S. 1783 (Enzi) - Expand Coverage

FEHBP Expansion

Target population(s)
No provision.

Eligibility
No provision

Choice of health insurance plans
No provision.

Enrollment process
No provision.

Effective date
No provision.

COBRA Continuation Coverage

Duration of coverage
No provision.

Nature of COBRA
No provision.

Other
No provision

Pooling Mechanisms (Purchasing Groups, Association Plans, High Risk Pools for Medically Uninsurable)

Pooling mechanism
Provides for the sale of fully insured health insurance coverage through Small Business Health Plans (SBHPs). A SBHP is a fully insured group health plan whose sponsor is a bona fide trade, industry, or professional association; a rural electric or telephone cooperative; or a bona fide chamber of commerce (or similar organization). A SBHP would have to be organized for substantial purposes other than that of obtaining or providing medical care. It would have to be a permanent entity and receive the active support of its members (i.e., employers). It could not make membership, dues, or coverage under the health plan dependent on any health status-related factor (such as past or current medical history or claims experience) of the employees (or employees' dependents) of its members. It also could not require participation in the health plan of the SBHP as a condition of membership. Would also establish Alternative Market Pooling Organizations (AMPOs), generally subject to the same rules as SBHPs.

Pooling mechanism target population
SBHPs: Small employers, their employees and dependents. A small employer is one who employed an average of at least 2 but not more than 50 employees on business days during the preceding year and who employed at least 2 employees on the first day of the plan year. It also includes group health plans with less than 2 participants in states where such plans are treated by state law as small groups. Rules are also specified for participation of affiliated employers and for SBHPs with participating employers that have more than 50 employees. SBHPs would be prohibited from excluding eligible employers and employees unless such employers failed to meet minimum group participation and premium contribution requirements. (These typically require an employer to enroll a minimum of some percentage of its employees into the health plan and for the employer to contribute at least a specific proportion of the total premium.)

AMPOs: Instead of pooling employers or professional organizations, these would pool churches, unions and other organizations with little or no association with employment.

Pooling mechanism eligibility requirements
SBHPs: Small employers, their employees and dependents. A small employer is one who employed an average of at least 2 but not more than 50 employees on business days during the preceding year and who employed at least 2 employees on the first day of the plan year. It also includes group health plans with less than 2 participants in states where such plans are treated by state law as small groups. Rules are also specified for participation of affiliated employers and for SBHPs with participating employers that have more than 50 employees. SBHPs would be prohibited from excluding eligible employers and employees unless such employers failed to meet minimum group participation and premium contribution requirements. (These typically require an employer to enroll a minimum of some percentage of its employees into the health plan and for the employer to contribute at least a specific proportion of the total premium.)

AMPOs: Instead of pooling employers or professional organizations, these would pool churches, unions and other organizations with little or no association with employment.

Requirements on pooling mechanism
SBHPs and AMPOs would have to be certified by the Secretary of Labor. Certification requirements include rules relating to the sponsors and to the boards of trustees. Trustees would be required to maintain complete fiscal control over the plan and a 3-year plan of operation and financial controls adequate to carry out the terms of the plan. Certification requirements also include rules relating to participation and coverage; plan documents, contribution rates, and benefit options; and application fees and required information. Each entity seeking certification as a SBHP would be required to pay a $5,000 filing fee to the Department of Labor. An SBHP would have to identify as part of its application the states in which participants and beneficiaries under the plan were to be located and the number of them expected to be located in each such state. A certification would not be effective unless written notice of the certification was filed with the state insurance commissioner of each state in which the SBHP operated.

Before a SBHP terminated health insurance for its members, it would have to give 60 days notice of the termination to participants and beneficiaries and notify the applicable authority.

A SBHP could not vary its premium contribution rates for any participating employer based on any health status-related factors (e.g., claims experience or medical condition) associated with the employer's employees and dependents. Also, it could not vary its rates based on the employer's type of business or industry. A SBHP could, however, vary the premiums charged to its different member employers on the basis of the age, gender, location, and other demographic characteristics of the particular employer's employees. Moreover, the SBHP or insurer of a SBHP could vary an employer's premium to the extent that such rates are allowed to vary under state law. An insurer of SBHP coverage could also set an employer's premium based on the overall claims experience of the pool of insureds covered by the SBHP. (Insurers could, therefore, charge different rates to different SBHPs based on the claims experience of the specific SBHP.) (However, under a separate part of title II, rating rules are established that would apply to the individual and small group markets that would also, with certain exceptions, apply to SBHPs in states that elected to adopt such rules. In states failing to adopt these rules, an insurer that met certain requirements could elect to apply these rules instead of any state laws that might otherwise apply. The bill calls for the Secretary of Labor to reconcile these and other parts of the bill through regulation.

