AB394: Bill Text

AB394,1,13 An Act to repeal subchapter I of chapter 635 [precedes 635.01.], subchapter II (title) of chapter 635 [precedes 635.20] and 635.26 (1s); to amend 15.735 (1), 111.70 (1) (a), 185.981 (4t), 185.983 (1) (intro.), 185.983 (1g), 600.01 (2) (b), 619.12 (1) (intro.), 619.12 (2) (e) 2. (intro.), 619.12 (2) (e) 2. b., 625.03 (6), 625.12 (2), 625.15 (1), 625.22 (1), 625.22 (4), 628.36 (2) (b) 1., 3. and 5., 631.01 (4), 632.70, 632.76 (2) (a), 632.896 (4), 632.897 (2) (d), 632.897 (9) (c), chapter 635 (title), 635.20 (intro.), 635.20 (10), 635.25 (1) (a) (intro.), 635.25 (1) (b), 635.25 (1m), 635.254 (1), 635.254 (3), 635.28, 635.29, 635.31 and 646.35 (5); to repeal and recreate 635.20 (1c), 635.20 (1m) and 635.20 (13); and to create 20.145 (1) (h), 111.70 (4) (m), 601.424, 628.34 (3) (c), 632.727, 632.745, 632.746, 632.7465, 632.747, 632.748, 632.749 and 632.83 of the statutes; relating to: health insurance market reform, granting rule-making authority and making an appropriation.

Analysis by the Legislative Reference Bureau

Health insurance market reform

Scope of reform

This bill imposes a number of general requirements on insurers with respect to individual and group health benefit plans that are issued or renewed on or after October 1, 1996. A health benefit plan is defined in the bill as any hospital or medical policy or certificate, including a conversion health insurance policy, but excluding such insurance policies as dental, vision, long-term care, medicare supplement, medicare replacement, worker's compensation, specified disease, health insurance risk-sharing plan and automobile medical payment insurance policies.

Community rating

All health benefit plans must be community rated. The community rates, however, may be modified by the insured's age and gender and by whether the insured's coverage is single or a type of family. The commissioner of insurance (commissioner) must by rule define "community" for the purpose of determining community rates. A "community" may not be a geographical area that includes less than an entire county or federal metropolitan statistical area, whichever is larger. The commissioner must by rule prescribe rate bands for the modifications and may also by rule prescribe rate restrictions that provide for a transition to the modified community rates.

Guaranteed issue

With certain specified exceptions, an insurer that has in force a health benefit plan must issue a group health benefit plan to an employer that agrees to pay the premium and comply with all other plan provisions, and to all of the employer's employes with a normal work week of 30 or more hours and any of the employer's other employes for whom the employer desires to provide coverage, including employes who become eligible for coverage after the commencement of the employer's coverage, without regard to health condition or claims experience. Such an insurer is also required to issue an individual health benefit plan to an individual who agrees to pay the premium and comply with all other plan provisions, without regard to health condition or claims experience. An insurer, however, may limit its issuance of health benefit plans to group plans, and related individual conversion policies, for employers with 2 to 25 employes, group plans, and related individual conversion policies, for employers with more than 25 employes or individual plans.

Reinsurance

The bill requires the commissioner to establish a risk adjustment mechanism by rule for insurers issuing health benefit plans. The rules must define "high-risk medical conditions", determine the percentage of individuals with coverage under all health benefit plans who have high-risk medical conditions and provide for an assessment against each insurer that insures a lower percentage of individuals with high-risk medical conditions than the overall percentage and a reimbursement for each insurer that insures a higher percentage of individuals with high-risk medical conditions than the overall percentage. The commissioner must establish an advisory committee to advise the commissioner on the contents of the rules and to review the rules and make recommendations on them to the legislature. The committee members are to be appointed by the commissioner and must be, in addition to the commissioner, representatives of insurers, including a health maintenance organization; 2 actuaries; 2 underwriters; and a medical director.

Preexisting conditions and portability

Under current law a group health benefit plan issued to an employer with 2 to 25 employes may not exclude or limit benefits on account of a preexisting condition for more than 12 months after the commencement of coverage and may not define a preexisting condition more restrictively than a pregnancy existing on the effective date of coverage or a condition for which the insured sought or should have sought medical care during the 6 months immediately preceding coverage. Additionally, such a plan must waive any period applicable to a preexisting condition exclusion or limitation that was satisfied under another plan under which the insured had coverage to a date not more than 30 days before the effective date of coverage under the new plan.

