The Florida Senate

627.6475  Individual reinsurance pool.--

(1)  PURPOSE.--The purpose of this section is to provide for the establishment of a reinsurance program for coverage of individuals who are eligible for issuance of individual health insurance from a health insurance issuer pursuant to s. 627.6487.

(2)  DEFINITIONS.--As used in this section:

(a)  "Board," "carrier," and "health benefit plan" have the same meaning ascribed in s. 627.6699(3).

(b)  "Health insurance issuer," "issuer," and "individual health insurance" have the same meaning ascribed in s. 627.6487(2).

(c)  "Reinsuring carrier" means a health insurance issuer that elects to comply with the requirements set forth in subsection (7).

(d)  "Risk-assuming carrier" means a health insurance issuer that elects to comply with the requirements set forth in subsection (6).

(e)  "Eligible individual" has the same meaning ascribed in s. 627.6487(3).

(3)  APPLICABILITY AND SCOPE.--This section applies to individual health insurance offered by a health insurance issuer to an eligible individual.

(4)  MAINTENANCE OF RECORDS.--Each health insurance issuer that offers individual health insurance must maintain at its principal place of business a complete and detailed description of its rating practices and renewal practices, as required for small employer carriers pursuant to s. 627.6699(8).

(5)  ISSUER'S ELECTION TO BECOME A RISK-ASSUMING CARRIER.--

(a)  Each health insurance issuer that offers individual health insurance must elect to become a risk-assuming carrier or a reinsuring carrier for purposes of this section. Each such issuer must make an initial election, binding through December 31, 1999. The issuer's initial election must be made no later than October 31, 1997. By October 31, 1997, all issuers must file a final election, which is binding for 2 years, from January 1, 1998, through December 31, 1999, after which an election shall be binding for a period of 5 years. The department may permit an issuer to modify its election at any time for good cause shown, after a hearing.

(b)  The department shall establish an application process for issuers seeking to change their status under this subsection.

(c)  An election to become a risk-assuming carrier is subject to approval under this subsection.

(d)  An issuer that elects to cease participating as a reinsuring carrier and to become a risk-assuming carrier may not reinsure or continue to reinsure any individual health benefits plan under subsection (7) once the issuer becomes a risk-assuming carrier, and the issuer must pay a prorated assessment based upon business issued as a reinsuring carrier for any portion of the year that the business was reinsured. An issuer that elects to cease participating as a risk-assuming carrier and to become a reinsuring carrier may reinsure individual health insurance under the terms set forth in subsection (7) and must pay a prorated assessment based upon business issued as a reinsuring carrier for any portion of the year that the business was reinsured.

(6)  ELECTION PROCESS TO BECOME A RISK-ASSUMING CARRIER.--

(a)1.  A health insurance issuer that offers individual health insurance may become a risk-assuming carrier by filing with the department a designation of election under this subsection in a format and manner prescribed by the department. The department shall approve the election of a health insurance issuer to become a risk-assuming carrier if the department finds that the issuer is capable of assuming that status pursuant to the criteria set forth in paragraph (b).

2.  The department must approve or disapprove any designation as a risk-assuming carrier within 60 days after a filing.

(b)  In determining whether to approve an application by an issuer to become a risk-assuming carrier, the department shall consider:

1.  The issuer's financial ability to support the assumption of the risk of individuals.

2.  The issuer's history of rating and underwriting individuals.

3.  The issuer's commitment to market fairly to all individuals in the state or its service area, as applicable.

4.  The issuer's ability to assume and manage the risk of enrolling individuals without the protection of the reinsurance program provided in subsection (7).

(c)  The department shall provide public notice of an issuer's designation of election under this subsection to become a risk-assuming carrier and shall provide at least a 21-day period for public comment prior to making a decision on the election. The department shall hold a hearing on the election at the request of the issuer.

(d)  The department may rescind the approval granted to a risk-assuming carrier under this subsection if the department finds that the carrier no longer meets the criteria of paragraph (b).

