SB218: Bill Text

LRB-2407/1

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1997 - 1998 LEGISLATURE

1997 Senate BILL 218

May 27, 1997 - Introduced by Senators Moen, Wirch, Decker, Risser and Clausing, cosponsored by Representatives Lorge, Musser, Dobyns, Staskunas, Hanson, Ward, R. Young, Gronemus, Ainsworth, Robson, Meyer, Baumgart, Plouff, Travis, Murat, Hasenohrl and Reynolds. Referred to Committee on Health, Human Services, Aging, Corrections, Veterans and Military Affairs.

SB218,2,7 An Act to repeal 15.735 (1), 111.70 (4) (n), 185.983 (1g), 619.12 (2) (e) 2., 619.12 (2) (e) 3., 619.123, 632.70, 632.745, 632.747 (2), 632.749, subchapter I (title) of chapter 635 [precedes 635.01], 635.01, 635.08 (1) (b), 635.18 (3) (c) and subchapter II of chapter 635 [precedes 635.20]; to renumber 632.747 (3) (intro.); to renumber and amend 619.12 (2) (e) 1., 632.747 (title), 632.747 (1), 632.747 (3) (a), 632.747 (3) (b), 632.747 (3) (c), 635.11, 635.15 and 635.18 (1); to amend 40.51 (8), 40.51 (8m), 60.23 (25), 66.184, 111.70 (1) (a), 111.91 (2) (k), 120.13 (2) (g), 185.981 (4t), 185.983 (1) (intro.), 600.01 (2) (b), 625.12 (2), 628.34 (3) (a), 628.34 (3) (b), 628.36 (2) (b) 1., 628.36 (2) (b) 3., 628.36 (2) (b) 5., 631.01 (4), 632.76 (2) (a), 632.896 (4), 632.898 (7), chapter 635 (title), 635.11 (title), 635.13 (title), 635.13 (1), 635.18 (title), 635.18 (2), 635.18 (3) (a), 635.18 (3) (b), 635.18 (4), 635.18 (5), 635.18 (6), 635.18 (7) and 635.18 (8); to repeal and recreate 632.898 (1) (b), 635.02, 635.05 and 635.09; and to create 635.03, 635.06, 635.08, 635.11 (1m) (e), 635.11 (1m) (f), 635.11 (2m), 635.11 (3m), 635.16, 635.165 and 635.18 (1) (a) and (b) of the statutes; relating to: health insurance coverage requirements, including preexisting condition exclusions, guaranteed issue, guaranteed acceptance, portability, rating restrictions, contract termination and renewability and fair marketing standards; eliminating the small employer health insurance plan and board; collective bargaining of certain health care coverage requirements; granting rule-making authority; and requiring the exercise of rule-making authority.

Analysis by the Legislative Reference Bureau

Group health insurance requirements under current law

Current law contains a number of provisions that are known collectively as group health insurance market reform. The provisions went into effect on May 1, 1997, and apply to group health benefit plans that are sold to employers (including the state and municipalities) to provide health insurance coverage for their eligible employes (those that normally work 30 or more hours per week). Individual health benefit plans covering eligible employes of one employer are considered to be a group health benefit plan if 3 or more are sold to the employer. Most of the provisions also apply to self-insured health plans of the state and municipalities.

Guaranteed acceptance

An insurer that offers group health benefit plan coverage to any employer must offer coverage to all of the employer's eligible employes. Although such an insurer is not required to issue a group health benefit plan to any employer that applies for coverage, an insurer that does provide coverage to an employer group under a group health benefit plan must provide coverage under the plan to any employe who becomes eligible for coverage under the plan after the commencement of the employer's coverage. Additionally, such an insurer must provide coverage under the group health benefit plan to an eligible employe who waived coverage previously because he or she was covered as a dependent (usually as a spouse) under another health benefit plan, if the employe's coverage under the other health benefit plan was terminated not more than 30 days before the effective date of coverage under the group health benefit plan due to a divorce from the employe's spouse or due to the spouse's death or loss of coverage under the other health benefit plan.

Preexisting conditions and portability

A group health benefit plan may not exclude or limit benefits on account of a preexisting condition for more than 12 months after the commencement of an individual's coverage and may not define a preexisting condition more restrictively than a condition for which the individual sought or should have sought medical care during the 6 months immediately preceding the effective date of coverage. Pregnancy may not be defined as a preexisting condition. A group health benefit plan must waive any period applicable to a preexisting condition exclusion or limitation for particular services for the period that the individual had other health insurance coverage that provided benefits with respect to those services and that terminated not more than 60 days before the effective date of coverage under the new plan.

Contract termination and renewability

A group 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 group health benefit plan only if the insurer thereafter ceases to issue or renew any group health benefit plans for a minimum of 5 years.

