HBA-ATS C.S.H.B. 3096 76(R)BILL ANALYSIS Office of House Bill AnalysisC.S.H.B. 3096 By: Burnam Insurance 4/25/1999 Committee Report (Substituted) BACKGROUND AND PURPOSE Before a health insurance product is marketed, the insurer performs an actuarial analysis. An actuarial analysis helps the insurer price the product (set the premium) by analyzing the cost of the risks (benefits provided) that the insurer assumes. Ideally, the forecasting methodology should be actuarially sound so that there is a quantifiable and measurable correlation between the price of the premium and the cost of the benefits. However, some insurers have limited or cut benefits without a corresponding reduction in premium rates. The result is the perception that premiums are rising and benefits are decreasing. C.S.H.B. 3096 prohibits an issuer of a health benefit plan from excluding from coverage under the plan, or limiting the amount, type, or extent of coverage under the plan, for a specified health condition, injury, sickness, or disability unless the exclusion or limitation is based on sound actuarial principles or actual or reasonably anticipated loss experience. An issuer is required to use actuarial data or loss experience data that is accurate, reliable, geographically specific, and current at the time of use. An actuary who certifies a plan as complying with these requirements violates the law if the actuary knows, at the time the certification is made, that the certification is false. Sanctions and penalties may be imposed under Article 21.21, Insurance Code. RULEMAKING AUTHORITY It is the opinion of the Office of House Bill Analysis that rulemaking authority is expressly delegated to the commissioner of insurance in SECTION 1 (Article 21.52L, Insurance Code) of this bill. SECTION BY SECTION ANALYSIS SECTION 1. Amends Subchapter E, Chapter 21, Insurance Code, by adding Article 21.52L, as follows: Art. 21.52L. ACTUARIAL SUPPORT FOR LIMITATIONS AND EXCLUSIONS APPLIED IN HEALTH BENEFIT PLANS Sec. 1. DEFINITION. Defines "health benefit plan." Sec. 2. SCOPE OF ARTICLE. (a) Specifies that Article 21.52L applies only to a health benefit plan (plan) that provides benefits for medical or surgical expenses incurred because of a health condition, accident, or sickness. These types of plans include an individual, group, blanket, or franchise insurance policy or insurance agreement, a group hospital service contract, and individual or group coverage. Specifies that these plans are offered by an insurance company; a group hospital service corporation; a fraternal benefit society; a stipulated premium insurance company; a reciprocal exchange; a health maintenance organization; a multiple employer welfare arrangement; an approved nonprofit health corporation, or a small employer carrier or a large employer carrier. (b) Provides that Article 21.52L does not apply to a plan that provides coverage only for a specified disease or other limited benefit. Sec. 3. USE OF CERTAIN EXCLUSIONS OR LIMITATIONS PROHIBITED. Prohibits an issuer of a health benefit plan (issuer of a plan) from excluding from coverage under the plan, or limiting the amount, type, or extent of coverage under the plan for, a specified health condition, injury, sickness, or disability unless the exclusion or limitation is based on sound actuarial principles or actual or reasonably anticipated loss experience. Requires an issuer of a plan to use actuarial data or loss experience data that is accurate, reliable, geographically specific, and current at the time of use. Authorizes the commissioner of insurance (commissioner) to adopt rules to implement this article. Sec. 4. CONDUCT OF OTHER PERSONS. Prohibits an insurance agent, third party administrator, or life insurance counselor from offering, recommending, selling, or administering, or participating in the offering, recommendation, sale, or administration of, a plan that violates Section 3. Provides that an actuary who certifies a plan as complying with Section 3 violates this article if the actuary knows, at the time the certification is made, that the certification is false. Sec. 5. VIOLATION; PENALTY. Provides that a violation of this article is an unfair and deceptive act or practice in the business of insurance for purposes of Article 21.21 (Unfair Competition and Unfair Practices) and is subject to the sanctions and penalties imposed under that article. Provides that approval by the commissioner of the policy form or other form used by the plan issuer under any law of this state is not a defense to an action brought under Article 21.21. SECTION 2. Effective date: September 1, 1999. SECTION 3. Makes application of this Act prospective for a health benefit plan that is delivered, issued for delivery, or renewed on or after January 1, 2000. SECTION 4. Emergency clause. COMPARISON OF ORIGINAL TO SUBSTITUTE C.S.H.B. 3096 modifies the original bill in SECTION 1 by adding Section 2(b), Article 21.52L, Insurance Code, to provide that proposed Article 21.52L does not apply to a health benefit plan that provides coverage only for a specified disease or other limited benefit. The substitute also makes a nonsubstantive change in proposed Section 4, Article 21.52L, Insurance Code.