(7)  INDIVIDUAL HEALTH REINSURANCE PROGRAM.--

(a)  The individual health reinsurance program shall operate subject to the supervision and control of the board of the small employer health reinsurance program established pursuant to s. 627.6699(11). The board shall establish a separate, segregated account for eligible individuals reinsured pursuant to this section, which account may not be commingled with the small employer health reinsurance account.

(b)  A reinsuring carrier may reinsure with the program coverage of an eligible individual, subject to each of the following provisions:

1.  A reinsuring carrier may reinsure an eligible individual within 60 days after commencement of the coverage of the eligible individual.

2.  The program may not reimburse a participating carrier with respect to the claims of a reinsured eligible individual until the carrier has paid incurred claims of at least $5,000 in a calendar year for benefits covered by the program. In addition, the reinsuring carrier is responsible for 10 percent of the next $50,000 and 5 percent of the next $100,000 of incurred claims during a calendar year, and the program shall reinsure the remainder.

3.  The board shall annually adjust the initial level of claims and the maximum limit to be retained by the carrier to reflect increases in costs and utilization within the standard market for health benefit plans within the state. The adjustment may not be less than the annual change in the medical component of the "Commerce Price Index for All Urban Consumers" of the Bureau of Labor Statistics of the United States Department of Labor, unless the board proposes and the department approves a lower adjustment factor.

4.  A reinsuring carrier may terminate reinsurance for all reinsured eligible individuals on any plan anniversary.

5.  The premium rate charged for reinsurance by the program to a health maintenance organization that is approved by the Secretary of Health and Human Services as a federally qualified health maintenance organization pursuant to 42 U.S.C. s. 300e(c)(2)(A) and that, as such, is subject to requirements that limit the amount of risk that may be ceded to the program, which requirements are more restrictive than subparagraph 2., shall be reduced by an amount equal to that portion of the risk, if any, which exceeds the amount set forth in subparagraph 2., which may not be ceded to the program.

6.  The board may consider adjustments to the premium rates charged for reinsurance by the program or carriers that use effective cost-containment measures, including high-cost case management, as defined by the board.

7.  A reinsuring carrier shall apply its case-management and claims-handling techniques, including, but not limited to, utilization review, individual case management, preferred provider provisions, other managed-care provisions, or methods of operation consistently with both reinsured business and nonreinsured business.

(c)1.  The board, as part of the plan of operation, shall establish a methodology for determining premium rates to be charged by the program for reinsuring eligible individuals pursuant to this section. The methodology must include a system for classifying individuals which reflects the types of case characteristics commonly used by carriers in this state. The methodology must provide for the development of basic reinsurance premium rates, which shall be multiplied by the factors set for them in this paragraph to determine the premium rates for the program. The basic reinsurance premium rates shall be established by the board, subject to the approval of the department, and shall be set at levels that reasonably approximate gross premiums charged to eligible individuals for individual health insurance by health insurance issuers. The premium rates set by the board may vary by geographical area, as determined under this section, to reflect differences in cost. An eligible individual may be reinsured for a rate that is five times the rate established by the board.

2.  The board shall periodically review the methodology established, including the system of classification and any rating factors, to ensure that it reasonably reflects the claims experience of the program. The board may propose changes to the rates that are subject to the approval of the department.

(d)  If individual health insurance for an eligible individual is entirely or partially reinsured with the program pursuant to this section, the premium charged to the eligible individual for any rating period for the coverage issued must be the same premium that would have been charged to that individual if the health insurance issuer elected not to reinsure coverage for that individual.

(e)1.  Before March 1 of each calendar year, the board shall determine and report to the department the program net loss in the individual account for the previous year, including administrative expenses for that year and the incurred losses for that year, taking into account investment income and other appropriate gains and losses.

