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    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 separate geographic regions determined by the health carrier and to
establish separate index rates for each such region. The commissioner shall grant approval if
the following conditions are met:
(1) the geographic regions must be applied uniformly by the health carrier;
(2) each geographic region must be composed of no fewer than seven counties that create a
contiguous region; and
(3) 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. 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.
    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.
History: 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; 2005 c 77
s 3; 2006 c 255 s 29

Official Publication of the State of Minnesota
Revisor of Statutes