56-7-2221 - Small employer health reinsurance pool.
56-7-2221. Small employer health reinsurance pool.
(a) There is created a nonprofit entity to be known as the Tennessee small employer health reinsurance pool. All carriers issuing or providing health benefit plans in this state on or after January 1, 1993, except any small employer carrier electing to be a risk-assuming carrier, are members of the pool.
(b) The board shall consist of nine (9) members. There shall be no more than two (2) members of the board representing any one (1) carrier. Voting rights shall be based on net group health benefit plan premiums derived from small employer business. The board shall at all times, to the extent possible, include at least one (1) domestic insurance company licensed to transact accident and health insurance, one (1) HMO and one (1) nonprofit hospital or medical service plan. Six (6) of the members of the board shall be small employer carriers. In approving selection of the board, the commissioner shall assure that all members are fairly represented.
(c) As used in this section, plan of operation includes articles, bylaws and operating rules of the pool. If the board fails to submit suitable amendments to the plan of operation, the commissioner shall adopt and promulgate a plan of operation or amendment, as appropriate. The commissioner shall amend any plan of operation the commissioner adopts, as necessary, after a plan of operation is submitted by the board and approved by the commissioner.
(d) The plan of operation shall establish procedures for, among other things:
(1) Handling and accounting of assets and moneys of the pool and for an annual financial reporting to the commissioner;
(2) Filling vacancies on the board, subject to the commissioner's approval;
(3) Selecting an administering carrier and setting forth the powers and duties of the administering carrier;
(4) Reinsuring risks in accordance with this part;
(5) Collecting assessments from members subject to assessment to provide for claims reinsured by the pool and for administrative expenses incurred or estimated to be incurred during the period for which the assessment is made; and
(6) Any additional matters, in the board's discretion.
(e) The pool has the general powers and authority granted under the laws of this state to insurance companies licensed to transact accident and health insurance, except the power to issue coverage directly to enrollees and, in addition, the specific authority to do all of the following:
(1) Enter into contracts that are necessary or proper to carry out the provisions and purposes of this part, including the authority, with the commissioner's approval, to enter into contracts with similar pools of other states for the joint performance of common administrative functions, or with persons or other organizations for the performance of administrative functions;
(2) Sue or be sued, including taking any legal actions necessary or proper for recovery of any assessments for, on behalf of or against members;
(3) Take any legal action necessary to avoid the payment of improper, incorrect or fraudulent claims against the pool or the coverage reinsured by the pool;
(4) Issue various reinsurance policies in accordance with the requirements of this section;
(5) Establish rules, conditions and procedures pertaining to the reinsurance of members' risks by the pool;
(6) Establish appropriate rates, rate schedules, rate adjustments, rate classifications and any other actuarial functions appropriate to the pool's operation;
(7) Assess members in accordance with subsections (h)-(o), and make advance interim assessments that are reasonable and necessary for organizational and interim operating expenses. Any interim assessments shall be credited as offsets against any regular assessments due following the close of the pool's fiscal year;
(8) Appoint from among members appropriate legal, actuarial and other committees that are necessary to provide technical assistance in the operation of the pool, policy and other contract design and any other function within the pool's authority; and
(9) Borrow money to effect the purposes of the pool. Any notes or other evidence of indebtedness of the pool not in default are legal investments for members and may be carried as admitted assets.
