CHAPTER 635
SMALL EMPLOYER HEALTH INSURANCE
635.10 Uniform employee application.
635.11 Disclosure of rating factors and renewability provisions.
635.12 Annual publication of rates.
635.13 Annual certification of compliance.
635.15 Temporary suspension of rate regulation.
635.18 Fair marketing standards.
635.19 Issuance of coverage in small group market.
Ch. 635 Cross-reference
Cross Reference: See definitions in ss.
600.03 and
628.02.
Ch. 635 Cross-reference
Cross Reference: See also s.
Ins 8.40, Wis. adm. code.
635.01
635.01
Scope. This chapter applies to all group health insurance plans, policies or certificates, written on risks or operations in this state, providing coverage for employees of a small employer, or employees of a small employer and the employer, and to individual health insurance policies, written on risks or operations in this state, providing coverage for employees of a small employer, or employees of a small employer and the employer when 3 or more are sold to or through a small employer.
635.01 History
History: 1991 a. 39;
1997 a. 27.
635.02
635.02
Definitions. In this chapter:
635.02(1)
(1) "Base premium rate" means the lowest premium rate chargeable under a rating system to small employers with similar case characteristics and the same or similar benefit design characteristics in the same class of business.
635.02(1m)
(1m) "Benefit design characteristics" means covered services, cost sharing, utilization management, managed care networks and other features that differentiate plan or coverage designs.
635.02(2)
(2) "Case characteristics" means the demographic, actuarially based characteristics of the employees of a small employer, and the employer, if covered, such as age, sex, and geographic location, used by a small employer insurer to determine premium rates for a small employer. "Case characteristics" does not include loss or claim history, health status, occupation, duration of coverage, or other factors related to claim experience.
635.02(3)
(3) "Class of business" means all or a distinct grouping of small employers determined in accordance with rules promulgated by the commissioner under
s. 635.05 (4).
635.02(3j)
(3j) "Established geographic service area" means a geographic area within which a small employer insurer provides coverage and that has been approved by the commissioner.
635.02(4m)
(4m) "Midpoint rate" means the arithmetic average of the base premium rate and the corresponding highest premium rate.
635.02(5)
(5) "New business premium rate" means the premium rate charged or offered to small employers with similar case characteristics in the same class of business for newly issued health insurance with the same or similar benefit design characteristics.
635.02(6)
(6) "Rating period" means the period, determined by a small employer insurer, during which a premium rate established by the small employer insurer remains in effect.
635.02(6m)
(6m) "Restricted network provision" means a provision of a health benefit plan that conditions the payment of benefits, in whole or in part, on obtaining services or articles from health care providers that have contracted with the small employer insurer to provide health care services or articles to covered individuals.
635.02(7)
(7) "Small employer" means, with respect to a calendar year and a plan year, an employer that employed an average of at least 2 but not more than 50 employees on business days during the preceding calendar year, or that is reasonably expected to employ an average of at least 2 but not more than 50 employees on business days during the current calendar year if the employer was not in existence during the preceding calendar year, and that employs at least 2 employees on the first day of the plan year.
635.02(8)
(8) "Small employer 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 employees of one or more small employers in this state, or that sells 3 or more individual health benefit plans to a small employer, covering eligible employees of the small employer. 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).
635.05
635.05
Rate regulation. Notwithstanding
ch. 625, the commissioner shall promulgate rules:
635.05(1)
(1) Establishing restrictions on premium rates that a small employer insurer may charge a small employer such that the premium rates charged to small employers with similar case characteristics for the same or similar benefit design characteristics do not vary from the midpoint rate for those small employers by more than 35% of that midpoint rate.
635.05(2)
(2) Establishing restrictions on increases in premium rates that a small employer insurer may charge a small employer such that:
635.05(2)(a)
(a) The percentage increase in the premium rate for a new rating period does not exceed the sum of the following:
635.05(2)(a)1.
1. The percentage change in the new business premium rate measured from the first day of the prior rating period to the first day of the new rating period, or the percentage change in the base premium rate in the case of a class of business for which the small employer insurer is not issuing new policies.
635.05(2)(a)2.
2. An adjustment, not to exceed 15% per year, adjusted proportionally for rating periods of less than one year, for such rating factors as claim experience, health status, occupation, and duration of coverage, determined in accordance with the small employer insurer's rate manual or rating procedures.
635.05(2)(a)3.
3. An adjustment for a change in case characteristics or in benefit design characteristics, determined in accordance with the small employer insurer's rate manual or rating procedures.
635.05(2)(b)
(b) The percentage increase in the premium rate for a new rating period for a policy issued before August 15, 1991, does not exceed the sum of
par. (a) 1. and
3., unless premium rates are in compliance with the rules promulgated under
sub. (1).
635.05(3)
(3) Requiring the premium rate of a policy issued before August 15, 1991, to comply with the rules promulgated under
sub. (1) no later than 3 years after August 15, 1991.
635.05(4)
(4) Defining the terms necessary for compliance with this section.
635.05(5)
(5) Ensuring that small employers are classified using objective criteria.
635.05(6)
(6) Ensuring that rating factors are applied objectively and consistently within a class of business.