Under the bill, except for a conversion health insurance policy, which under current law may not impose any preexisting condition limitations or exclusions, a group or an individual health benefit plan may not exclude or limit benefits on account of a preexisting condition for more than 12 months, as under current law. A group or individual health benefit plan may not define a preexisting condition more restrictively than a pregnancy existing on the effective date of coverage, except that coverage may not be excluded for covered prenatal care expenses or for other covered expenses for such a pregnancy that exceed a separate deductible amount prescribed by the commissioner by rule. Additionally, a group health benefit plan may not define a preexisting condition more restrictively than a condition for which the insured sought or should have sought medical care during the 6 months immediately preceding coverage, and an individual plan may not define a preexisting condition more restrictively than a condition for which the insured sought or should have sought medical care during the 12 months immediately preceding coverage. An individual who is a resident or an employe who has satisfied any necessary waiting period may obtain coverage under a group or individual health benefit plan without any preexisting condition exclusion or limitation if the individual, employer or employe applies for coverage during the 45-day period beginning on October 1, 1996, within 30 days after the later of the date on which the individual or employe becomes 18 years old or the date on which the individual's or employe's coverage under a health benefit plan as a dependent ceases or during a biennial 30-day open enrollment period specified by the commissioner by rule. Both group and individual health benefit plans must waive any period applicable to a preexisting condition exclusion or limitation that was satisfied under another plan, including the health insurance risk-sharing plan (HIRSP), under which coverage terminated not more than 60 days before the effective date of coverage under the new plan.

Contract renewability and fair marketing standards

A health benefit plan may not be canceled before the expiration of the agreed term, and must be renewed at the option of the policyholder, except for such reasons as failure to pay a premium when due or fraud or misrepresentation. An insurer may elect not to renew a health benefit plan only if the insurer thereafter ceases to issue or renew any health benefit plans for a minimum of 5 years.

Insurers that offer health benefit plans must actively market such health benefit plans and are prohibited from such marketing practices as discouraging an employer or individual from applying for coverage, or encouraging an employer or individual to seek coverage from a different insurer, for reasons related to health condition, claims experience or other characteristics of the employer or individual.

These contract renewability and fair marketing provisions apply under current law to group health benefit plans that are issued to an employer with 2 to 25 employes.

Other

Electronic claims

The bill requires every insurer that offers health insurance (called disability insurance in the statutes) to accept all claims electronically and to allow electronic access to eligibility and claims status information. Insurers must have this capability and use it beginning on January 1, 1996. Also beginning on that date, health care providers that have annual gross revenues of more than $1,000,000 must be able to transmit health insurance claims electronically. All other health care providers must have and use this capability beginning on January 1, 1998.

For further information see the state and local fiscal estimate, which will be printed as an appendix to this bill.

The people of the state of Wisconsin, represented in senate and assembly, do enact as follows:

AB394, s. 1 Section 1. 15.735 (1) of the statutes is amended to read:

AB394,4,11 15.735 (1) Small employer insurance board. There is created a small employer insurance board which is attached to the office of the commissioner of insurance under s. 15.03. The board shall consist of 11 members. Notwithstanding s. 15.07 (2) (intro.), one member shall be the commissioner of insurance, or his or her designee, who shall be a nonvoting member and who shall serve permanently as chairperson of the board. The other 10 members shall be nominated by the governor, and with the advice and consent of the senate appointed, for 3-year terms. Five members shall represent employers that are eligible to participate in the plan under subch. II of ch. 635, and 5 members shall represent employes of employers that are eligible to participate in the plan under subch. II of ch. 635.

AB394, s. 2 Section 2. 20.145 (1) (h) of the statutes is created to read:

AB394,5,3 20.145 (1) (h) Risk adjustment mechanism. All moneys received from risk adjustment assessments against health insurers for risk adjustment reimbursements to health insurers under rules promulgated under s. 632.747 (4).