Changes to group health insurance requirements

This bill makes changes to current law, with respect to group health benefit plans, as a result of the passage by Congress of the Health Insurance Portability and Accountability Act of 1996. The bill also adds certain requirements for group health benefit plans that are unrelated to that act and other requirements that apply to individual health benefit plans. As under current law, most of the provisions also apply to self-insured health plans of the state and municipalities.

Guaranteed issue

With certain specified exceptions, an insurer that has in force a group health benefit plan must issue a group health benefit plan to any employer that agrees to pay the premiums and comply with all other plan provisions, and to all of the employer's eligible employes, without regard to health condition or claims experience. An insurer may be exempted from the requirement, however, for the remainder of a calendar year after the number of high-risk individuals covered by the insurer reaches a certain threshold level. The insurer must apply for exemption by certifying its qualification to the commissioner of insurance (commissioner), and, if the commissioner does not object, the insurer is exempted. The threshold level, as well as what constitutes a high-risk individual, is determined by the commissioner by rule, in consultation with a committee on risk adjustment. The commissioner appoints the 5 to 8 committee members, at least 5 of whom must be representatives of insurers.

Guaranteed acceptance and special enrollment periods

The bill does not change the requirement under current law that an insurer that issues a group health benefit plan must offer coverage under the plan to all of the employer's eligible employes. The bill requires such an insurer to cover an employe, or an employe's dependent, who is eligible for coverage under the plan and who did not enroll previously because he or she had other coverage. The insurer must enroll the employe or dependent if he or she still has the other coverage or if he or she requests enrollment within 30 days after the other coverage is exhausted or terminated. In addition, the bill requires an insurer offering coverage under a group health benefit plan to provide for special enrollment periods during which the spouse or newly born or adopted child of an enrollee under the plan may enroll under the plan. Any such special enrollment period must begin within 30 days after the date of the marriage, birth or adoption, or within 30 days after the date on which dependent coverage is made available under the plan, whichever is later.

Preexisting conditions and portability

Under the bill, an insurer offering a group health benefit plan may impose a preexisting condition limitation or exclusion only if the limitation or exclusion relates to a condition for which the individual received medical advice or treatment within the 6-month period before the individual's enrollment date. The limitation or exclusion may extend no more than 12 months, or 18 months for a late enrollee (an individual who enrolls at a time other than the first period during which the individual is eligible to enroll or a special enrollment period). In addition, the length of time for which an insurer may impose a limitation or exclusion must be reduced by the aggregate of the individual's creditable coverage (defined in the bill to include many types of health care coverage), regardless of the benefits provided under the creditable coverage. A period of creditable coverage after which an individual had no coverage for at least 63 days is not counted toward the aggregate. Generally, beginning on October 1, 1996, an insurer is required to provide an individual with certification of creditable coverage when the individual's coverage under a health care plan provided by the insurer terminates.

An insurer may not treat genetic information as a preexisting condition without a diagnosis of a condition related to the information. An insurer may not impose a preexisting condition limitation or exclusion relating to pregnancy as a preexisting condition. An insurer may not impose any preexisting condition limitation or exclusion with respect to an individual if the individual had creditable coverage on the 30th day after the individual was born or adopted, unless the individual was without any creditable coverage for a period of at least 63 days.

Prohibiting discrimination

The bill prohibits an insurer from establishing rules for eligibility for group health benefit plan coverage on the basis of various specified factors, such as health status, claims experience, genetic information, disability or medical history. An insurer offering a group health benefit plan may not use any of the specified factors as a basis for charging an individual a higher premium than another similarly situated individual.

Contract termination and renewability

As under current law, an insurer that offers a group health benefit plan must renew the plan at the option of the employer unless certain specified events occur, such as the employer fails to pay premiums. The insurer may, however, discontinue offering a particular type of group health benefit plan if the insurer acts uniformly without regard to any health status-related factor of covered individuals and offers each affected employer the option to purchase another type of group health benefit plan that the insurer offers. The insurer may also discontinue offering in this state all group health benefit plans in the large group market (group health benefit plans sold to employers with more than 50 employes), in the market other than the large group market, or in both group markets, if the insurer does not issue any group health benefit plans in the affected market for 5 years.

