2004 Minnesota Statutes

     62L.08 Restrictions relating to premium rates. 

    Subdivision 1.    Rate restrictions.  Premium rates for 
 all health benefit plans sold or issued to small employers are 
 subject to the restrictions specified in this section. 

    Subd. 2.    General premium variations.  Beginning July 
 1, 1993, each health carrier must offer premium rates to small 
 employers that are no more than 25 percent above and no more 
 than 25 percent below the index rate charged to small employers 
 for the same or similar coverage, adjusted pro rata for rating 
 periods of less than one year.  The premium variations permitted 
 by this subdivision must be based only on health status, claims 
 experience, industry of the employer, and duration of coverage 
 from the date of issue.  For purposes of this subdivision, 
 health status includes refraining from tobacco use or other 
 actuarially valid lifestyle factors associated with good health, 
 provided that the lifestyle factor and its effect upon premium 
 rates have been determined to be actuarially valid and approved 
 by the commissioner.  Variations permitted under this 
 subdivision must not be based upon age or applied differently at 
 different ages.  This subdivision does not prohibit use of a 
 constant percentage adjustment for factors permitted to be used 
 under this subdivision.  

    Subd. 2a.    Renewal premium increases limited.  (a) 
 Beginning January 1, 2003, the percentage increase in the 
 premium rate charged to a small employer for a new rating period 
 must not exceed the sum of the following: 

    (1) the percentage change in the index rate measured from 
 the first day of the prior rating period to the first day of the 
 new rating period; 

    (2) an adjustment, not to exceed 15 percent annually and 
 adjusted pro rata for rating periods of less than one year, due 
 to the claims experience, health status, or duration of coverage 
 of the employees or dependents of the employer; and 

    (3) any adjustment due to change in coverage or in the case 
 characteristics of the employer. 

    (b) This subdivision does not apply if the employer, 
 employee, or any applicant provides the health carrier with 
 false, incomplete, or misleading information. 

    Subd. 3.    Age-based premium variations.  Beginning 
 July 1, 1993, each health carrier may offer premium rates to 
 small employers that vary based upon the ages of the eligible 
 employees and dependents of the small employer only as provided 
 in this subdivision.  In addition to the variation permitted by 
 subdivision 2, each health carrier may use an additional premium 
 variation based upon age of up to plus or minus 50 percent of 
 the index rate. 

    Subd. 4.    Geographic premium variations.  A health 
 carrier may request approval by the commissioner to establish no 
 more than three geographic regions and to establish separate 
 index rates for each region, provided that the index rates do 
 not vary between any two regions by more than 20 percent.  
 Health carriers that do not do business in the Minneapolis/St. 
 Paul metropolitan area may request approval for no more than two 
 geographic regions, and clauses (2) and (3) do not apply to 
 approval of requests made by those health carriers.  A health 
 carrier may also request approval to establish one or more 
 additional geographic regions and one or more separate index 
 rates for premiums for employees working and residing outside of 
 Minnesota.  The commissioner may grant approval if the following 
 conditions are met: 

    (1) the geographic regions must be applied uniformly by the 
 health carrier; 

    (2) one geographic region must be based on the 
 Minneapolis/St. Paul metropolitan area; 

    (3) if one geographic region is rural, the index rate for 
 the rural region must not exceed the index rate for the 
 Minneapolis/St. Paul metropolitan area; 

    (4) the health carrier provides actuarial justification 
 acceptable to the commissioner for the proposed geographic 
 variations in index rates, establishing that the variations are 
 based upon differences in the cost to the health carrier of 
 providing coverage. 

    Subd. 5.    Gender-based rates prohibited.  Beginning 
 July 1, 1993, no health carrier may determine premium rates 
 through a method that is in any way based upon the gender of 
 eligible employees or dependents.  Rates must not in any way 
 reflect marital status or generalized differences in expected 
 costs between employees and spouses. 

    Subd. 6.    Rate cells permitted.  Health carriers may 
 use rate cells and must file with the commissioner the rate 
 cells they use.  Rate cells must be based on the number of 
 adults and children covered under the policy and may reflect the 
 availability of Medicare coverage.  The rates for different rate 
 cells must not in any way reflect marital status or differences 
 in expected costs between employees and spouses.  

    Subd. 7.    Index and premium rate development.  (a) In 
 developing its index rates and premiums, a health carrier may 
 take into account only the following factors: 

    (1) actuarially valid differences in benefit designs of 
 health benefit plans; 

    (2) actuarially valid differences in the rating factors 
 permitted in subdivisions 2 and 3; 

    (3) actuarially valid geographic variations if approved by 
 the commissioner as provided in subdivision 4. 

    (b) All premium variations permitted under this section 
 must be based upon actuarially valid differences in expected 
 cost to the health carrier of providing coverage.  The variation 
 must be justified in initial rate filings and upon request of 
 the commissioner in rate revision filings.  All premium 
 variations are subject to approval by the commissioner.  

    Subd. 7a. Repealed, 1995 c 234 art 7 s 28 

    Subd. 8.    Filing requirement.  No later than July 1, 
 1993, and each year thereafter, a health carrier that offers, 
 sells, issues, or renews a health benefit plan for small 
 employers shall file with the commissioner the index rates and 
 must demonstrate that all rates shall be within the rating 
 restrictions defined in this chapter.  Such demonstration must 
 include the allowable range of rates from the index rates and a 
 description of how the health carrier intends to use demographic 
 factors including case characteristics in calculating the 
 premium rates.  The rates shall not be approved, unless the 
 commissioner has determined that the rates are reasonable.  In 
 determining reasonableness, the commissioner shall consider the 
 growth rates applied under section 62J.04, subdivision 1, 
 paragraph (b), to the calendar year or years that the proposed 
 premium rate would be in effect, actuarially valid changes in 
 risk associated with the enrollee population, and actuarially 
 valid changes as a result of statutory changes in Laws 1992, 
 chapter 549.  For premium rates proposed to go into effect 
 between July 1, 1993 and December 31, 1993, the pertinent growth 
 rate is the growth rate applied under section 62J.04, 
 subdivision 1, paragraph (b), to calendar year 1994.  

    Subd. 9.    Effect of assessments.  Premium rates must 
 comply with the rating requirements of this section, 
 notwithstanding the imposition of any assessments or premiums 
 paid by health carriers as provided under sections 62L.13 to 
 62L.22. 

    Subd. 10.    Rating report.  Beginning January 1, 1995, 
 and annually thereafter, the commissioners of health and 
 commerce shall provide a joint report to the legislature on the 
 effect of the rating restrictions required by this section and 
 the appropriateness of proceeding with additional rate reform.  
 Each report must include an analysis of the availability of 
 health care coverage due to the rating reform, the equitable and 
 appropriate distribution of risk and associated costs, the 
 effect on the self-insurance market, and any resulting or 
 anticipated change in health plan design and market share and 
 availability of health carriers. 

    Subd. 11.    Loss ratio standards.  Notwithstanding 
 section 62A.02, subdivision 3, relating to loss ratios, each 
 policy or contract form used with respect to a health benefit 
 plan offered, or issued in the small employer market, is 
 subject, beginning July 1, 1993, to section 62A.021.  The 
 commissioner of health has, with respect to carriers under that 
 commissioner's jurisdiction, all of the powers of the 
 commissioner of commerce under that section. 

    HIST: 1992 c 549 art 2 s 8,23; 1993 c 345 art 7 s 11,12; 1994 
 c 625 art 10 s 40-46,50; 1Sp1995 c 3 art 13 s 2; 1997 c 7 art 1 
 s 18; 1997 c 225 art 2 s 63; 2002 c 330 s 26