§ 513B.13 — Small employer carrier reinsurance program

Iowa § 513B.13

• Jurisdiction: Iowa
• Title XIII: COMMERCE
• Ch. 513B: SMALL GROUP HEALTH COVERAGE

Text

1. A nonprofit corporation is established to be known as the Iowa small employer health
reinsurance program.
2. A reinsuring carrier is subject to this program.
3. a. The program shall operate subject to the supervision and control of a board. Subject
to the provisions of paragraph “b”, the board shall consist of nine members appointed by the
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commissioner, and the commissioner or the commissioner’s designee, who shall serve as an
ex officio member and as chairperson of the board.
b. Inappointingthemembersoftheboard,thecommissionershallincluderepresentatives
of small employers and small employer carriers and such other individuals as determined
to be qualified by the commissioner. At least five of the members of the board shall be
representatives of carriers and shall be selected from individuals nominated by small
employer carriers in this state pursuant to procedures and guidelines provided by rule of the
commissioner.
c. Members shall be appointed for terms of three years. A board member’s term shall
continue until the member’s successor is appointed.
d. A vacancy in the board shall be filled by the commissioner for the remainder of the
term. A member of the board may be removed by the commissioner for cause.
e. During the period of time that the program is suspended pursuant to subsection 14, the
size of the board may be reduced with the approval of the commissioner.
4. Theboardmaysubmitaplanofoperationtothecommissioner. Thecommissioner,after
notice and hearing, may approve a plan of operation if the commissioner determines that the
plan is suitable to assure the fair, reasonable, and equitable administration of the program,
and provides for the sharing of program gains and losses on an equitable and proportionate
basis in accordance with the provisions of this section. A plan of operation is effective upon
written approval of the commissioner.
5. The board may submit to the commissioner any amendments to the plan necessary
or suitable to assure the fair, reasonable, and equitable administration of the program. The
amendments shall be effective upon the written approval of the commissioner.
6. The plan of operation shall do all of the following:
a. Establish procedures for the handling and accounting of program assets and moneys,
and for an annual fiscal reporting to the commissioner.
b. Establishproceduresforselectinganadministeringcarrierandsettingforththepowers
and duties of the administering carrier.
c. Establish procedures for reinsuring risks in accordance with the provisions of this
section.
d. Establishproceduresforcollectingassessmentsfromreinsuringcarrierstofundclaims
and administrative expenses incurred or estimated to be incurred by the program.
e. Establish a methodology for applying the dollar thresholds contained in this section for
carriers that pay or reimburse health care providers through capitation or a salary.
f. Provide for any additional matters necessary to implement and administer the program.
7. Thesamegeneralpowersandauthoritygrantedunderthelawsofthisstatetoinsurance
companies and health maintenance organizations licensed to transact business in this state
maybeexercisedbytheboardundertheprogram, exceptthepowertoissuehealthinsurance
coverages directly to either groups or individuals. Additionally, the board is granted the
specific authority to do all or any of the following:
a. Enterintocontractsasnecessaryorpropertoadministertheprovisionsandpurposesof
this subchapter, including the authority, with the approval of the commissioner, to enter into
contractswithsimilarprogramsinotherstatesforthejointperformanceofcommonfunctions
or with persons or other organizations for the performance of administrative functions.
b. Sue or be sued, including taking any legal action necessary or proper to recover any
assessmentsandpenaltiesfor, onbehalfof, oragainsttheprogramoranyreinsuringcarriers.
c. Take any legal action necessary to avoid the payment of improper claims made against
the program.
d. Definethehealthinsurancecoveragesforwhichreinsurancewillbeprovided,andissue
reinsurance policies, pursuant to this subchapter.
e. Establish rules, conditions, and procedures for reinsuring risks under the program.
f. Establish and implement actuarial functions as appropriate for the operation of the
program.
g. Assessreinsuringcarriersinaccordancewiththeprovisionsofsubsection11,andmake
advance interim assessments as may be reasonable and necessary for organizational and
§513B.13, SMALL GROUP HEALTH COVERAGE 14
interim operating expenses. Any interim assessments shall be credited as offsets against any
regular assessments due following the close of the calendar year.
h. Appoint appropriate legal, actuarial, and other committees as necessary to provide
technical assistance in the operation of the program, policy and other contract design, and
any other function within the authority of the program.
i. Borrow money to effect the purposes of the program. Any notes or other evidence of
indebtedness of the program not in default are legal investments for carriers and may be
carried as admitted assets.
