Sec. 38a-567. Provisions of small employer plans and arrangements.
Sec. 38a-567. Provisions of small employer plans and arrangements. Health
insurance plans and insurance arrangements covering small employers and insurers and
producers marketing such plans and arrangements shall be subject to the following
provisions:
(1) (A) Any such plan or arrangement shall be renewable with respect to all eligible
employees or dependents at the option of the small employer, policyholder or contractholder, as the case may be, except: (i) For nonpayment of the required premiums
by the small employer, policyholder or contractholder; (ii) for fraud or misrepresentation
of the small employer, policyholder or contractholder or, with respect to coverage of
individual insured, the insureds or their representatives; (iii) for noncompliance with
plan or arrangement provisions; (iv) when the number of insureds covered under the
plan or arrangement is less than the number of insureds or percentage of insureds required
by participation requirements under the plan or arrangement; or (v) when the small
employer, policyholder or contractholder is no longer actively engaged in the business
in which it was engaged on the effective date of the plan or arrangement.
(B) Renewability of coverage may be effected by either continuing in effect a plan
or arrangement covering a small employer or by substituting upon renewal for the prior
plan or arrangement the plan or arrangement then offered by the carrier that most closely
corresponds to the prior plan or arrangement and is available to other small employers.
Such substitution shall only be made under conditions approved by the commissioner.
A carrier may substitute a plan or arrangement as stated above only if the carrier effects
the same substitution upon renewal for all small employers previously covered under
the particular plan or arrangement, unless otherwise approved by the commissioner.
The substitute plan or arrangement shall be subject to the rating restrictions specified
in this section on the same basis as if no substitution had occurred, except for an adjustment based on coverage differences.
(C) Notwithstanding the provisions of this subdivision, any such plan or arrangement, or any coverage provided under such plan or arrangement may be rescinded for
fraud, material misrepresentation or concealment by an applicant, employee, dependent
or small employer.
(D) Any individual who was not a late enrollee at the time of his or her enrollment
and whose coverage is subsequently rescinded shall be allowed to reenroll as of a current
date in such plan or arrangement subject to any preexisting condition or other provisions
applicable to new enrollees without previous coverage. On and after the effective date
of such individual's reenrollment, the small employer carrier may modify the premium
rates charged to the small employer for the balance of the current rating period and for
future rating periods, to the level determined by the carrier as applicable under the
carrier's established rating practices had full, accurate and timely underwriting information been supplied when such individual initially enrolled in the plan. The increase in
premium rates allowed by this provision for the balance of the current rating period
shall not exceed twenty-five per cent of the small employer's current premium rates.
Any such increase for the balance of said current rating period shall not be subject to the
rate limitation specified in subdivision (6) of this section. The rate limitation specified in
this section shall otherwise be fully applicable for the current and future rating periods.
The modification of premium rates allowed by this subdivision shall cease to be permitted for all plans and arrangements on the first rating period commencing on or after July
1, 1995.
(2) Except in the case of a late enrollee who has failed to provide evidence of insurability satisfactory to the insurer, the plan or arrangement may not exclude any eligible
employee or dependent who would otherwise be covered under such plan or arrangement
on the basis of an actual or expected health condition of such person. No plan or arrangement may exclude an eligible employee or eligible dependent who, on the day prior to
the initial effective date of the plan or arrangement, was covered under the small employer's prior health insurance plan or arrangement pursuant to workers' compensation,
continuation of benefits pursuant to federal extension requirements established by the
Consolidated Omnibus Budget Reconciliation Act of 1985 (P.L. 99-2721, as amended)
or other applicable laws. The employee or dependent must request coverage under the
new plan or arrangement on a timely basis and such coverage shall terminate in accordance with the provisions of the applicable law.
(3) (A) For rating periods commencing on or after October 1, 1993, and prior to
July 1, 1994, the premium rates charged or offered for a rating period for all plans and
arrangements may not exceed one hundred thirty-five per cent of the base premium rate
for all plans or arrangements.
(B) For rating periods commencing on or after July 1, 1994, and prior to July 1, 1995,
the premium rates charged or offered for a rating period for all plans or arrangements may
not exceed one hundred twenty per cent of the base premium rate for such rating period.
The provisions of this subdivision shall not apply to any small employer who employs
more than twenty-five eligible employees.