AB394, s. 3 Section 3. 111.70 (1) (a) of the statutes is amended to read:

AB394,5,25 111.70 (1) (a) "Collective bargaining" means the performance of the mutual obligation of a municipal employer, through its officers and agents, and the representatives of its employes, to meet and confer at reasonable times, in good faith, with the intention of reaching an agreement, or to resolve questions arising under such an agreement, with respect to wages, hours and conditions of employment, and with respect to a requirement of the municipal employer for a municipal employe to perform law enforcement and fire fighting services under s. 61.66, except as provided in sub. (4) (m) and s. 40.81 (3) and except that a municipal employer shall not meet and confer with respect to any proposal to diminish or abridge the rights guaranteed to municipal employes under ch. 164. The duty to bargain, however, does not compel either party to agree to a proposal or require the making of a concession. Collective bargaining includes the reduction of any agreement reached to a written and signed document. The employer shall not be required to bargain on subjects reserved to management and direction of the governmental unit except insofar as the manner of exercise of such functions affects the wages, hours and conditions of employment of the employes. In creating this subchapter the legislature recognizes that the public employer must exercise its powers and responsibilities to act for the government and good order of the municipality, its commercial benefit and the health, safety and welfare of the public to assure orderly operations and functions within its jurisdiction, subject to those rights secured to public employes by the constitutions of this state and of the United States and by this subchapter.

AB394, s. 4 Section 4. 111.70 (4) (m) of the statutes is created to read:

AB394,6,5 111.70 (4) (m) Health insurance market reform requirements. A municipal employer that is an employer under the definition specified in s. 632.745 (1) (b) 2. is prohibited from bargaining collectively with respect to the health insurance requirements under ss. 632.745 to 632.749.

AB394, s. 5 Section 5. 185.981 (4t) of the statutes is amended to read:

AB394,6,9 185.981 (4t) A sickness care plan operated by a cooperative association is subject to ss. 252.14, 631.89, 632.72 (2), 632.745 to 632.749, 632.87 (2m), (3), (4) and (5), 632.895 (10) and 632.897 (10) and ch. 155.

AB394, s. 6 Section 6. 185.983 (1) (intro.) of the statutes is amended to read:

AB394,6,16 185.983 (1) (intro.)  Every such voluntary nonprofit sickness care plan shall be exempt from chs. 600 to 646, with the exception of ss. 601.04, 601.13, 601.31, 601.41, 601.42, 601.43, 601.44, 601.45, 611.67, 619.04, 628.34 (10), 631.89, 631.93, 632.72 (2), 632.745 to 632.749, 632.775, 632.79, 632.795, 632.87 (2m), (3), (4) and (5), 632.895 (5), (9) and (10), 632.896 and 632.897 (10), subch. II of ch. 619 and chs. 609, 630, 635, 645 and 646, but the sponsoring association shall:

AB394, s. 7 Section 7. 185.983 (1g) of the statutes is amended to read:

AB394,6,21 185.983 (1g) A cooperative association that is a small employer insurer, as defined in s. 635.02 (8) 635.20 (13), is subject to the health insurance mandates, as defined in s. 601.423 (1), to the same extent as any other small employer insurer, as defined in s. 635.02 (8) 635.20 (13).

AB394, s. 8 Section 8. 600.01 (2) (b) of the statutes is amended to read:

AB394,6,24 600.01 (2) (b) Group or blanket insurance described in sub. (1) (b) 3. and 4. is not exempt from ss. 632.745 to 632.749 or ch. 633 or 635.

AB394, s. 9 Section 9. 601.424 of the statutes is created to read:

AB394,7,7 601.424 Reports on market reform impact on the health insurance risk-sharing plan. The commissioner shall study the effects of the health insurance market reforms under ss. 632.745 to 632.749 on enrollment under, and other aspects of, the health insurance risk-sharing plan under subch. II of ch. 619. The commissioner shall annually submit a report on the effects and any recommendations to the legislature under s. 13.172 (2) commencing on October 1, 1997.

AB394, s. 10 Section 10. 619.12 (1) (intro.) of the statutes is amended to read:

AB394,7,15 619.12 (1) (intro.) Except as provided in subs. (1m) and (2) to (3), the board or administering carrier shall certify as eligible a person who is covered by medicare because he or she is disabled under 42 USC 423, a person who submits evidence that he or she has tested positive for the presence of HIV, antigen or nonantigenic products of HIV or an antibody to HIV, and any person who receives and submits any of the following based wholly or partially on medical underwriting considerations within 9 months prior to making application for coverage by the plan:

AB394, s. 11 Section 11. 619.12 (2) (e) 2. (intro.) of the statutes is amended to read:

AB394,7,19 619.12 (2) (e) 2. (intro.) Subdivision 1 does not apply to a person who is eligible for health care benefits under the small employer health insurance plan under subch. II of ch. 635 if all of the following apply:

AB394, s. 12 Section 12. 619.12 (2) (e) 2. b. of the statutes is amended to read:

AB394,7,23 619.12 (2) (e) 2. b. The board determines that the coverage under the small employer health insurance plan under subch. II of ch. 635 is not substantially equivalent to or greater than the coverage under the plan.

