Tennessee Code Annotated

Title 56: Insurance

Chapter 7: Policies and Policyholders

Part 22: Tennessee Small Employer Group Health Coverage Reform Act

TCA 56-7-2209: Health benefit plans -- Preexisting conditions -- Late enrollees -- Premiums -- Transfers -- Place of business -- Filings -- Documentation.

(a) Health benefit plans covering small employers are subject to the following:

(1) Except in the case of a late enrollee, any preexisting conditions provision may not limit or exclude coverage for a period beyond twelve (12) months following the insured's effective date of coverage, and may only relate to conditions manifesting themselves in a manner that would cause an ordinarily prudent person to seek medical advice, diagnosis, care or treatment; for which medical advice, diagnosis, care or treatment was recommended or received during the twelve (12) months immediately before the effective date of coverage, or as to a pregnancy existing on the effective date of coverage;

(2) In determining whether a preexisting conditions provision applies to an eligible employee or to a dependent, all health benefit plans shall credit the time the person was covered under a previous group health benefit plan if the previous coverage was continuous to a date not more than thirty (30) days before the effective date of the new coverage, exclusive of any applicable waiting period under the plan;

(3) (A) The health benefit plan is renewable with respect to all eligible employees or dependents at the option of the policyholder or contract holder except:

(i) For nonpayment of the required premiums by the policyholder or contract holder;

(ii) For fraud or misrepresentation of the policyholder or contract holder or, with respect to coverage of individual enrollees, the enrollees or their representatives;

(iii) For noncompliance with plan provisions that have been approved by the commissioner;

(iv) When the number of enrollees covered under the plan is fewer than the number of insureds or percentage of enrollees required by participation requirements under the plan;

(v) When the policyholder or contract holder is no longer actively engaged in the business in which it was engaged on the effective date of the plan; or

(vi) When the small employer carrier stops writing new business in the small employer market, if the employer:

(a) Provides notice to the department and either to the policyholder, contract holder or employer of its decision to stop writing new business in the small employer market; and

(b) Does not cancel health benefit plans subject to this part for one hundred eighty (180) days after the date of the notice required under subdivision (a)(3)(A)(vi)(a); and for that business of the carrier that remains in force, the carrier shall continue to be governed by this part with respect to business conducted under this part;

(B) A small employer carrier that stops writing new business in the small employer market in this state after January 1, 1993, shall be prohibited from writing new business in the small employer market in this state for a period of five (5) years from the date of notice to the commissioner. In the case of an HMO doing business in the small employer market in one (1) service area of this state, the rules set forth in this subdivision (a)(3) shall apply to the HMO's operations in the service area, unless SC 56-7-2208(g) [repealed] applies;

(4) Late enrollees may be excluded from coverage for the greater of eighteen (18) months or an eighteen-month preexisting condition exclusion; however, if both a period of exclusion from coverage and a preexisting condition exclusion are applicable to a late enrollee, the combined period shall not exceed eighteen (18) months; and

(5) A carrier may continue to enforce reasonable employer participation and contribution requirements on small employers applying for coverage; however, participation and contributions requirements may vary among small employers only by the size of the small group.

(6) [Deleted by 2011 amendment.]

(b) Premium rates for health benefit plans subject to this part are subject to the following:

(1) The index rate for a rating period for any class of business shall not exceed the index rate for any other class of business by more than twenty-five percent (25%), adjusted pro rata for any rating period of less than one (1) year;

(2) For a class of business, the premium rates charged during a rating period to small employers with similar case characteristics for the same or similar coverage, or the rates that could be charged to those employers under the rating system for that class of business shall not vary from the index rate by more than thirty-five percent (35%) of the index rate, adjusted pro rata for any rating period of less than one (1) year;

(3) The percentage increase in the premium rate charged to a small employer for a new rating period, adjusted pro rata for any rating period of less than one (1) year, may not exceed the sum of the following:

(A) The percentage change in the new business premium rate measured from the first day of the prior rating period to the first day of the new rating period. If a small employer carrier is not issuing any new policies, but is only renewing policies, the carrier shall use the percentage change in the base premium rate;

(B) Any adjustment, not to exceed fifteen percent (15%) annually and adjusted pro rata for any rating period of less than one (1) year, due to the claim experience, health status, or duration of coverage of the employees or dependents of the small employer as determined from the small employer carrier's rate manual for the class of business;

(C) Any adjustment because of a change in coverage or change in the case characteristics of the small employer as determined from the small employer carrier's rate manual for the class of business;

(4) [Deleted by 2011 amendment.]

(5) Premium rates for health benefit plans shall comply with the requirements of this section, notwithstanding any reinsurance premiums and assessments paid or payable by small employer carriers in accordance with SC 56-7-2221 [repealed];

(6) In any case where a small employer carrier uses industry as a case characteristic in establishing premium rates, the rate factor associated with any industry classification may not vary from the arithmetic average of the rate factors associated with all industry classifications by greater than fifteen percent (15%) of coverage; and

(7) Small employer carriers shall apply rating factors including case characteristics consistently with respect to all small employers in a class of business. Adjustments in rates for claims experience, health status and duration from issue may not be applied individually. Any such adjustment must be applied uniformly to the rate charged for all participants of the small employer.

(c) All premium rates for a small employer carrier shall be subject to the review and approval or disapproval of the commissioner as provided for in SC 56-26-102 and any regulations promulgated under the authority of that section. Section 56-26-102 and regulations shall apply to all plans subject to this section in the same manner as to accident and sickness policies subject to SC 56-26-102.

(d) A small employer carrier shall not involuntarily transfer a small employer into or out of a class of business. A small employer carrier shall not offer to transfer a small employer into or out of a class of business unless the carrier offers to transfer all small employers in the class of business without regard to case characteristics, claims experience, health status or duration of coverage since issue.

(e) In connection with the offering for sale of any health benefit plan to a small employer, each small employer carrier shall make a reasonable disclosure as part of its solicitation and sales materials of:

(1) The extent to which premium rates for a specified small employer are established or adjusted in part based upon the actual or expected variation in claims costs, or actual or expected variation in health condition of the eligible employees and dependents of the small employer;

(2) Provisions concerning the small employer carrier's right to change premium rates and the factors other than claims experience that affect changes in premium rates;

(3) Provisions relating to renewability of policies and contracts; and

(4) Provisions affecting any preexisting conditions provision.

(f) 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 demonstrate that its rating methods and practices are based upon commonly accepted actuarial assumptions and are in accordance with sound actuarial principles.

(g) Each small employer carrier shall file with the commissioner annually, on or before March 15, an actuarial certification certifying that it is in compliance with this part and that its rating methods are actuarially sound. The small employer carrier shall retain a copy of the certification at its principal place of business.

(h) A small employer carrier shall make the information and documentation described in subsection (f) available to the commissioner upon request. Except in cases of violations of this part, the information is proprietary and trade secret information and is not subject to disclosure by the commissioner to persons outside the department except as agreed to by the small employer carrier or as ordered by a court of competent jurisdiction.

(i) Subdivisions (a)(1), (3) and (5) and subsections (b) and (d)-(h) apply to health benefit plans delivered, issued for delivery, renewed or continued in this state or covering persons residing in this state on or after January 1, 1993. Subdivisions (a)(2) and (4) apply to health benefit plans delivered, issued for delivery, renewed or continued in this state or covering persons residing in this state on or after the date the plan becomes operational, as designated by the commissioner. For purposes of this subsection (i), the date a health benefit plan is continued is the anniversary date of the issuance of the health benefit plan.

History: Acts 1992, ch. 808, SC 9; 1993, ch. 228, SC 1; 2011, ch. 344, SCSC 4-6.