Rate regulation

Under current law, the commissioner is required to promulgate rules that establish restrictions on premium rates and increases in premium rates that an insurer may charge for coverage provided to a small employer (one that employs not fewer than 2 nor more than 25 eligible employes). The restrictions must require that the rates charged by an insurer to small employers with employes with similar demographic, actuarially based characteristics for the same or similar benefit design characteristics not vary from the midpoint rate for those small employers by more than 35% of that midpoint rate. The bill expands the requirement for restrictions on rates to all group health benefit plans, regardless of the size of the employer group that the plan covers. The restrictions must require that the rates charged by an insurer to employers with employes with similar demographic, actuarially based characteristics for similar benefit design characteristics not vary from the midpoint rate for those employers by more than 30% of that midpoint rate. The restrictions for rate increases must allow for, among other things, an adjustment that does not exceed 15% per year for employers with 2 to 50 eligible employes or 25% per year for employers with more than 50 eligible employes.

Individual health insurance requirements

The health insurance market reform provisions under current law apply only to group health benefit plans. This bill provides for similar health insurance market reform provisions for individual health benefit plans.

Guaranteed issue

With certain specified exceptions, an insurer that has in force an individual health benefit plan must issue an individual health benefit plan to an individual who is a resident of this state, without regard to health condition or claims experience. The individual must agree to pay the premium and comply with all other plan provisions and must have been covered, within 31 days before applying for the new coverage, under other health insurance that provided benefits similar to or exceeding the benefits under the new coverage. An insurer is exempt from the guaranteed issue requirement, for the remainder of a calendar year, if the insurer fulfills certain requirements set out in the bill based on the number of individuals covered by the insurer who fulfill the requirements necessary for guaranteed issue in comparison to the total number of individuals covered by the insurer under all individual health benefit plans.

Preexisting conditions, portability and other restrictions

Under the bill, an individual health benefit plan may not exclude or limit benefits on account of a preexisting condition for more than 12 months after the commencement of an individual's coverage and may not define a preexisting condition more restrictively than a condition for which the individual sought or should have sought medical care during the 18 months immediately preceding the effective date of coverage. An individual health benefit plan may not impose a preexisting condition limitation or exclusion relating to pregnancy as a preexisting condition. If the individual fulfills the requirements necessary for guaranteed issue of an individual health benefit plan, the plan must waive any period applicable to a preexisting condition exclusion or limitation for particular services for the period that the individual was covered for those services under his or her previous health insurance coverage. In addition, the plan may not restrict the individual's coverage except to the extent that the individual's coverage was restricted under the previous health insurance coverage. The maximum lifetime benefits under the plan, however, may be reduced by the total benefits paid under the previous health insurance coverage.

Contract termination and renewability

Similar to the requirement for group health benefit plans, the bill requires an insurer to renew individual health benefit plan coverage at the option of the insured individual unless certain specified events occur, such as the individual fails to pay premiums. The insurer may, however, discontinue offering in this state a particular type of individual health benefit plan coverage if the insurer acts uniformly without regard to any health status-related factor of covered individuals and offers to each individual who has that type of coverage the option to purchase any other type of individual health benefit plan coverage that the insurer offers. The insurer may also discontinue offering in this state all individual health benefit plan coverage if the insurer does not issue in this state any individual health benefit plan coverage for 5 years.

Rate regulation

Similar to the requirement for group health benefit plans, the bill requires the commissioner to promulgate rules that establish restrictions on premium rates that an insurer may charge for coverage under an individual health benefit plan. The restrictions must require that the rates charged by an insurer to individuals with similar demographic, actuarially based characteristics for the same or similar benefit design characteristics not vary from the midpoint rate for those individuals by more than 35% of that midpoint rate. Unlike the requirement for group health benefit plans, the bill does not require the commissioner to establish restrictions on increases in premium rates for individual health benefit plans.

Repeal of basic benefits plan

Under current law, a small employer may purchase a group health insurance policy providing basic benefits for the health insurance coverage of its employes. The small employer insurance board determines by rule most aspects of the basic benefits policies that insurers may offer to small employers, including the basic benefits that the policies must contain and the deductible, copayment and maximum benefit requirements for the policies. The bill eliminates the provisions related to the basic benefits policies, as well as the small employer insurance board.

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:

SB218, s. 1 Section 1. 15.735 (1) of the statutes is repealed.

SB218, s. 2 Section 2. 40.51 (8) of the statutes, as affected by 1995 Wisconsin Act 289, is amended to read:

SB218,7,6 40.51 (8) Every health care coverage plan offered by the state under sub. (6) shall comply with ss. 631.89, 631.90, 631.93 (2), 632.72 (2), 632.745 (1) to (3) and (5), 632.747, 632.87 (3) to (5), 632.895 (5m) and (8) to (10) and 632.896 and ch. 635.

SB218, s. 3 Section 3. 40.51 (8m) of the statutes, as created by 1995 Wisconsin Act 289, is amended to read:

SB218,7,11 40.51 (8m) Every health care coverage plan offered by the group insurance board under sub. (7) shall comply with ss. 632.745 (1) to (3) and (5) and 632.747 ch. 635.