(4) For rating periods commencing on or after October 1, 1993, and prior to July
1, 1995, the percentage increase in the premium rate charged to a small employer, who
employs not more than twenty-five eligible employees, for a new rating period may not
exceed the sum of:
(A) The percentage change in the base premium rate measured from the first day
of the prior rating period to the first day of the new rating period;
(B) An adjustment of the small employer's premium rates for the prior rating period,
and adjusted pro rata for rating periods of less than one year, due to the claim experience,
health status or duration of coverage of the employees or dependents of the small employer, such adjustment (i) not to exceed ten per cent annually for the rating periods
commencing on or after October 1, 1993, and prior to July 1, 1994, and (ii) not to exceed
five per cent annually for the rating periods commencing on or after July 1, 1994, and
prior to July 1, 1995; and
(C) Any adjustments due to change in coverage or change in the case characteristics
of the small employer, as determined from the small employer carrier's applicable rate
manual.
(5) (A) With respect to plans or arrangements issued on or after July 1, 1995, the
premium rates charged or offered to small employers shall be established on the basis
of a community rate, adjusted to reflect one or more of the following classifications:
(i) Age, provided age brackets of less than five years shall not be utilized;
(ii) Gender;
(iii) Geographic area, provided an area smaller than a county shall not be utilized;
(iv) Industry, provided the rate factor associated with any industry classification
shall not vary from the arithmetic average of the highest and lowest rate factors associated with all industry classifications by greater than fifteen per cent of such average,
and provided further, the rate factors associated with any industry shall not be increased
by more than five per cent per year;
(v) Group size, provided the highest rate factor associated with group size shall not
vary from the lowest rate factor associated with group size by a ratio of greater than
1.25 to 1.0;
(vi) Administrative cost savings resulting from the administration of an association
group plan or a plan written pursuant to section 5-259, provided the savings reflect
a reduction to the small employer carrier's overall retention that is measurable and
specifically realized on items such as marketing, billing or claims paying functions taken
on directly by the plan administrator or association, except that such savings may not
reflect a reduction realized on commissions;
(vii) Savings resulting from a reduction in the profit of a carrier who writes small
business plans or arrangements for an association group plan or a plan written pursuant
to section 5-259 provided any loss in overall revenue due to a reduction in profit is not
shifted to other small employers; and
(viii) Family composition, provided the small employer carrier shall utilize only
one or more of the following billing classifications: (I) Employee; (II) employee plus
family; (III) employee and spouse; (IV) employee and child; (V) employee plus one
dependent; and (VI) employee plus two or more dependents.
(B) The small employer carrier shall quote premium rates to small employers after
receipt of all demographic rating classifications of the small employer group. No small
employer carrier may inquire regarding health status or claims experience of the small
employer or its employees or dependents prior to the quoting of a premium rate.
(C) The provisions of subparagraphs (A) and (B) of this subdivision shall apply to
plans or arrangements issued on or after July 1, 1995. The provisions of subparagraphs
(A) and (B) of this subdivision shall apply to plans or arrangements issued prior to July
1, 1995, as of the date of the first rating period commencing on or after that date, but
no later than July 1, 1996.
(6) For any small employer plan or arrangement on which the premium rates for
employee and dependent coverage or both, vary among employees, such variations shall
be based solely on age and other demographic factors permitted under subparagraph
(A) of subdivision (5) of this section and such variations may not be based on health
status, claim experience, or duration of coverage of specific enrollees. Except as otherwise provided in subdivision (1) of this section, any adjustment in premium rates charged
for a small employer plan or arrangement to reflect changes in case characteristics prior
to the end of a rating period shall not include any adjustment to reflect the health status,
medical history or medical underwriting classification of any new enrollee for whom
coverage begins during the rating period.
(7) For rating periods commencing prior to July 1, 1995, in any case where a small
employer carrier utilized industry classification as a case characteristic in establishing
premium rates, the rate factor associated with any industry classification shall not vary
from the arithmetical average of the highest and lowest rate factors associated with all
industry classifications by greater than fifteen per cent of such average.
(8) Differences in base premium rates charged for health benefit plans by a small
employer carrier shall be reasonable and reflect objective differences in plan design,
not including differences due to the nature of the groups assumed to select particular
health benefit plans.
(9) For rating periods commencing prior to July 1, 1995, in any case where an insurer
issues or offers a policy or contract under which premium rates for a specific small
employer are established or adjusted in part based upon the actual or expected variation
in claim costs or actual or expected variation in health conditions of the employees or
dependents of such small employer, the insurer shall make reasonable disclosure of such
rating practices in solicitation and sales materials utilized with respect to such policy
or contract.
(10) If a small employer carrier denies coverage as requested to a small employer
that is self-employed, the small employer carrier shall promptly offer such small employer the opportunity to purchase a small employer health care plan. If a small employer
carrier or any producer representing that carrier fails, for any reason, to offer coverage
as requested by a small employer that is self-employed, that small employer carrier shall
promptly offer such small employer an opportunity to purchase a small employer health
care plan.
