SB201: Bill Text

Analysis by the Legislative Reference Bureau

Health insurance market reform

Scope of reform

This bill imposes a number of insurance market reform requirements on insurers with respect to individual health benefit plans and group health benefit plans sold to employers with 2 to 100 employes with a normal work week of 30 or more hours. 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 (HIRSP) and automobile medical payment insurance policies.

Community rating

All health benefit plans subject to the market reform requirements must be community rated. The community rates, however, may be modified by the insured's age, gender, geographic area and tobacco use and by whether the insured's coverage is single or family. An insured's "geographic area" for this purpose may not be less than an entire county. The commissioner of insurance (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. Additionally, an insurer may provide discounts for insured individuals for healthy lifestyle choices.

Guaranteed issue

With some exceptions, an insurer that has in force a health benefit plan that is subject to the market reform requirements 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, including employes who were excluded from coverage previously and 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, to group plans, and related individual conversion policies, for employers with 26 to 100 employes or to individual plans.

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 less 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 subject to the market reform requirements may not exclude or limit benefits on account of a preexisting condition for more than 12 months. 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 any covered prenatal care expenses or for other covered expenses that exceed a deductible amount prescribed by the commissioner by rule. The deductibles prescribed by the commissioner may not exceed $5,000 and must be based on a sliding scale related to the stage of the pregnancy on the effective date of coverage. 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 has been a resident for at least 6 months 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 or employe applies for coverage 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 subject to the market reform requirements must waive any period applicable to a preexisting condition exclusion or limitation that was satisfied under another plan, including HIRSP, under which the insured had coverage if that coverage terminated 60 days or less before the effective date of coverage under the new plan.

Contract renewability and fair marketing standards

A health benefit plan that is subject to the market reform requirements 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 that are subject to the requirements 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.

Comprehensive health care board and reinsurance

The bill creates a comprehensive health care board (board) as an expansion of the small employer insurance board. The board consists of the commissioner, the secretary of employe trust funds, 3 members of the board on health care information who are elected by the board on health care information and the following members appointed for 3-year terms: 5 members who represent employers, 3 members who represent eligible employes, one member who represents a labor organization and 3 members who represent purchasing coalitions. (A purchasing coalition is a corporation or cooperative that purchases or arranges for the purchase of health care coverage or services for 2 or more employers and that is controlled by those employers.)

The bill repeals the small employer insurance board and the comprehensive health care board assumes the duties of the small employer insurance board with respect to administering the small employer health insurance plan under current law. In addition, the board is given additional duties to provide data or technical assistance to any purchasing coalition, develop quality outcomes measures, quality and practice pattern standards and health plan performance criteria, provide information on technology assessment to any purchasing coalition and recommend cost containment measures and provide assessments of health care needs to any purchasing coalition. The board must also submit proposed legislation for a reinsurance program for insurers that are subject to the market reform requirements. The reinsurance program must be optional, must allow an insurer to select among 3 different threshold amounts, must require the commissioner to pay 80% of claims above the threshold amount selected by an insurer and must provide for a premium and assessment arrangement for funding a health reinsurance fund out of which the claims will be paid.

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, 1997. 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.

Health insurance risk-sharing plan reports

The bill requires the commissioner to study the effects that the health insurance market reforms under the bill have on enrollment in, and other aspects of, HIRSP. Beginning on October 1, 1999, the commissioner must submit an annual report to the legislature on the effects.

Group insurance board

The bill authorizes the group insurance board to enter into contracts with purchasing coalitions to further the purposes of the health care plans for state employes.

For further information see the state 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:

SB201, s. 1 Section 1. 15.07 (1) (b) 21. of the statutes is created to read:

SB201,5,3 15.07 (1) (b) 21. The members of the comprehensive health care board appointed under s. 15.735 (3) (b) 1. to 4.

SB201, s. 2 Section 2. 15.735 (1) of the statutes is repealed.

SB201, s. 3 Section 3. 15.735 (3) of the statutes is created to read:

SB201,5,6 15.735 (3) Comprehensive health care board. (a) In this subsection:

SB201,6,3 1. "Eligible employe" means an employe who works on a full-time 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 part-time, temporary or substitute basis.

SB201,6,4 2. "Employer" means any of the following:

SB201,6,7 a. 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, and that employs in this state not more than 100 eligible employes.