8. A reinsuring carrier may reinsure with the program as provided in this section.
a. The program shall reinsure up to the level of coverage provided in either a basic health
benefit plan or standard health benefit plan established by the board.
b. A small employer carrier may reinsure an entire employer group within sixty days of
the commencement of the group’s coverage under health insurance coverage.
c. A reinsuring carrier may reinsure an eligible employee or dependent within a period of
sixty days following the commencement of the coverage with the small employer. A newly
eligible employee or dependent of a reinsured small employer may be reinsured within sixty
days of the commencement of such person’s coverage.
d. (1) The program shall not reimburse a reinsuring carrier with respect to the claims of
a reinsured employee or dependent until the small employer carrier has incurred an initial
level of claims for such employee or dependent of five thousand dollars in a calendar year
for benefits covered by the program. In addition, the reinsuring carrier is responsible for ten
percent of the next fifty thousand dollars of incurred claims during a calendar year and the
programshallreinsuretheremainder. Areinsuringcarrier’sliabilityunderthissubparagraph
shall not exceed a maximum limit of ten thousand dollars in any one calendar year with
respect to any reinsured individual.
(2) The board annually shall adjust the initial level of claims and the maximum limit to
be retained by the small employer carrier to reflect increases in costs and utilization within
the standard market for health benefit plans within the state. The adjustment shall not be
less than the annual change in the medical component of the “consumer price index for all
urban consumers” of the United States department of labor, bureau of labor statistics, unless
the board proposes and the commissioner approves a lower adjustment factor.
e. A small employer carrier may terminate reinsurance for one or more of the reinsured
employees or dependents of a small employer on any plan anniversary date.
f. Premium rates charged for reinsurance by the program to a health maintenance
organization that is federally qualified under 42 U.S.C. §300e(c)(2)(A), and is thereby subject
to requirements that limit the amount of risk that may be ceded to the program that are more
restrictive than those specified in paragraph “d”, shall be reduced to reflect that portion of the
risk above the amount set forth in paragraph “d” that may not be ceded to the program, if any.
9. a. The board, as part of the plan of operation, shall establish a methodology for
determining premium rates to be charged by the program for reinsuring small employers
and individuals pursuant to this section. The methodology shall include a system for
classification of small employers that reflects the types of case characteristics commonly
used by small employer carriers in the state. The methodology shall provide for the
development of base reinsurance premium rates, which shall be multiplied by the factors
set forth in paragraph “b” to determine the premium rates for the program. The base
reinsurance premium rates shall be established by the board, subject to the approval of the
commissioner, and shall be set at levels which reasonably approximate gross premiums
charged to small employers by small employer carriers for health insurance coverages with
benefits similar to the standard health benefit plan.
b. Premiums for the program shall be as follows:
(1) An entire small employer group may be reinsured for a rate that is one and one-half
times the base reinsurance premium rate for the group established pursuant to this
subsection.
(2) An eligible employee or dependent may be reinsured for a rate that is five times the
base reinsurance premium rate for the individual established pursuant to this subsection.
c. The board periodically shall review the methodology established under paragraph “a”,
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including the system of classification and any rating factors, to assure that it reasonably
reflects the claims experience of the program. The board may propose changes to the
methodology which shall be subject to the approval of the commissioner.
10. If health insurance coverage for a small employer is entirely or partially reinsured
with the program, the premium charged to the small employer for any rating period for the
coverage issued shall meet the requirements relating to premium rates set forth in section
513B.4.
11. a. Prior to March 1 of each year, the board shall determine and report to the
commissioner the program net loss for the previous calendar year, including administrative
expenses and incurred losses for the year, taking into account investment income and other
appropriate gains and losses.
b. Any net loss for the year shall be recouped by assessments of reinsuring carriers.
(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 both of
the following:
(a) Eachreinsuringcarrier’sshareofthetotalpremiumsearnedintheprecedingcalendar
year from health insurance coverages delivered or issued for delivery to small employers in
this state by reinsuring carriers.
(b) Eachreinsuringcarrier’sshareofthepremiumsearnedintheprecedingcalendaryear
from newly issued health insurance coverages delivered or issued for delivery during such
calendar year to small employers in this state by reinsuring carriers.