AB394, s. 13 Section 13. 625.03 (6) of the statutes is amended to read:

AB394,8,3 625.03 (6) Group and blanket accident and sickness insurance other than credit accident and sickness insurance, except as provided in s. 625.22 with regard to s. 632.746 and any rules promulgated under s. 632.7465.

AB394, s. 14 Section 14. 625.12 (2) of the statutes is amended to read:

AB394,8,14 625.12 (2) Classification. Risks Subject to s. 632.746 and any rules promulgated under s. 632.7465, risks may be classified in any reasonable way for the establishment of rates and minimum premiums, except that no such classifications may be based on race, color, creed or national origin, and classifications in automobile insurance may not be based on physical condition or developmental disability as defined in s. 51.01 (5). Subject to s. ss. 632.365 and 632.746 and any rules promulgated under s. 632.7465, rates thus produced may be modified for individual risks in accordance with rating plans or schedules that establish reasonable standards for measuring probable variations in hazards, expenses, or both. Rates may also be modified for individual risks under s. 625.13 (2).

AB394, s. 15 Section 15. 625.15 (1) of the statutes is amended to read:

AB394,8,24 625.15 (1) Rate making. An insurer may itself establish rates and supplementary rate information for one or more market segments based on the factors in s. 625.12 and, subject to s. 632.365 if the rates are for motor vehicle liability insurance, subject to s. 632.365, or s. 632.746 and any rules promulgated under s. 632.7465 if the rates are for health benefit plans, as defined in s. 632.745 (1) (d). In the alternative, the insurer may use rates and supplementary rate information prepared by a rate service organization, with average expense factors determined by the rate service organization or with such modification for its own expense and loss experience as the credibility of that experience allows.

AB394, s. 16 Section 16. 625.22 (1) of the statutes is amended to read:

AB394,9,4 625.22 (1) Order in event of violation. If the commissioner finds after a hearing that a rate is not in compliance with s. 625.11 or 632.746 or rules promulgated under s. 632.7465, the commissioner shall order that its use be discontinued for any policy issued or renewed after a date specified in the order.

AB394, s. 17 Section 17. 625.22 (4) of the statutes is amended to read:

AB394,9,15 625.22 (4) Interim rates. Whenever an insurer has no legally effective rates as a result of the commissioner's disapproval of rates or other act, the commissioner shall on request specify interim rates for the insurer that are high enough to protect the interests of all parties, and that comply with s. 632.746 and any rules promulgated under s. 632.7465 if the rates are for health benefit plans, as defined in s. 632.745 (1) (d), and may order that a specified portion of the premiums be placed in an escrow account approved by the commissioner. When new rates become legally effective, the commissioner shall order the escrowed funds or any overcharge in the interim rates to be distributed appropriately, except that refunds to policyholders that are trifling shall not be required.

AB394, s. 18 Section 18. 628.34 (3) (c) of the statutes is created to read:

AB394,9,18 628.34 (3) (c) Paragraphs (a) and (b) do not apply to coverage under a health benefit plan, as defined in s. 632.745 (1) (d), which is subject to ss. 632.745 to 632.749.

AB394, s. 19 Section 19. 628.36 (2) (b) 1., 3. and 5. of the statutes are amended to read:

AB394,9,25 628.36 (2) (b) 1. Except for health maintenance organizations, preferred provider plans, limited service health organizations and the small employer health insurance plan under subch. II of ch. 635, no health care plan may prevent any person covered under the plan from choosing freely among providers who have agreed to participate in the plan and abide by its terms, except by requiring the person covered to select primary providers to be used when reasonably possible.

AB394,10,5 3. Except as provided in subd. 4., no provider may be denied the opportunity to participate in a health care plan, other than a health maintenance organization, a limited service health organization, a preferred provider plan or the small employer health insurance plan under subch. II of ch. 635, under the terms of the plan.

AB394,10,9 5. Except for the small employer health insurance plan under subch. II of ch. 635 to the extent determined by the small employer insurance board under s. 635.23 (1) (b), all health care plans, including health maintenance organizations, limited service health organizations and preferred provider plans are subject to s. 632.87 (3).