2.  Any net loss in the individual account for the year shall be recouped by assessing the carriers as follows:

a.  The operating losses of the program shall be assessed in the following order subject to the specified limitations. The first tier of assessments shall be made against reinsuring carriers in an amount that may not exceed 5 percent of each reinsuring carrier's premiums for individual health insurance. If such assessments have been collected and additional moneys are needed, the board shall make a second tier of assessments in an amount that may not exceed 0.5 percent of each carrier's health benefit plan premiums.

b.  Except as provided in paragraph (f), risk-assuming carriers are exempt from all assessments authorized pursuant to this section. The amount paid by a reinsuring carrier for the first tier of assessments shall be credited against any additional assessments made.

c.  The board shall equitably assess reinsuring carriers for operating losses of the individual account based on market share. The board shall annually assess each carrier a portion of the operating losses of the individual account. The first tier of assessments shall be determined by multiplying the operating losses by a fraction, the numerator of which equals the reinsuring carrier's earned premium pertaining to direct writings of individual health insurance in the state during the calendar year for which the assessment is levied, and the denominator of which equals the total of all such premiums earned by reinsuring carriers in the state during that calendar year. The second tier of assessments shall be based on the premiums that all carriers, except risk-assuming carriers, earned on all health benefit plans written in this state. The board may levy interim assessments against reinsuring carriers to ensure the financial ability of the plan to cover claims expenses and administrative expenses paid or estimated to be paid in the operation of the plan for the calendar year prior to the association's anticipated receipt of annual assessments for that calendar year. Any interim assessment is due and payable within 30 days after receipt by a carrier of the interim assessment notice. Interim assessment payments shall be credited against the carrier's annual assessment. Health benefit plan premiums and benefits paid by a carrier that are less than an amount determined by the board to justify the cost of collection may not be considered for purposes of determining assessments.

d.  Subject to the approval of the department, the board shall adjust the assessment formula for reinsuring carriers that are approved as federally qualified health maintenance organizations by the Secretary of Health and Human Services pursuant to 42 U.S.C. s. 300e(c)(2)(A) to the extent, if any, that restrictions are placed on them which are not imposed on other carriers.

3.  Before March 1 of each year, the board shall determine and file with the department an estimate of the assessments needed to fund the losses incurred by the program in the individual account for the previous calendar year.

4.  If the board determines that the assessments needed to fund the losses incurred by the program in the individual account for the previous calendar year will exceed the amount specified in subparagraph 2., the board shall evaluate the operation of the program and report its findings and recommendations to the department in the format established in s. 627.6699(11) for the comparable report for the small employer reinsurance program.

(f)  Notwithstanding paragraph (e), the administrative expenses of the program shall be recouped by assessing risk-assuming carriers and reinsuring carriers, and such amounts may not be considered part of the operating losses of the plan for the purposes of this paragraph. Each carrier's portion of such administrative expenses shall be determined by multiplying the total of such administrative expenses by a fraction, the numerator of which equals the carrier's earned premium pertaining to direct writing of individual health benefit plans in the state during the calendar year for which the assessment is levied, and the denominator of which equals the total of such premiums earned by all carriers in the state during such calendar year.

(g)  Except as otherwise provided in this section, the board and the department shall have all powers, duties, and responsibilities with respect to carriers that issue and reinsure individual health insurance, as specified for the board and the department in s. 627.6699(11) with respect to small employer carriers, including, but not limited to, the provisions of s. 627.6699(11) relating to:

1.  Use of assessments that exceed the amount of actual losses and expenses.

2.  The annual determination of each carrier's proportion of the assessment.

3.  Interest for late payment of assessments.

4.  Authority for the department to approve deferment of an assessment against a carrier.

5.  Limited immunity from legal actions or carriers.

6.  Development of standards for compensation to be paid to agents. Such standards shall be limited to those specifically enumerated in s. 627.6699(13)(d).

7.  Monitoring compliance by carriers with this section.

(8)  STANDARDS TO ASSURE FAIR MARKETING.--

(a)  Each health insurance issuer that offers individual health insurance shall actively market coverage to eligible individuals in the state. The provisions of s. 627.6699(13) that apply to small employer carriers that market policies to small employers shall also apply to health insurance issuers that offer individual health insurance with respect to marketing policies to individuals.

(b)  A violation of this section by a health insurance issuer or an agent is an unfair trade practice under s. 626.9541 or ss. 641.3903 and 641.3907.

(9)  RULEMAKING AUTHORITY.--The department may adopt rules to administer this section, including rules governing compliance by carriers.

History.--s. 3, ch. 97-179.