(2) The formula established pursuant to subparagraph (1) shall not result in any
reinsuring carrier having an assessment share that is less than fifty percent nor more than
one hundred fifty percent of an amount which is based on the proportion of the reinsuring
carrier’s total premiums earned in the preceding calendar year from health insurance
coverages 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 insurance
coverages delivered or issued for delivery to small employers in this state by all reinsuring
carriers.
(3) The board, with approval of the commissioner, may change the assessment formula
established pursuant to subparagraph (1) from time to time as appropriate. The board may
provide for the shares of the assessment base attributable to premiums from all health
insurance coverages and to premiums from newly issued health insurance coverages to vary
during a transition period.
(4) Subject to the approval of the commissioner, the board shall make an adjustment
to the assessment formula for reinsuring carriers that are approved health maintenance
organizations which are federally qualified under 42 U.S.C. §300e et seq., to the extent, if any,
that restrictions are placed on them that are not imposed on other small employer carriers.
(5) 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.
c. (1) Prior to March 1 of each year, the board shall determine and file with the
commissioner an estimate of the assessments needed to fund the losses incurred by the
program in the previous calendar year.
(2) If the board determines that the assessments needed to fund the losses incurred by
the program in the previous calendar year will exceed the amount specified in subparagraph
(3), the board shall evaluate the operation of the program and report its findings, including
any recommendations for changes to the plan of operation, to the commissioner within
ninety days following the end of the calendar year in which the losses were incurred. The
evaluation shall include: an estimate of future assessments, the administrative costs of the
program, the appropriateness of the premiums charged, and the level of insurer retention
under the program and the costs of coverage for small employers. If the board fails to file
the report with the commissioner within ninety days following the end of the applicable
calendar year, the commissioner may evaluate the operations of the program and implement
such amendments to the plan of operation the commissioner deems necessary to reduce
future losses and assessments.
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(3) Foranycalendaryear,theamountspecifiedinthissubparagraphisfivepercentoftotal
premiums earned in the previous year from health insurance coverages delivered or issued
for delivery to small employers in this state by reinsuring carriers.
(4) If assessments in each of two consecutive calendar years exceed by ten percent the
amount specified in subparagraph (3), the commissioner may relieve carriers from any or
all of the regulations of this subchapter or take such other actions as the commissioner
deems equitable and necessary to spread the risk of loss and assure portability of coverages
and continuity of benefits so as to reduce assessments to ten percent or less of that amount
specified in subparagraph (3).
d. If assessments exceed net losses of the program, the excess shall be held in an
interest-bearing account and used by the board to offset future losses or to reduce program
premiums. As used in this paragraph, “future losses” includes reserves for incurred but not
reported claims.
e. Each reinsuring carrier’s proportion of the assessment shall be determined annually by
the board based on annual statements and other reports deemed necessary by the board and
filed by the reinsuring carriers with the board.
f. The plan of operation shall provide for the imposition of an interest penalty for late
payment of assessments.
g. A reinsuring carrier may seek from the commissioner a deferment from all or part of an
assessment imposed by the board. The commissioner may defer all or part of the assessment
of a reinsuring carrier if the commissioner determines that the payment of the assessment
would place the reinsuring carrier in a financially impaired condition. If all or part of an
assessment against a reinsuring carrier is deferred, the amount deferred shall be assessed
against the other participating carriers in a manner consistent with the basis for assessment
set forth in this subsection. The reinsuring carrier receiving such deferment shall remain
liable to the program for the amount deferred and shall be prohibited from reinsuring any
individuals or groups in the program until such time as it pays such assessments.
12. The participation in the program as reinsuring carriers, the establishment of rates,
forms, or procedures, or any other joint or collective action required by this subchapter shall
not be the basis of any legal action, criminal or civil liability, or penalty against the program
or any of its reinsuring carriers either jointly or separately.
13. The program is exempt from any and all state or local taxes.
14. The board of the Iowa small employer health reinsurance program, on an ongoing
basis, shall review the program and make recommendations as to the continued cost
effectiveness of the program to the commissioner, which recommendations may include
proposed modifications or suspension of operation of the program. In making such a
review, the board shall consider such factors as the population reinsured by the program,
the premiums and assessments paid to the program, the number and percentage of carriers
electing to utilize the program, health care reform measures implemented in the state, as
well as other factors deemed relevant by the board. The commissioner, upon finding that
the program is not cost effective, may make modifications to the program or suspend the
operation of the program by rule.