Report Title:

Insurance; Small Employers

Description:

Authorizes the formation of a purchasing pool for small employers to purchase health care insurance to meet the requirements of the prepaid health care law. Gives administrative duties to the insurance commissioner.

HOUSE OF REPRESENTATIVES

H.B. NO.

2571

TWENTY-SECOND LEGISLATURE, 2004

 

STATE OF HAWAII

 


 

A BILL FOR AN ACT

 

RELATING TO INSURANCE.

 

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:

SECTION 1. Chapter 431, Hawaii Revised Statutes, is amended by adding a new article to be appropriately designated and to read as follows:

"article

purchasing pool for small employers

§431: -1 Definitions. Unless otherwise specified, the following terms shall mean as follows:

"Eligible employee" means any permanent employee who is actively engaged on a full-time basis in the conduct of the business of the small employer with a normal workweek of at least thirty hours, in the small employer's regular place of business. The term includes sole proprietors or partners of a partnership, if they are actively engaged on a full-time basis in the small employer's business and they are included as employees under a health benefit plan of a small employer, but does not include employees who work on a part-time, temporary, or substitute basis. A permanent employee who works at least twenty hours but not more than twenty-nine hours is deemed to be an eligible employee if all four of the following apply:

(1) The employee otherwise meets the definition of an eligible employee except for the number of hours worked;

(2) The employer offers the employee health coverage under a health benefit plan;

(3) All similarly situated individuals are offered coverage under the health benefit plan; and

(4) The employee must have worked at least twenty hours per normal workweek for at least fifty per cent of the weeks in the previous calendar quarter. The insurer may request any necessary information to document the hours and time period in question, including, but not limited to, payroll records and employee wage and tax filings.

"Health benefit plan" means a policy or contract written or administered by a carrier that arranges or provides health care benefits for the covered eligible employees of a small employer and their dependents that meets the requirements of chapter 393. The term does not include accident only, credit, disability income, coverage of medicare services pursuant to contracts with the United States government, medicare supplement, long-term care insurance, dental, vision, coverage issued as a supplement to liability insurance, automobile medical payment insurance, or insurance under which benefits are payable with or without regard to fault and that is statutorily required to be contained in any liability insurance policy or equivalent self-insurance.

"Small employer" means any person, proprietary or nonprofit firm, corporation, partnership, public agency, or association that is actively engaged in business or service that, on at least fifty per cent of its working days during the preceding calendar quarter, or preceding calendar year, employed at least two, but not more than fifty, eligible employees, the majority of whom were employed within this State, that was not formed primarily for purposes of buying health insurance and in which a bona fide employer-employee relationship exists. In determining whether to apply the calendar quarter or calendar year test, the insurer shall use the test that ensures eligibility if only one test would establish eligibility. In determining the number of eligible employees, companies that are affiliated companies and that are eligible to file a combined income tax return for purposes of state taxation shall be considered one employer. Subsequent to the issuance of a health benefit plan to a small employer pursuant to this article, and for the purpose of determining eligibility, the size of a small employer shall be determined annually. Except as otherwise specifically provided, provisions of this article that apply to a small employer shall continue to apply until the health benefit plan anniversary following the date the employer no longer meets the requirements of this definition. It includes any small employer who purchases coverage through a guaranteed association and any employer purchasing coverage for employees through a guaranteed association.

§431: -2 Voluntary alliance uniting employers purchasing program; established. (a) The voluntary alliance uniting employers purchasing program is hereby created and shall be administered by the commissioner.

(b) No decisionmaker for any nonprofit entity that assumes administrative and fiscal responsibility for operation of the program pursuant to sections 431: -14 and 431: -15 shall make, participate in making, or in any way attempt to use the decisionmaker's official position to influence the making of any decision that the decisionmaker knows or has reason to know will have a reasonably foreseeable material financial effect, distinguishable from its effect on the public generally, on the decisionmaker or a member of the decisionmaker's immediate family, or on any of the following:

(1) Any source of income, other than gifts and other than loans by a commercial lending institution in the regular course of business on terms available to the public without regard to official status aggregating $250 or more in value provided to, received by, or promised to the commissioner or decisionmaker for a nonprofit entity that assumes administrative and fiscal responsibility for operation of the program pursuant to sections 431: -14 and 431: -15 within twelve months prior to the time when the decision is made; or

(2) Any business entity in which the commissioner or decisionmaker for a nonprofit entity that assumes administrative and fiscal responsibility for operation of the program pursuant to sections 431:  -14 and 431:  -15 is a director, officer, partner, trustee, employee, or holds any position of management.

(c) Commencing January 1, 2005, neither the commissioner nor a decisionmaker for any nonprofit entity that assumes administrative and fiscal responsibility for the program pursuant to sections 431: -14 and 431: -15 may be an employee, a consultant, or a member of the board of directors of any insurer, hospital service plan, or health care service plan, or an insurance broker or agent doing business in the State.