SB201,6,9 b. A municipality, as defined in s. 16.70 (8), that employs not more than 100 eligible employes.

SB201,6,15 (b) There is created a comprehensive health care board that is attached to the office of the commissioner of insurance under s. 15.03, consisting of the commissioner of insurance or his or her designee, the secretary of employe trust funds or his or her designee, 3 members of the board on health care information who are elected by the board on health care information and the following members appointed for 3-year terms:

SB201,6,16 1. Five members who represent employers.

SB201,6,17 2. Three members who represent eligible employes.

SB201,6,18 3. One member who represents a labor organization.

SB201,6,20 4. Three members who represent purchasing coalitions, as defined in s. 600.03 (40m).

SB201,6,22 (c) Notwithstanding s. 15.07 (2) (intro.), the commissioner of insurance shall be a nonvoting member who shall serve permanently as chairperson of the board.

SB201, s. 4 Section 4. 40.02 (48g) of the statutes is created to read:

SB201,6,24 40.02 (48g) "Purchasing coalition" has the meaning given in s. 600.03 (40m).

SB201, s. 5 Section 5. 40.03 (6) (a) 2. of the statutes is amended to read:

SB201,7,6 40.03 (6) (a) 2. May, wholly or partially in lieu of subd. 1., on behalf of the state, provide any group insurance plan on a self-insured basis in which case the group insurance board shall approve a written description setting forth the terms and conditions of the plan, and may contract directly with providers of hospital, medical or ancillary services to provide insured employes with the benefits provided under this chapter.; or

SB201, s. 6 Section 6. 40.03 (6) (a) 3. of the statutes is created to read:

SB201,7,10 40.03 (6) (a) 3. May, wholly or partially in lieu of subd. 1., on behalf of the state, enter into a contract with one or more purchasing coalitions to further the purpose of ss. 40.51 and 40.52.

SB201, s. 7 Section 7. 111.70 (1) (a) of the statutes is amended to read:

SB201,8,7 111.70 (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.

SB201, s. 8 Section 8. 111.70 (4) (m) of the statutes is created to read:

SB201,8,12 111.70 (4) (m) Health insurance market reform. A municipal employer that is an employer under the definition specified in s. 635.02 (3h) (b) is prohibited from bargaining collectively with respect to the health insurance requirements under subch. I of ch. 635.

SB201, s. 9 Section 9. 153.07 (4) of the statutes is created to read:

SB201,8,15 153.07 (4) The board shall elect 3 members to serve on the comprehensive health care board.

SB201, s. 10 Section 10. 185.983 (1g) of the statutes is amended to read:

SB201,8,20 185.983 (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).

SB201, s. 11 Section 11. 600.03 (40m) of the statutes is created to read:

SB201,8,24 600.03 (40m) "Purchasing coalition" means a corporation or cooperative that purchases or arranges for the purchase of health care coverage or services for 2 or more employers and that is controlled by those employers.

SB201, s. 12 Section 12. 601.424 of the statutes is created to read:

SB201,9,6 601.424 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 ch. 635 on enrollment in, 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, 1999.

SB201, s. 13 Section 13. 625.12 (2) of the statutes is amended to read:

SB201,9,17 625.12 (2) Classification. Risks Subject to s. 635.05 and any rules promulgated under s. 635.06, risks may be classified in any reasonable way for the establishment of rates and minimum premiums, except that no 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 635.05 and any rules promulgated under s. 635.06, 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).

SB201, s. 14 Section 14. 628.34 (3) of the statutes is amended to read:

SB201,9,24 628.34 (3) Unfair discrimination. (a) No insurer may unfairly discriminate among policyholders by charging different premiums or by offering different terms of coverage except on the basis of classifications related to the nature and the degree of the risk covered or the expenses involved, subject to s. ss. 632.365 and 635.05 and any rules promulgated under s. 635.06. Rates are not unfairly discriminatory if they are averaged broadly among persons insured under a group, blanket or franchise policy, and terms are not unfairly discriminatory merely because they are more favorable than in a similar individual policy.

SB201,10,9 (b) No insurer may refuse to insure or refuse to continue to insure, or limit the amount, extent or kind of coverage available to an individual, or charge an individual a different rate for the same coverage because of a mental or physical disability except when the refusal, limitation or rate differential is based on either sound actuarial principles supported by reliable data or actual or reasonably anticipated experience, subject to ss. 635.05, 635.07 and 635.15 and any rules promulgated under s. 635.06.

