28 Tex. Admin. Code § 26.11 - Restrictions Relating to Premium Rates
(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).
Notes
State regulations are updated quarterly; we currently have two versions available. Below is a comparison between our most recent version and the prior quarterly release. More comparison features will be added as we have more versions to compare.
No prior version found.