AB394, s. 20 Section 20. 631.01 (4) of the statutes is amended to read:

AB394,10,20 631.01 (4) Group policies and annuities for eleemosynary institutions. This chapter, ch. 632 and the health insurance mandates under ch. 632 that apply to the plan under subch. II of ch. 635 do not apply to group policies or annuities provided on a basis as uniform nationally as state statutes permit to educational, scientific research, religious or charitable institutions organized without profit to any person, for the benefit of employes of such institutions. The commissioner may by order subject such contracts issued by a particular insurer to this chapter, ch. 632 or the health insurance mandates under ch. 632 that apply to the plan under subch. II of ch. 635 or any portion of those provisions upon a finding, after a hearing, that the interests of Wisconsin insureds or creditors or the public of this state so require.

AB394, s. 21 Section 21. 632.70 of the statutes is amended to read:

AB394,10,25 632.70 Exemption for plan under ch. 635. The health insurance mandates, as defined in s. 601.423 (1), that are provided under this subchapter apply to the small employer health insurance plan under subch. II of ch. 635 only to the extent determined by the small employer insurance board under s. 635.23 (1) (b).

AB394, s. 22 Section 22. 632.727 of the statutes is created to read:

AB394,11,3 632.727 Electronic claims capability. (1) Definition. In this section, "health care provider" has the meaning given in s. 146.81 (1) (a) to (m).

AB394,11,7 (2) Insurers. Beginning on January 1, 1996, every insurer that offers disability insurance must have and use the capability to accept all claims electronically and to allow electronic access to information on eligibility, claim status and remittance advice.

AB394,11,10 (3) Health care providers. (a) Beginning on January 1, 1996, every health care provider that has annual gross revenues of more than $1,000,000 must have and use the capability to electronically transmit disability insurance claims information.

AB394,11,13 (b) Beginning on January 1, 1998, every health care provider not specified in par. (a) must have and use the capability to electronically transmit disability insurance claims information.

AB394, s. 23 Section 23. 632.745 of the statutes is created to read:

AB394,11,16 632.745 Coverage requirements for health benefit plans. (1) Health insurance market reform; definitions. In ss. 632.745 to 632.749:

AB394,11,23 (a) "Eligible employe" means an employe who works on a permanent basis and has a normal work week of 30 or more hours. The term includes a sole proprietor, a business owner, including the owner of a farm business, a partner of a partnership, a member of a limited liability company and an independent contractor if the sole proprietor, business owner, partner, member or independent contractor is included as an employe under a health benefit plan of an employer, but the term does not include an employe who works on a temporary or substitute basis.

AB394,11,24 (b) "Employer" means any of the following:

AB394,12,3 1. An individual, firm, corporation, partnership, limited liability company or association that is actively engaged in a business enterprise in this state, including a farm business.

AB394,12,4 2. A municipality, as defined in s. 16.70 (8).

AB394,12,6 (c) "Established geographic service area" means a geographic area within which an insurer provides coverage and that has been approved by the commissioner.

AB394,12,15 (d) "Health benefit plan" means any hospital or medical policy or certificate, and includes a conversion health insurance policy. "Health benefit plan" does not include accident-only, credit, dental, vision, medicare supplement, medicare replacement, long-term care, or disability income insurance, coverage issued as a supplement to liability insurance, worker's compensation or similar insurance, automobile medical payment insurance, specified disease policies, hospital indemnity policies, as defined in s. 632.895 (1) (c), policies or certificates issued under the health insurance risk-sharing plan or an alternative plan under subch. II of ch. 619 or other insurance exempted by rule of the commissioner.

AB394,12,24 (e) "Insurer" means an insurer that is authorized to do business in this state, in one or more lines of insurance that includes health insurance, and that offers group health benefit plans covering eligible employes of one or more employers in this state, or that sells individual health benefit plans to individuals who are residents of this state. The term includes a health maintenance organization, as defined in s. 609.01 (2), a preferred provider plan, as defined in s. 609.01 (4), and an insurer operating as a cooperative association organized under ss. 185.981 to 185.985, but does not include a limited service health organization, as defined in s. 609.01 (3).

AB394,13,2 (em) "Qualifying coverage" means benefits or coverage provided under any of the following:

AB394,13,3 1. Medicare or medicaid.

AB394,13,6 2. An employer-based health insurance or health benefit arrangement that provides benefits similar to or exceeding benefits provided under a small employer health insurance plan under ch. 635.

AB394,13,9 3. An individual health insurance policy that provides benefits similar to or exceeding benefits provided under a small employer health insurance plan under ch. 635, if the policy has been in effect for at least one year.

AB394,13,11 4. The health insurance risk-sharing plan or an alternative plan under subch. II of ch. 619.