SB201, s. 15 Section 15. 628.36 (2) (b) 5. of the statutes is amended to read:

SB201,10,16 628.36 (2) (b) 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), 1993 stats., or the comprehensive health care 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).

SB201, s. 16 Section 16. 632.70 of the statutes is amended to read:

SB201,10,22 632.70 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), 1993 stats., or the comprehensive health care board under s. 635.23 (1) (b).

SB201, s. 17 Section 17. 632.727 of the statutes is created to read:

SB201,10,25 632.727 Electronic claims capability. (1) Definition. In this section, "health care provider" has the meaning given in s. 146.81 (1) (a) to (m).

SB201,11,4 (2) Insurers. Beginning on January 1, 1997, 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.

SB201,11,7 (3) Health care providers. (a) Beginning on January 1, 1997, 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.

SB201,11,10 (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.

SB201, s. 18 Section 18. 632.83 of the statutes is created to read:

SB201,11,16 632.83 Regulation of certain related policies. The commissioner may, by rule, prescribe standards for specified disease policies, hospital indemnity policies, as defined in s. 632.895 (1) (c), or limited benefit health policies, including prohibiting certain specified types of products, prescribing minimum coverage and establishing marketing or suitability standards.

SB201, s. 19 Section 19. 632.897 (2) (d) of the statutes is amended to read:

SB201,12,9 632.897 (2) (d) If the employer is notified to terminate the coverage for any of the reasons provided under par. (b), the employer shall provide the terminated insured written notification of the right to continue group coverage or convert to individual coverage and the payment amounts required for either continued or converted coverage including the manner, place and time in which the payments shall be made. This notice shall be given not more than 5 days after the employer receives notice to terminate coverage. The payment amount for continued group coverage may not exceed the group rate in effect for a group member, including an employer's contribution, if any, for a group policy as defined in sub. (1) (c) 1. or 1m. or the equivalent value of the monthly contribution of a group member to a group policy as defined in sub. (1) (c) 2. or the equivalent value of the monthly premium for franchise insurance as defined in sub. (1) (c) 3. The premium for converted coverage shall be determined in accordance with the insurer's table of premium rates applicable to the age and class of risks of each person to be covered under that policy and to the type and amount of coverage provided, subject to s. 635.05 and any rules promulgated under s. 635.06. The notice may be sent to the terminated insured's home address as shown on the records of the employer.

SB201, s. 20 Section 20. 632.897 (9) (c) of the statutes is amended to read:

SB201,12,23 632.897 (9) (c) When the insurer is notified that the coverage of a spouse may be terminated because of a divorce or annulment, the insurer shall provide the former spouse written notification of the right to obtain individual coverage under sub. (4), the premium amounts required and the manner, place and time in which premiums may be paid. This notice shall be given not less than 30 days before the former spouse's coverage would otherwise terminate. The premium shall be determined in accordance with the insurer's table of premium rates applicable to the age and class of risk of every person to be covered and to the type and amount of coverage provided, subject to s. 635.05 and any rules promulgated under s. 635.06. If the former spouse tenders the first monthly premium to the insurer within 30 days after the notice provided by this paragraph, sub. (4) shall apply and the former spouse shall receive individual coverage commencing immediately upon termination of his or her coverage under the insured's policy.

SB201, s. 21 Section 21. Chapter 635 (title) of the statutes is amended to read:

SB201,13,3 Chapter 635 SMALL EMPLOYER REGULATION OF HEALTH INSURANCE

SB201, s. 22 Section 22. 635.01 of the statutes is repealed and recreated to read:

SB201,13,5 635.01 Scope. (1) This subchapter applies to all of the following:

SB201,13,8 (a) Group health benefit plans, and insurers with respect to group health benefit plans, that are written on risks or operations in this state and that provide coverage for eligible employes of an employer.

SB201,13,11 (b) Individual health benefit plans, and insurers with respect to individual health benefit plans, that are issued or renewed to a policyholder who is a resident of this state and who was a resident of this state when the policy was first issued.

SB201,13,15 (2) The provisions of this subchapter that apply to individual health benefit plans apply to certificates issued under a group health benefit plan as if the certificates were individual health benefit plans if the group health benefit plan certificates are marketed to individuals.