2. To be considered acceptable by the
Commissioner, the community rates submitted by a registered small group carrier
must be effective for at least a six-month policy period.
3. Premiums shall be submitted for "single",
"two person" (two adults or one adult and one child) and "family" membership
classifications. Other or different classifications may be filed and used,
provided they are approved by the Commissioner.
4. Community rates shall be calculated in
such a manner that appropriate and separate rates are available for each
insurance model for each month in which small groups renew policies or new
small group business is written by a carrier. Compliance with this regulation
can be accomplished in many ways, some of which are listed here:
4.1 a set of community rates is calculated
for a calendar quarter, and applies to the renewals in that quarter. The rates
are to be effective for at least six months.
4.2 a set of community rates is calculated
for the first month of a six-month period. The rates are designed to be
effective for at least six months for accounts renewing in that month. Monthly
trend factors are supplied that, when applied, provide community rates for the
remaining five months of renewals, all of which are to be effective for a
minimum of six months.
4.3 other
methodologies that are submitted and approved by the Commissioner, but filings
should be made no more frequently than once a quarter.
5. Medical underwriting and screening to
exclude or individually rate small group insureds is not allowed Therefore, the
community rating plan for a registered small group carrier may not contain any
provisions for adjustments that are based on medical underwriting and/or
medical screening.
6. Proposed
community rates should be based upon reasonable projections of Vermont small
group experience that has been incurred by the registered small group carrier.
To the extent that the carrier's Vermont claims experience is not deemed to be
fully credible, it can be combined with the carrier's small group experience
from other states, if that experience is adjusted to reflect Vermont benefit
differences, demographics differences, geographic differences, etc., that, if
not otherwise made, would render the out-of-state experience invalid for
Vermont insureds. Carriers may be required to provide such Vermont-based data
as the Commissioner deems necessary.
Projection of the base claims experience forward to the
period for which the proposed community rates are designed to be effective
should be accomplished with the use of an appropriate health insurance trend
factor.
7. In addition to
the expected claims costs, the carrier's community rates may contain
appropriate allowances for administrative expense, taxes, profit, the cost for
reinsurance, if any, and other elements used by the carrier.
8. For a particular small group, the approved
community rates for a given benefit package may be adjusted for the following
rating classifications:
8.1
demographics
8.2 geographic
area
8.3 industrial class
8.4 the group's experience
8.5 durational rating
8.6 tier rating
8.7 other factors that the Commissioner would
approve
The total premium charged shall not deviate above or below
the community rate filed by the carrier by more than twenty percent (20%)
except for hospital or medical service corporations that qualify for tax-exempt
status, pursuant to Title
8 V.S.A., Section
4516.
8A. Notwithstanding the above, as of January
1, 2000, no small group carrier may deviate from the community rate when
writing new business. Additionally, small group carriers must phase out
deviations in business existing as of January 1, 2000, according to the
following schedule:
All renewals of business with anniversary dates on or after
January 1, 2000 through December 31, 2000: reduce deviation to 15%.
All renewals of business with anniversary dates on or after
January 1, 2001 through December 31, 2001: reduce deviation to 10%.
All renewals of business with anniversary dates on or after
January 1, 2002 through December 31, 2002: reduce deviation to 5%.
All renewals of business with anniversary dates on or after
January 1, 2003: no deviations.
9. The percentage increase in the premium
charged to a small employer for a new 12-month period may not exceed the sum of
the following:
a. the percentage change in
the community rate for a new rating period; and any adjustment, not to exceed
fifteen percent (15%) annually, due to a change in the deviation calculated for
a new rating period based on a change in the case characteristics of the group
as permitted under paragraph B(8) of this regulation.
b. Notwithstanding Section 9a of this
paragraph, a carrier may seek relief from the premium increase limitation by
requesting a determination from the Commissioner that such a limitation will
have a substantial adverse effect on the financial soundness and safety of the
carrier.
10. The
Commissioner may exempt from the requirements of Title
8 V.S.A., Section
4080a(d)(1) an association
as defined in Section 4079(2) of this title which:
10.1 offers a small group plan to a member
small employer which is community rated in accordance with the provisions of
this section. The plan may include rating classifications in accordance with
this section;
10.2 offers a small
group plan that guarantees acceptance of all persons within the association and
their dependents; and
10.3 offers
one or more of the common health care plans approved by the Commissioner.
The exemption referred to in this paragraph consists of
allowing an association to restrict access to small group accident and health
insurance to members of the association or a class of members of the
association with the approval of the. Commissioner. The Commissioner may revoke
or deny the exemption if it is determined that because of the nature, size or
other characteristics of the association and its members, the employees or
members are in need of the protection provided by this section or the exemption
would have a substantial adverse effect on the small group market.
C. APPROVAL OF
COMMUNITY RATES AND RATING METHODOLOGY
1.
Each registered small group carrier shall file its community rates, and the
method used to derive them, at least sixty days prior to their first intended
use. The rates filed may not be used until approved by the
Commissioner.
2. This filing should
contain, at a minimum, the following information:
2.1 a description of the base claims
experience data.