(f) Any member that elects to be a reinsuring carrier may cede, and the pool shall reinsure the reinsuring carrier, subject to all of the following:
(1) The pool shall reinsure any basic and standard health care plan originally issued or delivered for original issue by a reinsuring carrier on or after January 1, 1993, under the requirements in § 56-7-2208(d). With respect to a basic or standard health care plan, the pool shall reinsure the level of coverage provided and, with respect to other plans, the pool shall reinsure the level of coverage provided in the basic or standard health care plan up to, but not exceeding, the level of coverage provided under either the basic or standard health care plans. Small group business or reinsuring carriers in force before January 1, 1993, may not be ceded to the pool until January 1, 1996, and then only if and when the board determines that sufficient funding sources are available;
(2) The pool shall reinsure eligible employees or their dependents or entire small employer groups according to the following:
(A) The coverage may be reinsured within sixty (60) days after the beginning of the eligible employees or dependents coverage under the plan, with respect to eligible employees and their dependents who either:
(i) Are employed by a small employer as of the date the employers coverage by the member begins and who enroll in a manner such that they are not considered to be late enrollees to the plan; or
(ii) Hired after the beginning of the employers coverage by the member and who are not late enrollees to the plan;
(B) With respect to eligible employees and their dependents, when the entire employer group is eligible for reinsurance, a small employer carrier may reinsure the entire employer group within sixty (60) days after the beginning of the group's coverage under the plan;
(C) With respect to any person reinsured, no reinsurance may be provided for a reinsured employee or dependent until five thousand dollars ($5,000) in benefit payments have been made for services provided during a calendar year for that reinsured employee or dependent, which payments would have been reimbursed through the reinsurance in the absence of the five thousand dollar ($5,000) deductible. The board shall review periodically the amount of the deductible and adjust it for inflation. In addition, the member shall retain ten percent (10%) of the next fifty thousand dollars ($50,000) of benefit payments during a calendar year and the pool shall reinsure the remainder; provided, that the member's liability under this section shall not exceed ten thousand dollars ($10,000) in any one (1) calendar year with respect to any one (1) person reinsured. The amount of the member's maximum liability shall be periodically reviewed by the board and adjusted for inflation, as determined by the board;
(D) Reinsurance may be terminated for each reinsured employee or dependent on any plan anniversary;
(E) Premium rates charged for reinsurance by the program to an HMO that is approved by the secretary of health and human services as a federally qualified HMO under 42 U.S.C. § 300 et seq. shall be reduced to reflect the restrictions and requirements of 42 U.S.C. § 300 et seq;
(F) Every carrier subject to § 56-7-2209 shall apply its case management and claims handling techniques, including, but not limited to, utilization review, individual case management, preferred provider provisions and other managed care provisions or methods of operation consistently with both reinsured and nonreinsured business;
(G) Except as otherwise provided in this section, premium rates charged by the pool for coverage reinsured by the pool for that classification or group with similar case characteristics and coverage shall be established as follows:
(i) One and one half (1½) times the rate established by the pool with respect to the eligible employees and their dependents of a small employer, all of whose coverage is reinsured with the pool and who are reinsured in accordance with this section; and
(ii) Five (5) times the rate established by the pool with respect to an eligible employee or dependent who is reinsured in accordance with this section;
(3) The pool shall reinsure no more than the level of benefits provided in either the basic or standard health care plan established in accordance with § 56-7-2208;
(4) The pool may issue different types and levels of reinsurance coverage, including stop-loss coverage; and the reinsurance premium shall be adjusted to reflect the type and level of reinsurance coverage issued; and
(5) The reinsurance premium shall also be adjusted to reflect cost containment features of the plan of operation that have proven to be effective, including, but not limited to, preferred provider provisions, utilization review of medical necessity of hospital and physician services, case management benefit alternatives and other managed care provisions or methods of operation.
(g) Following the close of each fiscal year, the administering carrier shall determine the net premiums, the pool expenses of administration and the incurred losses for the year, taking into account investment income and other appropriate gains and losses. Health benefit plan premiums and benefits paid by a member that are less than the amount determined by the board to justify the cost of collection shall not be considered for purposes of determining assessments. As used in this subsection (g), net premiums means health benefit plan premiums for insured plans, but does not mean premiums or revenue received by a carrier for medicare and medicaid contracts.
