GENERAL ASSEMBLY OF NORTH CAROLINA
1995 SESSION

CHAPTER 238
SENATE BILL 652

AN ACT TO MAKE CHANGES TO THE GENERAL STATUTES PERTAINING TO SMALL EMPLOYER HEALTH CARE COVERAGE.

The General Assembly of North Carolina enacts:

Section 1.  G.S. 58-50-130(b) reads as rewritten:
"(b)	For all small employer health benefit plans that are subject to this section, premium rates for health benefit plans subject to this section are subject to the following provisions:
(1)	Small employer carriers shall use an adjusted-community rating methodology in which the premium for each small employer can vary only on the basis of the eligible employee's or dependent's age as determined in accordance with subdivision (6) of this subsection, the gender of the eligible employee or dependent, number of family members covered, or geographic area as determined under subdivision (7) of this subsection. Premium rates charged during a rating period to small employers with similar case characteristics for same coverage shall not vary from the adjusted community rate by more than twenty percent (20%) for any reason, including differences in administrative costs and claims experience.
(2)	Rating factors related to age, gender, number of family members covered, or geographic location may be developed by each carrier to reflect the carrier's experience. The factors used by carriers are subject to the Commissioner's review;
(3)	Small employer carriers shall not modify the rate for a small employer for 12 months from the initial issue date or renewal date, unless the group is composite rated and composition of the group changed by twenty percent (20%) or more or benefits are changed.  The percentage increase in the premium rate charged to a small employer for a new rating period may not exceed the sum of the following:
a.	The percentage change in the adjusted community rate as measured from the first day of the prior rating period to the first day of the new rating period, and
b.	Any adjustment, not to exceed fifteen percent (15%) annually, due to claim experience, health status, or duration of coverage of the employees or dependents of the small employer, and
c.	Any adjustment because of change in coverage or change in case characteristics of the small employer group.
					(6)	For the purposes of subsection (b) of this section, a small employer carrier shall, unless the employer uses composite rating, use the following age brackets:
a.	Younger than 15 years;
b.	15 to 19 years;
c.	20 to 24 years;
d.	25 to 29 years;
e.	30 to 34 years;
f.	35 to 39 years;
g.	40 to 44 years;
h.	45 to 49 years;
i.	50 to 54 years;
j.	55 to 59 years;
k.	60 to 64 years;
l.	65 years.
Carriers may combine, but shall not split, complete age brackets for the purposes of determining rates under subsection (b) of this section.  Small employer carriers shall be permitted to develop separate rates for individuals aged 65 years and older for coverage for which Medicare is the primary payor and coverage for which Medicare is not the primary payor.
(7)	For the purposes of subsection (b) of this section, a carrier shall not apply different geographic rating factors to the rates of small employers located within the same county; and
(8)	The Department may adopt rules to administer this subsection and to assure that rating practices used by small employer carriers are consistent with the purposes of this subsection. Those rules shall include consideration of differences based on the following:
a.	Health benefit plans that use different provider network arrangements may be considered separate plans for the purposes of determining the rating in subdivision (1) of this subsection, provided that the different arrangements are expected to result in substantial differences in claims costs;
b.	Except as provided for in sub-subdivision a. of this subdivision, differences in rates charged for different health benefit plans shall be reasonable and reflect objective differences in plan design, but shall not permit differences in premium rates because of the case characteristics of groups assumed to select particular health benefit plans; and
c.	Small employer carriers shall apply allowable rating factors consistently with respect to all small employers.."
Sec. 2.  G.S. 143-622(21) reads as rewritten:
"(21)	'Qualified health care plans' means the basic or standard health care plans offered by an Accountable Health Carrier to member small employers and as authorized by the Small Employer Carrier Committee pursuant to G.S. 58-50-120 and one additional plan.  This additional plan shall be strictly limited to medical benefits and shall not be instituted with any elements of dental benefits.  For the purposes of this section, 'medical' does not include any elements of life, property and casualty, or workers' compensation benefits."
Sec. 3.  G.S. 143-626(2) reads as rewritten:
"(2)	Accept applications by carriers to qualify as Accountable Health Carriers, determine the eligibility of carriers to become Accountable Health Carriers according to criteria described in G.S. 143-629, designate carriers as Accountable Health Carriers, and approve one additional qualified health care plan to be offered to small employers beyond the basic and standard health care plans."
Sec. 4.  G.S. 143-632(d) reads as rewritten:
"(d)	The Board shall require the use of agents or brokers licensed by the North Carolina Department of Insurance to assist small employers in obtaining coverage through an Alliance.  All licensed agents or brokers shall be eligible to market and sell coverage through an Alliance.  An Accountable Health Carrier shall not vary compensation or commissions to such agents or brokers based, directly or indirectly, on the anticipated or actual claims experience or health status associated with particular small employers to which each plan is sold."
Sec. 5.  The Small Group Carrier Committee, the Department of Insurance, and the State Health Plan Purchasing Alliance Board shall report no later than January 1, 1997, to the Joint Legislative Commission on Governmental Operations on the following:
(1)	The market impact study of adjusted community rating on the small group markets in other states, especially in Florida, California, Kentucky, South Carolina, and Maryland;
(2)	A market impact study to evaluate the short-term and long-term effect of adjusted community rating on the small group market in North Carolina; and
(3)	If deemed necessary, a proposed timeline for a transition toward adjusted community rating without experience and administrative expense bands.
Sec. 6.  This act is effective upon ratification.
In the General Assembly read three times and ratified this the 13th day of June, 1995.

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Dennis A. Wicker
President of the Senate

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Harold J. Brubaker
Speaker of the House of Representatives