| (a) A small employer carrier must develop a separate
rate manual for each class of business. Base premium rates and new
business premium rates charged to small employers by the small employer
carrier must be computed solely from the applicable rate manual developed
under this subsection. To the extent that a portion of the premium
rates charged by a small employer carrier are based on objective criteria
established by the small employer carrier consistent with the criteria
set out in Insurance Code Chapter 1501 (concerning Health Insurance
Portability and Availability Act), the manual must specify the criteria
and factors considered by the health carrier in exercising this discretion.
(b) A small employer carrier must file with TDI, at
least 60 days before the proposed date of the change, any proposed
change to the rating method used in the rate manual for a class of
business. The small employer carrier must ensure that the rating method
used is actuarially sound and appropriate to ensure compliance with
Insurance Code Chapter 1501 and this chapter, and that differences
in rates charged for each small employer health benefit plan are reasonable
and reflect objective differences in plan design. The commissioner
may disapprove a change to the rating method that does not meet the
requirements of this chapter. At the expiration of 60 days from the
filing of the form with TDI, the proposed change will be deemed compliant
unless the commissioner has disapproved it by written order.
(1) The filing must contain at least the following
information:
(A) the reasons the change in rating method is being
requested;
(B) a complete description of each of the proposed
modifications to the rating method;
(C) a description of how the change in rating method
would affect the premium rates currently charged to small employers
in the class of business, including an estimate from a qualified actuary
of the number of groups or individuals and a description of the types
of groups or individuals whose premium rates may change by more than
10 percent due to the proposed change in rating method (not including
general increases in premium rates applicable to all small employers
in a health benefit plan);
(D) a certification from a qualified actuary that the
new rating method would be based on objective and credible data and
would be actuarially sound and appropriate; and
(E) a certification from a qualified actuary that the
proposed change in rating method would not produce premium rates for
small employers that would be in violation of Insurance Code Chapter
1501.
(2) For the purpose of this section, a change in rating
method means:
(A) a change in the number of case characteristics
used by a small employer carrier to determine premium rates for health
benefit plans in a class of business;
(B) a change in the manner or procedures by which insureds
are assigned into categories for the purpose of applying a case characteristic
to determine premium rates for health benefit plans in a class of
business;
(C) a change in the method of allocating expenses among
health benefit plans in a class of business; or
(D) a change in a rating factor with respect to any
case characteristic if the change would produce a change in premium
for any small employer that exceeds 10 percent. For the purpose of
this paragraph, a change in a rating factor means the cumulative change
with respect to the factor considered over a 12-month period. If a
small employer carrier changes rating factors with respect to more
than one case characteristic in a 12-month period, the health carrier
must consider the cumulative effect of all the changes in applying
the 10 percent test under this paragraph.
(c) Each rate manual developed under subsection (a)
of this section must specify the case characteristics and rate factors
to be applied by the small employer carrier in establishing premium
rates for the class of business.
(1) A small employer may not use case characteristics
other than those specified in Insurance Code §1501.210 (concerning
Premium Rates: Nondiscrimination), without the prior approval of the
commissioner. A small employer carrier seeking approval must file
for a change in rating method under subsection (b) of this section
with the commissioner.
(2) A small employer carrier must use the same case
characteristics in establishing premium rates for each health benefit
plan in a class of business and must apply them in the same manner
in establishing premium rates for each health benefit plan. Case characteristics
may include the employer's industry classification consistent with
Insurance Code §1501.208 (concerning Premium Rates: Industry
Classification). Case characteristics must be applied without regard
to the risk characteristics of a small employer.
(3) The rate manual developed under subsection (a)
of this section must clearly illustrate the relationship among the
base premium rates charged for each health benefit plan in the class
of business. If the new business premium rate is different from the
base premium rate for a health benefit plan, the rate manual must
illustrate the difference.
(4) Differences among base premium rates for health
benefit plans must be based solely on the reasonable and objective
differences in the design and benefits of the health benefit plans
and may not be based in any way on the actual or expected health-status-related
factors of the small employer groups that choose or are expected to
choose a particular health benefit plan. A small employer carrier
must apply case characteristics and rate factors within a class of
business in a manner that ensures that premium differences among health
benefit plans for identical small employer groups vary only due to
reasonable and objective differences in the design and benefits of
the health benefit plans and are not due to the actual or expected
health-status-related factors of the small employer groups that choose
or are expected to choose a particular health benefit plan.
(5) Each rate manual developed under subsection (a)
of this section must provide for premium rates to be developed in
a two-step process. In the first step, the small employer carrier
must develop a base premium rate for the small employer group without
regard to any risk characteristics of the group. In the second step,
the small employer carrier may adjust the resulting base premium rate
by the risk load of the group, subject to the provisions of Insurance
Code Chapter 1501, to reflect the risk characteristics of the group.
(6) Except as provided in this subsection, a premium
charged to a small employer for a health benefit plan may not include
a separate application fee, underwriting fee, or any other separate
fee or charge. A small employer carrier may charge a separate fee
with respect to a health benefit plan (but only one fee with respect
to each plan) provided the fee is no more than $5 per month per covered
employee and that the fee is applied in a uniform manner to each health
benefit plan in a class of business.
(7) A small employer carrier must allocate administrative
expenses to the small employer health benefit plans on no less favorable
a basis than expenses are allocated to other health benefit plans
in the class of business. The rate manual developed under subsection
(a) of this section must describe the method of allocating administrative
expenses to the health benefit plans in the class of business for
which the manual was developed.