635.05(7)
(7) Specifying the manner in which rates must be published under
s. 635.12.
635.05 History
History: 1991 a. 39,
250;
2001 a. 16.
635.10
635.10
Uniform employee application. Beginning no later than August 1, 2003, every small employer insurer shall use the uniform employee application form developed by the commissioner by rule under
s. 601.41 (8) (b) when a small employer applies for coverage under a group health benefit plan offered by the small employer insurer.
635.10 History
History: 2001 a. 109.
635.11
635.11
Disclosure of rating factors and renewability provisions. 635.11(1m)(1m) Before the sale of a plan or policy subject to this chapter, a small employer insurer shall disclose to a small employer all of the following:
635.11(1m)(a)
(a) The small employer insurer's right to increase premium rates and the factors limiting the amount of increase.
635.11(1m)(b)
(b) The extent to which benefit design characteristics and case characteristics affect premium rates.
635.11(1m)(c)
(c) The extent to which rating factors and changes in benefit design characteristics and case characteristics affect changes in premium rates.
635.11(1m)(e)
(e) As part of the small employer insurer's solicitation and sales materials, the availability of the information under
par. (f).
635.11(1m)(f)
(f) Upon the request of the small employer, the following information:
635.11(1m)(f)1.
1. The provisions, if any, of the plan or policy relating to preexisting condition exclusions.
635.11(1m)(f)2.
2. The benefits and premiums available under all health insurance coverage offered by the small employer insurer for which the small employer is qualified.
635.11(2m)
(2m) Information required to be disclosed under this section shall be provided in a manner that is understandable to a small employer and shall be sufficient to reasonably inform a small employer of the small employer's rights and obligations under the health insurance coverage.
635.11(3m)
(3m) A small employer insurer is not required under this section to disclose information that is proprietary or trade secret information under applicable law.
635.11 History
History: 1991 a. 39,
250,
315;
1997 a. 27.
635.12
635.12
Annual publication of rates. Every small employer insurer shall annually publish the small employer insurer's current new business premium rates. The rates shall be published in the manner and according to categories required by rule under
s. 635.05 (7). New business premium rates for coverage under the health care coverage program under
subch. X of ch. 40 shall be published as required under
s. 40.98 (2) (d).
635.12 History
History: 2001 a. 16.
635.13
635.13
Annual certification of compliance. 635.13(1)
(1)
Records. A small employer insurer shall maintain at its principal place of business complete and detailed records relating to its rating methods and practices and its renewal underwriting methods and practices, and shall make the records available to the commissioner upon request.
635.13(2)
(2) Certification. A small employer insurer shall file with the commissioner on or before May 1 annually an actuarial opinion by a member of the American academy of actuaries certifying all of the following:
635.13(2)(a)
(a) That the small employer insurer is in compliance with the rate provisions of
s. 635.05.
635.13(2)(b)
(b) That the small employer insurer's rating methods are based on generally accepted and sound actuarial principles, policies and procedures.
635.13(2)(c)
(c) That the opinion is based on the actuary's examination of the small employer insurer's records and a review of the small employer insurer's actuarial assumptions and statistical methods used in setting rates and procedures used in implementing rating plans.
635.13 History
History: 1991 a. 39,
250;
1997 a. 27.
635.13 Cross-reference
Cross Reference: See also s.
Ins 8.56, Wis. adm. code.
635.15
635.15
Temporary suspension of rate regulation. The commissioner may suspend the operation of all or any part of
s. 635.05 with respect to one or more small employers for one or more rating periods upon the written request of a small employer insurer and a finding by the commissioner that the suspension is necessary in light of the financial condition of the small employer insurer or that the suspension would enhance the efficiency and fairness of the small employer health insurance market.
635.15 History
History: 1991 a. 39,
250.
635.18
635.18
Fair marketing standards. 635.18(1)
(1) Every small employer insurer shall actively market health benefit plan coverage to small employers in the state.
635.18(2)(a)(a) Except as provided in
par. (b), a small employer insurer or an intermediary may not, directly or indirectly, do any of the following:
635.18(2)(a)1.
1. Discourage a small employer from applying, or direct a small employer not to apply, for coverage with the small employer insurer because of the health status, claims experience, industry, occupation or geographic location of the small employer.
635.18(2)(a)2.
2. Encourage or direct a small employer to seek coverage from another insurer because of the health status, claims experience, industry, occupation or geographic location of the small employer.
635.18(2)(b)
(b) Paragraph (a) does not prohibit a small employer insurer or an intermediary from providing a small employer with information about an established geographic service area or a restricted network provision of the small employer insurer.
635.18(3)(a)(a) Except as provided in
par. (b), a small employer insurer may not, directly or indirectly, enter into any contract, agreement or arrangement with an intermediary that provides for or results in compensation to an intermediary for the sale of a health benefit plan that varies according to the health status, claims experience, industry, occupation or geographic location of the small employer or eligible employees or dependents.
635.18(3)(b)
(b) Payment of compensation on the basis of percentage of premium is not a violation of
par. (a) if the percentage does not vary based on the health status, claims experience, industry, occupation or geographic area of the small employer or eligible employees or dependents.