(11) No small employer carrier or producer shall, directly or indirectly, engage in
the following activities:
(A) Encouraging or directing small employers to refrain from filing an application
for coverage with the small employer carrier because of the health status, claims experience, industry, occupation or geographic location of the small employer, except the
provisions of this subparagraph shall not apply to information provided by a small employer carrier or producer to a small employer regarding the carrier's established geographic service area or a restricted network provision of a small employer carrier; or
(B) Encouraging or directing small employers to seek coverage from another carrier
because of the health status, claims experience, industry, occupation or geographic location of the small employer.
(12) No small employer carrier shall, directly or indirectly, enter into any contract,
agreement or arrangement with a producer that provides for or results in the compensation paid to a producer for the sale of a health benefit plan to be varied because of the
health status, claims experience, industry, occupation or geographic area of the small
employer. A small employer carrier shall provide reasonable compensation, as provided
under the plan of operation of the program, to a producer, if any, for the sale of a special
or a small employer health care plan. No small employer carrier shall terminate, fail to
renew or limit its contract or agreement of representation with a producer for any reason
related to the health status, claims experience, occupation, or geographic location of the
small employers placed by the producer with the small employer carrier.
(13) No small employer carrier or producer shall induce or otherwise encourage a
small employer to separate or otherwise exclude an employee from health coverage or
benefits provided in connection with the employee's employment.
(14) Denial by a small employer carrier of an application for coverage from a small
employer shall be in writing and shall state the reasons for the denial.
(15) No small employer carrier or producer shall disclose (A) to a small employer
the fact that any or all of the eligible employees of such small employer have been or
will be reinsured with the pool, or (B) to any eligible employee or dependent the fact
that he has been or will be reinsured with the pool.
(16) If a small employer carrier enters into a contract, agreement or other arrangement with another party to provide administrative, marketing or other services related
to the offering of health benefit plans to small employers in this state, the other party
shall be subject to the provisions of this section.
(17) The commissioner may adopt regulations in accordance with the provisions
of chapter 54 setting forth additional standards to provide for the fair marketing and
broad availability of health benefit plans to small employers.
(18) Each small employer carrier shall maintain at its principal place of business
a complete and detailed description of its rating practices and renewal underwriting
practices, including information and documentation that demonstrates that its rating
methods and practices are based upon commonly accepted actuarial assumptions and
are in accordance with sound actuarial principles. Each small employer carrier shall file
with the commissioner annually, on or before March fifteenth, an actuarial certification
certifying that the carrier is in compliance with this part and that the rating methods
have been derived using recognized actuarial principles consistent with the provisions
of sections 38a-564 to 38a-573, inclusive. Such certification shall be in a form and
manner and shall contain such information, as determined by the commissioner. A copy
of the certification shall be retained by the small employer carrier at its principle place
of business. Any information and documentation described in this subdivision but not
subject to the filing requirement shall be made available to the commissioner upon his
request. Except in cases of violations of sections 38a-564 to 38a-573, inclusive, 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.
(19) The commissioner may suspend all or any part of this section relating to the
premium rates applicable to one or more small employers for one or more rating periods
upon a filing by the small employer carrier and a finding by the commissioner that either
the suspension is reasonable in light of the financial condition of the carrier or that
the suspension would enhance the efficiency and fairness of the marketplace for small
employer health insurance.
(20) For rating periods commencing prior to July 1, 1995, a small employer carrier
shall quote premium rates to any small employer within thirty days after receipt by the
carrier of such employer's completed application.
(21) Any violation of subdivisions (10) to (16), inclusive, and any regulations established under subdivision (17) of this section shall be an unfair and prohibited practice
under sections 38a-815 to 38a-830, inclusive.
(22) (A) With respect to plans or arrangements issued pursuant to subsection (i)
of section 5-259, at the option of the Comptroller, the premium rates charged or offered
to small employers purchasing health insurance shall not be subject to this section,
provided (i) the plan or plans offered or issued cover such small employers as a single
entity and cover not less than three thousand employees on the date issued, (ii) each small
employer is charged or offered the same premium rate with respect to each employee and
dependent, and (iii) the plan or plans are written on a guaranteed issue basis.