§431: -3 Powers of the commissioner. The commissioner may do any of the following:

(1) Enter into contracts with carriers to provide health benefits coverage to eligible employees and their dependents. Any contract entered into pursuant to this article shall be exempt from the public procurement code. The commissioner shall not be required to specify the amounts encumbered for each contract, but may allocate funds to each contract based on projected and actual subscriber enrollments;

(2) Enter into other contracts as are necessary or proper to carry out this article;

(3) Employ necessary staff;

(4) Sue or be sued, including taking any legal actions necessary or proper for recovering any penalties for, on behalf of, or against, the program or the commissioner;

(5) Define the health benefits coverage which the program will contract to purchase from participating carriers;

(6) Appoint committees, as necessary, to provide technical assistance in the operation of the program;

(7) Assess participating employers a reasonable fee for necessary costs in connection with the program;

(8) Undertake activities necessary to administer the program, including marketing and publicizing the program, and assuring carrier, employer, and enrollee compliance with program requirements;

(9) Establish rules, conditions, and procedures for participation for small employers;

(10) Establish rules, conditions, and procedures for participation for participating carriers;

(11) Establish a financial relationship directly with agents or brokers to provide services pursuant to this program;

(12) Approve the benefit plan designs sold by carriers participating in the pool;

(13) Issue rules as necessary to administer the program;

(14) Exercise all powers reasonably necessary to carry out the powers and responsibilities expressly granted or imposed by this article;

§431: -4 Contracts with participating carriers. On or after the effective date of this article, the commissioner shall enter into contracts with carriers for the purpose of providing health benefits coverage to eligible employees and dependents. Participating carriers shall have, but need not be limited to, all of the following operating characteristics satisfactory to the commissioner:

(1) Strong financial condition, including the ability to assume the risk of providing and paying for covered services. A participating carrier may utilize reinsurance, provider risk sharing, and other appropriate mechanisms to share a portion of the risk;

(2) Adequate administrative management;

(3) In the case of the health care service plan, the health care service plan shall use a system for identifying in a simple and clear fashion both in its own records and in the medical records of subscribers and enrollees the fact that the services provided are provided under the program;

(4) A satisfactory grievance procedure; and

(5) Participating carriers that contract with or employ health care providers shall have mechanisms to accomplish all of the following, in a manner satisfactory to the commissioner:

(A) Review the quality of care covered;

(B) Review the appropriateness of care covered; and

(C) Provide accessible health care services.

§431: -5 Eligibility to purchase coverage retained. Notwithstanding any other provision of law, an employer purchasing coverage through the program shall not be determined to be no longer eligible to participate in the program solely because the employer employs more than fifty eligible employees, provided the employer employs no more than one hundred eligible employees.

§431: -6 Carrier selection. The commissioner shall contract with a broad range of carriers in an area, if available, to ensure that enrollees have a choice from among a reasonable number and types of competing carriers. The commissioner shall develop and make available objective criteria for carrier selection and provide adequate notice of the application process to permit all carriers a reasonable and fair opportunity to participate. The criteria and application process shall allow participating carriers to comply with their state and federal licensing and regulatory obligations, except as otherwise provided in this chapter. Carrier selection shall be based on the criteria developed by the commissioner. The administrator shall not eliminate any carrier from selection solely because of the carrier's size or limited service area.

§431: -7 Marketing and servicing contracts allowed. Participating carriers may contract with agents or brokers to provide marketing and servicing of health benefits coverage offered through the program. Any commissions set and paid pursuant to this section shall be determined by the participating carrier and the agent or broker.

§431: -8 Conditions of participation enforced. The commissioner shall enforce conditions of participation in the program for small employers and enrollees which shall conform with the requirements of this article.

§431: -9 Premium collections. The commissioner shall establish a mechanism to collect premiums from small employers, including remittance of the share of the premium paid by the enrollee.

§431: -10 Reenrollment restrictions. The commissioner may prohibit employers or employees who drop coverage after enrolling in the pool from reenrolling in the program for up to twelve months.

§431: -11 Rates offered. Participating carriers shall offer rates to small employers or enrollees in the program that, at a minimum, are consistent with the program requirements and existing statutes and rules regulating health insurance offerings to small employers.

§431: -12 Payment adjustments to carriers permitted. The commissioner may adjust payments made to a carrier if the commissioner finds that the carrier has a significantly disproportionate share of high- or low-risk enrollees. Prior to making this finding, the program shall obtain valid data from participating carriers. Reporting requirements shall be administratively compatible with the methods of operation of the carrier. Any adjustments to payments shall be prospective and shall utilize demographic and other factors that are actuarially related to risk.

§431: -13 Right to appeal. If a small employer, employee, or dependent of a small employer is dissatisfied with any action or failure to act that has occurred in connection with eligibility for, or enrollment in, the program, the employer or employee shall have the right to appeal to the commissioner and shall be accorded an opportunity for a fair hearing.

§431: -14 Bids for proposals to assume administrative and fiscal responsibility of program. No later than three years from the effective date of this article, the commissioner shall issue a request for proposals that solicits nonprofit entities to submit bids to assume administrative and fiscal responsibility for operation of the program. The commissioner shall assess a bidder's qualifications in the areas of administrative capacity, financial responsibility, local experience, and demonstrated ability. Within six months of issuing the request for proposals, the commissioner shall select from among the qualified bidders and award administrative and financial responsibility for the program to the selected nonprofit entity. If no qualified nonprofit entity submits a bid pursuant to the commissioner's request for proposals, one year from the date that bids were due, the board shall reissue a request for proposals if the commissioner has reason to believe that there is a possibility for a response from a qualified nonprofit entity. The commissioner shall provide for an orderly transition of administrative and financial responsibility for the program.

§431: -15 Delegation of administrative and financial responsibility of the program. At any time prior to the process described in section 431: -14, the commissioner shall accept and review proposals submitted from nonprofit entities for assumption of administrative and financial responsibility of the program. If the commissioner determines that a qualified entity exists, the commissioner may relinquish administrative and financial responsibility for the program to the nonprofit entity. Any contract entered into pursuant to this section shall be exempt from the public procurement code.

§431: -16 Voluntary alliance uniting employers special fund created. There is created a voluntary alliance uniting employers special fund which shall consist of moneys collected pursuant to this article. Costs of the voluntary alliance for uniting employers purchasing program shall not be paid with state funds other than appropriations for the commissioner's operating expenses. Moneys within the fund shall be utilized for the purposes of this article."

SECTION 2. This Act shall take effect upon its approval.

INTRODUCED BY:

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