1.1 	A bill for an act
1.2 	relating to insurance; permitting reductions in premiums on small employer 
1.3 	health insurance in greater Minnesota; amending Minnesota Statutes 2004, 
1.4 	sections 62A.65, subdivision 3; 62L.08, subdivision 4.
1.5 	BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:

1.6 	Section 1. Minnesota Statutes 2004, section 62A.65, subdivision 3, is amended to read:
1.7 		Subd. 3.Premium rate restrictions. No individual health plan may be offered, 
1.8 	sold, issued, or renewed to a Minnesota resident unless the premium rate charged is 
1.9 	determined in accordance with the following requirements:
1.10 	(a) Premium rates must be no more than 25 percent above and no more than 25 
1.11 	percent below the index rate charged to individuals for the same or similar coverage, 
1.12 	adjusted pro rata for rating periods of less than one year. The premium variations 
1.13 	permitted by this paragraph must be based only upon health status, claims experience, 
1.14 	and occupation. For purposes of this paragraph, health status includes refraining from 
1.15 	tobacco use or other actuarially valid lifestyle factors associated with good health, 
1.16 	provided that the lifestyle factor and its effect upon premium rates have been determined 
1.17 	by the commissioner to be actuarially valid and have been approved by the commissioner. 
1.18 	Variations permitted under this paragraph must not be based upon age or applied 
1.19 	differently at different ages. This paragraph does not prohibit use of a constant percentage 
1.20 	adjustment for factors permitted to be used under this paragraph.
1.21 	(b) Premium rates may vary based upon the ages of covered persons only as 
1.22 	provided in this paragraph. In addition to the variation permitted under paragraph (a), 
1.23 	each health carrier may use an additional premium variation based upon age of up to 
1.24 	plus or minus 50 percent of the index rate.
2.1 	(c) A health carrier may request approval by the commissioner to establish no 
2.2 	more than three separate geographic regions areas determined by the health carrier and 
2.3 	to establish separate index rates for each region such area, provided that the index rates 
2.4 	do not vary between any two regions by more than 20 percent. Health carriers that do 
2.5 	not do business in the Minneapolis/St. Paul metropolitan area may request approval for 
2.6 	no more than two geographic regions, and clauses (2) and (3) do not apply to approval 
2.7 	of requests made by those health carriers. The commissioner may grant approval if the 
2.8 	following conditions are met:
2.9 	(1) the geographic regions areas must be applied uniformly by the health carrier;
2.10 	(2) one geographic region must be based on the Minneapolis/St. Paul metropolitan 
2.11 	area;
2.12 	(3) for each geographic region that is rural, the index rate for that region must not 
2.13 	exceed the index rate for the Minneapolis/St. Paul metropolitan area; and
2.14 	(2) each geographic area must be composed of no fewer than seven counties that 
2.15 	create a contiguous area; and
2.16 	(4) (3) the health carrier provides actuarial justification acceptable to the 
2.17 	commissioner for the proposed geographic variations in index rates, establishing that the 
2.18 	variations are based upon differences in the cost to the health carrier of providing coverage.
2.19 	(d) Health carriers may use rate cells and must file with the commissioner the rate 
2.20 	cells they use. Rate cells must be based upon the number of adults or children covered 
2.21 	under the policy and may reflect the availability of Medicare coverage. The rates for 
2.22 	different rate cells must not in any way reflect generalized differences in expected costs 
2.23 	between principal insureds and their spouses.
2.24 	(e) In developing its index rates and premiums for a health plan, a health carrier shall 
2.25 	take into account only the following factors:
2.26 	(1) actuarially valid differences in rating factors permitted under paragraphs (a) 
2.27 	and (b); and
2.28 	(2) actuarially valid geographic variations if approved by the commissioner as 
2.29 	provided in paragraph (c).
2.30 	(f) All premium variations must be justified in initial rate filings and upon request of 
2.31 	the commissioner in rate revision filings. All rate variations are subject to approval by 
2.32 	the commissioner.
2.33 	(g) The loss ratio must comply with the section  62A.021 requirements for individual 
2.34 	health plans. 
2.35 	(h) The rates must not be approved, unless the commissioner has determined that the 
2.36 	rates are reasonable. In determining reasonableness, the commissioner shall consider the 
3.1 	growth rates applied under section  62J.04, subdivision 1, paragraph (b), to the calendar 
3.2 	year or years that the proposed premium rate would be in effect, actuarially valid changes 
3.3 	in risks associated with the enrollee populations, and actuarially valid changes as a result 
3.4 	of statutory changes in Laws 1992, chapter 549. 

3.5 	EFFECTIVE DATE. This section is effective January 1, 2007, and applies to 
3.6 	policies issued or renewed on or after that date.

3.7 	Sec. 2. Minnesota Statutes 2004, section 62L.08, subdivision 4, is amended to read:
3.8 		Subd. 4.Geographic premium variations. A health carrier may request approval 
3.9 	by the commissioner to establish no more than three separate geographic regions areas 
3.10 	determined by the health carrier and to establish separate index rates for each region such 
3.11 	area, provided that the index rates do not vary between any two regions by more than 20 
3.12 	percent. Health carriers that do not do business in the Minneapolis/St. Paul metropolitan 
3.13 	area may request approval for no more than two geographic regions, and clauses (2) and 
3.14 	(3) do not apply to approval of requests made by those health carriers. A health carrier 
3.15 	may also request approval to establish one or more additional geographic regions and one 
3.16 	or more separate index rates for premiums for employees working and residing outside of 
3.17 	Minnesota. The commissioner may grant approval if the following conditions are met:
3.18 	(1) the geographic regions areas must be applied uniformly by the health carrier;
3.19 	(2) one geographic region must be based on the Minneapolis/St. Paul metropolitan 
3.20 	area;
3.21 	(3) if one geographic region is rural, the index rate for the rural region must not 
3.22 	exceed the index rate for the Minneapolis/St. Paul metropolitan area;
3.23 	(2) each geographic area must be composed of no fewer than seven counties that 
3.24 	create a contiguous area; and
3.25 	(4) (3) the health carrier provides actuarial justification acceptable to the 
3.26 	commissioner for the proposed geographic variations in index rates, establishing that the 
3.27 	variations are based upon differences in the cost to the health carrier of providing coverage.

3.28 	EFFECTIVE DATE. This section is effective January 1, 2007, and applies to 
3.29 	policies issued or renewed on or after that date.