(8) The health carrier must retain each rate manual
developed under subsection (a) of this section for a period of six
years, including all updates and changes.
(9) Each rate manual and the rating practices of a
small employer carrier must comply with any applicable rules.
(d) If a small employer carrier uses the number of
employees and dependents of a small employer as a case characteristic,
the highest rate factor associated with a classification based on
the number of employees and dependents of a small employer may not
exceed the lowest rate factor associated with the classification by
more than 20 percent.
(e) The restrictions related to changes in premium
rates in Insurance Code Chapter 1501 must be applied as follows.
(1) A small employer carrier must revise its rate manuals
each rating period to reflect changes in base premium rates and changes
in new business premium rates.
(2) If, for any health benefit plan with respect to
any rating period, the percentage change in the new business premium
rate is less than or the same as the percentage change in the base
premium rate, the change in the new business premium rate will be
deemed to be the change in the base premium rate for the purposes
of Insurance Code Chapter 1501.
(3) If, for any health benefit plan with respect to
any rating period, the percentage change in the new business premium
rate exceeds the percentage change in the base premium rate, the health
benefit plan will be considered a health benefit plan into which the
small employer carrier is no longer enrolling new small employers
for the purposes of Insurance Code Chapter 1501.
(4) If, for any rating period, the change in the new
business premium rate for a health benefit plan differs from the change
in the new business premium rate for any other health benefit plan
in the same class of business by more than 20 percent, the health
carrier must make a filing with the commissioner containing a complete
explanation of how the respective changes in new business premium
rates were established and the reason for the difference. The filing
must be made at least 60 days before the beginning of the rating period
during which the change is applicable. The filing allows the commissioner
to determine whether the methodology is actuarially sound and appropriate
to ensure compliance with Insurance Code Chapter 1501.
(5) A small employer carrier must keep the calculations
used to determine the change in base premium rates and new business
premium rates for each health benefit plan for each rating period
for six years.
(f) Changes in premium rates and revised premium rates
must comply with the following.
(1) Except as provided in subsection (e) of this section,
a change in premium rate for a small employer must produce a revised
premium rate that is no more than the base premium rate for the small
employer (as shown in the rate manual as revised for the rating period),
multiplied by one plus the sum of:
(A) the risk load applicable to the small employer
during the previous rating period; and
(B) 15 percent (prorated for periods of less than one
year).
(2) In the case of a health benefit plan into which
a small employer carrier is no longer enrolling new small employers,
a change in premium rate for a small employer must produce a revised
premium rate that is no more than the base premium rate for the small
employer (given its present composition and as shown in the rate manual
in effect for the small employer at the beginning of the previous
rating period), multiplied by one plus the lesser of:
(A) the change in the base rate; or
(B) the percentage change in the new business premium
for the most similar health benefit plan into which the small employer
carrier is enrolling new small employers, multiplied by one plus the
sum of:
(i) the risk load applicable to the small employer
during the previous rating period; and
(ii) 15 percent (prorated for periods of less than
one year).
(3) In the case of a health benefit plan described
in Insurance Code §1501.208, if the current premium rate for
the health benefit plan exceeds the ranges set forth in Insurance
Code §1501.204 (concerning Index Rates), the formulae set forth
in paragraphs (1) and (2) of this subsection will be applied as if
the 15 percent adjustment provided in paragraphs (1)(B) and (2)(B)(ii)
of this subsection were a 0 percent adjustment.
(4) Notwithstanding the provisions of paragraphs (1)
and (2) of this subsection, a change in premium rate for a small employer
may not produce a revised premium rate that would exceed the limitations
on rates provided in Insurance Code §1501.204.
(g) An HMO offering any state-approved, federally qualified
plan described in Insurance Code §1501.255 (concerning Health
Maintenance Organization Plans) and §26.14 of this title (relating
to Coverage) must establish premium rates for those plans in accordance
with formulae or schedules of charges filed with TDI under the procedures
set forth in Insurance Code Chapter 1271 (concerning Benefits Provided
by Health Maintenance Organizations; Evidence of Coverage; Charges)
and Chapter 11, Subchapter H of this title (relating to Schedule of
Charges). An HMO must follow the rating requirements set out in this
section for any plan it offers that is not federally qualified.
(h) An HMO participating in a purchasing cooperative
that provides employees of small employers a choice of benefit plans,
which has established a separate class of business as provided by
Insurance Code §1501.202 (concerning Establishment of Classes
of Business) and §1501.203 (concerning Establishment of Classes
of Business on Certain Bases Prohibited), and a separate line of business
as provided under Insurance Code §1501.255 and 42 U.S.C. §§300e
et seq. (concerning Health Maintenance Organizations), may use rating
methods in accordance with this subchapter that are used by other
small employer carriers participating in the same purchasing cooperative,
including rating by age and gender.
(i) When seeking to obtain information relating to
a small employer group, including the risk characteristics of the
small employer group, a small employer carrier must comply with §26.13(l)
of this title (relating to Fair Marketing).
|
| Source Note: The provisions of this §26.11 adopted to be effective December 30, 1993, 18 TexReg 9375; amended to be effective April 9, 1996, 21 TexReg 2648; amended to be effective March 5, 1998, 23 TexReg 2297; amended to be effective April 6, 2005, 30 TexReg 1931; amended to be effective May 17, 2017, 42 TexReg 2539 |