2.2 Actuarial
support for the health insurance trend factor used to project the base claims
experience data forward to the rating period.
2.3 A description of the elements of
retention.
2.4 A description of
other adjustments or elements included in the rates.
2.5 An identification of the exact effective
date that the rates were designed for and the effective period of the rates.
One way to appropriately make this identification would be to include a
statement in the filing similar to the following:
"These premium rates have been designed to apply to all small
groups renewing in the third calendar quarter of 1992, and will remain in
effect for twelve months for each renewal;"
2.6 a description of the rating
classifications that are part of the rating plan, including a demonstration of
how the requirement that the premium for any given group should not deviate by
more than twenty percent (20%) from the carrier's approved community rate is
being met.
Filings made after the initial approved filing should also
identify what changes, if any, are made in the use of rating classification
factors as compared to the last filing. Similarly, if no changes are proposed
in the use of rating classification factors as compared to the last filing,
this should also be noted. The rating factors shall be applied in their
entirety without exception or adjustment.
Once the rating plan together with rating classifications has
been approved, the carrier shall not selectively apply the rating factors:
every approved rating factor contained in the rating plan shall be applied in
respect to every small group without any adjustment unless such adjustment has
been approved by the Commissioner;
2.7 a statement by a qualified actuary who is
a member of the American Academy of Actuaries that the rates and proposed
rating methodology meet the requirements of this section, that they are
reasonable in relation to the benefits provided, and that they are neither
excessive, deficient, nor unfairly discriminatory.
2.8 The filing form show in Attachment 1
shall be used for each premium rate submission to the Commissioner.
D.
UNDERWRITING STANDARDS FOR REGISTERED SMALL GROUP CARRIERS
1. A registered small group carrier shall
guarantee acceptance of all small groups as defined in Title
8 V.S.A., Section
4080a(1) for any small group
plan offered by the carrier. A registered small group carrier shall, upon
application by any small group which is currently insured by another carrier,
accept such small group and grant insurance under a plan with substantially
comparable benefits without imposing any additional restrictions for
pre-existing conditions and may restrict coverage only to the extent provided
in Title
8 V.S.A., Section
4080a(g).
2. A registered small group carrier shall
also guarantee acceptance of all employees or members of a small group, each
spouse of an employee or member and dependent children, including disabled
children. Insurers may gather medical information from employees of small
employers in order to make informed decisions concerning reinsurance or for
other non-underwriting purposes.
3.
Registered small group carriers are required to accept groups of one, who are
self-employed persons. The carrier may require proof of current Vermont
residency and that such residency has endured for a continuous period of at
least one year. In addition, the carrier may require appropriate federal tax
records which demonstrate bona fide self-employment. (The intention is the
protection of the financial integrity of small group health plans against
adverse selection).
4. The
provisions of these regulations shall not be construed to prevent any person
from issuing or obtaining a bona fide individual health insurance policy;
provided that no person may offer a health benefit plan or insurance policy to
individual employees or members of a small group as a means of circumventing
the requirements of this section. The Commissioner shall adopt standards and a
process to carry out the provisions of this section.
5. A registered small group carrier which is
not a nonprofit health maintenance organization shall require that at least 75
percent of the employees or members of a small group participate in the
carrier's plan, provided that if a nonprofit health maintenance organization
provides a small group plan to more than 25 percent of the employees or members
of the small group, a registered small group carrier may offer or continue to
provide its small group plan to the remaining employees or members.
6. For the purpose of calculating whether or
not a small group meets the minimum enrollment requirements, the number of
eligible employees shall be counted as the total number of full-time employees
and part-time employees who work thirty hours per week or more. Any full-time
or part-time employee who is covered as a spouse or a dependent on another
health insurance plan are excluded from the count.
7. The minimum participation requirements
shall be calculated on an employer-by-employer basis if the small group is part
of an association, trust or other substantially similar arrangement.
8. In performing the computation to determine
the actual enrollment required for qualification as a small group plan, the
registered small group carrier must calculate seventy-five percent (75%) of the
actual number of eligible employees and round any fractional number to the
higher integer.
9. Registered small
group carriers are required to renew every small group plan as the policy
anniversary comes due. In addition, all employees or members and their
dependents must be renewed. If the insurer has the necessary information to
renew, it shall confirm in writing at least forty-five days prior to renewal,
the premium at which the policy is to be renewed.
10. If the small group health plan falls
below the seventy-five percent (75%) minimum enrollment or if it fails to pay
its premiums on a timely basis of if it provides fraudulent information to the
registered small group carrier or if the small employer ceases to exist, the
small group carrier may cancel the policy with thirty days written notice that
provides for a time period of at least thirty days. If, during a policy period,
an employer no longer satisfies the minimum enrollment requirements, coverage
must be continued to the end of that rate period.
11. Separability. Should a court hold any
provision of this regulation invalid in any circumstances, the invalidity shall
not affect any other provisions or circumstances.
12. This regulation shall become effective
upon passage and supersedes Regulation 91-4A.
Attachment 1
Worksheet
[SEE ORIGINAL]
Statutory Authority: 8 V.S.A. §§ 75
and
4080(a)