(h) Any net losses for the year shall be recouped by assessments of members as follows:
(1) The board shall establish, as part of the plan of operation, a formula by which to make assessments against reinsuring carriers. The assessment formula shall be based on:
(A) Each reinsuring carrier's share of the total premiums earned in the preceding calendar year from health benefit plans delivered or issued for delivery to small employers in this state by reinsuring carriers; and
(B) Each reinsuring carrier's share of the premiums earned in the preceding calendar year from newly issued health benefit plans delivered or issued for delivery during the calendar year to small employers in the state by reinsuring carriers;
(2) The formula established pursuant to subdivision (h)(1) shall not result in any reinsuring carrier having an assessment share that is less than fifty percent (50%) nor more than one hundred fifty percent (150%) of an amount that is based on the proportion of the reinsuring carrier's total premium earned in the preceding calendar year from health benefit plans delivered or issued for delivery to small employers in this state by reinsuring carriers to total premiums earned in the preceding calendar year from health benefit plans delivered or issued for delivery to small employers in this state by all reinsuring carriers;
(3) The board may, with approval of the commissioner, change the assessment formula established pursuant to subdivision (h)(1) from time to time as appropriate;
(4) In no event shall assessments exceed five percent (5%) of the total health benefit plan premiums earned in the state from health benefit plans covering small employers of members during the calendar year coinciding or ending during the fiscal year of the pool. If the board determines that the expected losses from the reinsurance program will exceed, during the calendar year, the five-percent assessments, then the requirements of § 56-7-2208(b) will be suspended; and
(5) Health benefit plan premiums and benefits paid by a reinsuring carrier that are less than an amount determined by the board to justify the cost of collection shall not be considered for purposes of determining assessments. For the purposes of this section, health benefit plan premiums earned by MEWAs and other benefit arrangements, to the extent permitted by ERISA, shall be established by adding paid health losses and administrative expenses.
(i) If the assessment level is inadequate, the board may adjust reinsurance thresholds, retention levels or consider other forms of reinsurance. After the first three (3) full years of operations, the board shall report to the commissioner on its experience, the effect on reinsurance and small group rates of individual ceding and recommendations on additional funding sources, if needed. If legislative or other broader funding alternatives are not found, the board may enter into negotiations with representatives of health care providers to resolve any deficit through reductions in future years' payment levels for reinsured plans. Any such recommendations shall take into account the findings of the actuarial study provided for in this subsection (i). An actuarial study shall be undertaken within the first three (3) years of the pool's operation to evaluate and measure the relative risks being assumed by differing types of small employer carriers as a result of this part. The study shall be developed by three (3) actuaries appointed by the commissioner, with one (1) representing risk-assuming carriers, one (1) representing reinsuring carriers and one (1) from within the department.
(j) Subject to the approval of the commissioner, the board may make an adjustment to the assessment formula for any reinsuring carrier that is HMO approved as a federally qualified HMO by the secretary of health and human services under 42 U.S.C. § 300 for restrictions placed on the carrier other than those for which an adjustment has already been made in subdivision (f)(2) or (5) that are not imposed on other small group carriers.
(k) If assessments exceed actual losses and administrative expenses of the pool, the excess shall be held as interest and used by the board to offset future losses or to reduce pool premiums. As used in this subsection (k), future losses includes reserves for incurred but not reported claims.
(l) The board shall determine annually each member's proportion of participation in the pool based on financial statements and other reports that the board considers to be necessary, and requires that the member file with the board. All carriers shall report to the board claims payments made and administrative expenses incurred in this state on an annual basis and on a form prescribed by the commissioner.
(m) The plan of operation shall provide for the imposition of an interest penalty for late payment of assessments.
(n) The board may abate or defer, in whole or in part, the assessment of a member if, in the board's opinion, payment of the assessment would endanger the member's ability to fulfill its contractual obligations. In the event an assessment against a member is abated or deferred in whole or in part, the amount by which the assessment is abated or deferred may be assessed against the other members in a manner consistent with the basis for assessments set forth in this section. The member receiving the abatement or deferment shall remain liable to the pool for the deficiency.
(o) Neither the participation in the pool as members, the establishment of rates, forms or procedures, nor any other joint or collective action required by this part shall be the basis of any legal action, criminal or civil liability, or penalty against the pool or any of its members.
(p) Any person or member made a party to any action, suit or proceeding because the person or member serves or served on the board or on a committee or is or was an officer or employee of the pool shall be held harmless and be indemnified by the pool against all liability and costs, including the amounts of judgments, settlements, fines or penalties and expenses and reasonable attorneys' fees incurred in connection with the action, suit or proceeding; however, the indemnification shall not be provided on any matter in which the person or member is finally adjudged in the action, suit or proceeding to have committed a breach of duty involving gross negligence, dishonesty, willful misfeasance or reckless disregard of the responsibilities of service or office. Costs and expenses of the indemnification shall be prorated among and paid for by all members.
(q) The pool is exempt from the taxes imposed by § 56-4-205.
[Acts 1992, ch. 808, § 13.]