(B) With respect to plans or arrangements issued by an association group plan, at
the option of the administrator of the association group plan, the premium rates charged
or offered to small employers purchasing health insurance shall not be subject to this
section, provided (i) the plan or plans offered or issued cover such small employers as
a single entity and cover not less than three thousand employees on the date issued, (ii)
each small employer is charged or offered the same premium rate with respect to each
employee and dependent, and (iii) the plan or plans are written on a guaranteed issue
basis. In addition, such association group (I) shall be a bona fide group as set forth in
the Employee Retirement and Security Act of 1974, (II) shall not be formed for the
purposes of fictitious grouping, as defined in section 38a-827, and (III) shall not issue
any plan that shall cause undue disruption in the insurance marketplace, as determined
by the commissioner.
(P.A. 90-134, S. 18, 28; P.A. 91-201, S. 2, 8; P.A. 92-125, S. 3, 5; P.A. 93-137, S. 3, 6; 93-345, S. 4; P.A. 94-214, S.
3, 4; P.A. 96-193, S. 14, 36; P.A. 99-59, S. 1; P.A. 04-163, S. 2; P.A. 05-238, S. 4, 5; P.A. 08-33, S. 2, 3; 08-181, S. 3.)
History: P.A. 91-201 clarified the renewability provisions concerning small employer plans and the insurer's right to
rescind coverage based on fraud or misrepresentation and eliminating an insurance carrier's ability to pass through reinsurance premiums; P.A. 92-125 made numerous changes and additions concerning renewability of coverage when a product
line is discontinued, conditions under which reenrolment is permitted when coverage is rescinded for fraud, limits on range
in rates, differences in plan design used for premium rates for plans, liberalizing of preexisting condition credits, reducing
the maximum allowable percentage increase in rates and establishing requirements for fair marketing of health benefit plans;
P.A. 93-137 applied provisions to insurers, agents and brokers marketing small employer health plans and arrangements,
amended Subdiv. (4) to disallow exclusion for those employees or dependents previously covered under a prior small
employer health plan issued pursuant to workers' compensation or COBRA who request such coverage on a timely basis,
inserted a new Subdiv. (17) re disclosure to a small employer or employee or dependent concerning reinsurance of covered
persons with pool, made technical changes for statutory consistency, renumbered the remaining Subdivs. and amended
internal references, effective June 11, 1993; P.A. 93-345 deleted Subdivs. (1) and (2) re preexisting condition coverage,
Subdiv. (5) re maximum allowable premium rate charged, Subdivs. (6) and (7) re increase in premium rates for rating
periods prior to October 1, 1992, amended Subdiv. (1)(D) re application of modification of premium rates not permitted
after July 1, 1995, inserted new Subdiv. (3) re caps on premiums for rating periods October 1, 1993 to June 30, 1994, and
from July 1, 1994, to July 1, 1995, amended Subdiv. (4) to change October 1, 1992, to October 1, 1993, and added prior
to July 1, 1995, deleted 15% annual adjustment and inserted 10% and 5% for October 1, 1993, to June 30, 1994, and July
1, 1994, to July 1, 1995 rating period respectively, added new Subdiv. (5) re adjusted community rating, added new Subdiv.
(19) re time for quotation and made technical changes; P.A. 94-214 amended Subdiv. (3) to specify its inapplicability to
any small employers who employ more than 25 eligible employees and amended Subdiv. (4) to specify applicability of
maximum increase in the premium rate charged to a small employer who employs not more than 25 eligible employees,
effective July 1, 1994; P.A. 96-193 substituted "producer" for "agent" and "broker", effective June 3, 1996; P.A. 99-59
amended Subdiv. (21) to substitute "38a-830" for "38a-831"; P.A. 04-163 inserted new Subdiv. (5)(A)(vi) to include
administrative cost savings as a community rating classification, renumbered existing Subdiv. (5)(A)(vi) as Subdiv.
(5)(A)(vii) and amended same to change subclause designators (a) to (f), inclusive, to (I) to (VI), inclusive, effective July
1, 2004; P.A. 05-238 inserted new Subdiv. (5)(A)(vii) re savings resulting from a reduction in profit, and redesignated
existing Subdiv. (5)(A)(vii) as Subdiv. (5)(A)(viii) and added new Subdiv. (22) re premium rates of plans or arrangements
under Sec. 5-259 and association group plans that are not subject to section, effective July 8, 2005; P.A. 08-33 amended
Subdiv. (10) to make technical changes, add "that is self-employed" re small employer and delete references to special
health care plans from small employer carriers, and amended Subdiv. (18) to make a technical change, effective May 7,
2008; P.A. 08-181 amended Subdiv. (22) by designating existing provisions as Subpara. (A), making conforming changes
therein, deleting references to association group plan and reducing number of covered lives required from 10,000 eligible
individuals to 3,000 employees, and by adding Subpara. (B) re association group plans.