Pooling arrangements that had at least 200 participating employers, had been in existence for 10 years, and were licensed under the laws of one or more states to provide health benefits to its participating employers, would be deemed to meet the requirements for a SBHP upon the filing of an application for certification with the Secretary of Labor. This grandfather provision would have a later application date for AMPOs.

Role of pool in providing health insurance
A SBHP or AMPO would make coverage available to its members and their employees. Its board of trustees would have to perform a variety of duties relating to operation and financial controls of the entity. The board would have sole authority to approve applications for participation in the plan and to contract with insurers. The SBHP or AMPO would also have to file various documents with regulators.

Types of coverage that pooling mechanism must offer
A SBHP/AMPO could offer only fully insured group health plans to its participating employers.

The bill also specifies the benefit requirements for "affordable plans" to be offered by SBHPs and by insurers selling in the individual and small group markets. States could either adopt or not adopt these benefit requirements. An insurer meeting the bill's requirements for an "adopting insurer" could operate under these rules in a non-adopting state if it notified federal and state regulators and provided them with certain information about its policies and operations. Within 3 months of enactment, the Secretary, in consultation with the NAIC, would be required to issue by interim final rule a list of required benefits, services, or categories of providers that would have to be offered by entities selling insurance to SBHPs and in the small, individual, and large group markets, in at least 26 states as a result of the application of state mandates. In states with mandates on this list, the state mandates would apply subject to a process specified in the bill for their uniform application. In states without the mandates, insurers would not be required to include them in their policies. These affordable plan requirements would apply to SBHPs 12 months after enactment and to other insurance 15 months after enactment.

Requires the Secretary, in consultation with the NAIC, to update the list of benefits based on changes in the laws and regulations of the states within 2 years after the list was issued, and every 2 years thereafter.

Requirements on health insurance issuers selling to the pooling mechanism
Insurers selling coverage through a SBHP/AMPO would have to comply with the HIPAA requirements relating to portability and guaranteed renewability and with the "affordable plan" requirements specified above (see "Types of coverage" above).

Federal preemption (override) of state laws
Under title II of the bill, state mandated benefit, services and provider laws would generally be preempted, including with respect to coverage issued to a SBHP or AMPO in a non-adopting State. For non-adopting states, the bill would preempt state laws that prohibit an eligible insurer from offering, marketing, or implementing coverage consistent with the affordable plan standards, or have the effect of retaliating against or otherwise punishing in any respect an eligible insurer for offering, such coverage. In general, title II of the bill would preempt any and all state laws of a non-adopting state related to rating in the small group insurance market, including with respect to coverage issued to a small employer through a SBHP.

The bill would also preempt any and all state laws in a non-adopting state that prohibit an eligible insurer from offering, marketing, or implementing small group health insurance coverage consistent with the rating rules or transitional model small group rating rules specified in the bill; or that have the effect of retaliating against or otherwise punishing in any respect an eligible insurer for offering, marketing, or implementing small group health insurance coverage consistent with the rating rules or transitional model small group rating rules. Coverage would be issued to a SBHP in the state in which the sponsor's principal business was located (i.e., the domicile state). The laws of a state in which an SBHP insurer was not yet licensed but that was providing coverage to employees in that state would be temporarily preempted subject to certain conditions. This preemption would be terminated upon the approval or denial of the insurer's licensure application or if a material violation was determined.

U.S. courts would have exclusive jurisdiction over civil actions involving the interpretation of this part (including the provisions related to mandated benefits and rating requirements). It would permit an eligible insurer to bring action in the U.S. district courts for injunctive or other equitable relief against any officials or agents of a non-adopting state related to violations of preemption. In an action brought directly in a U.S. court, the court must provide for expedited review, unless all parties to such proceeding agree to an extension. Provides that the court render a judgment based on a review of the merits of all questions presented in such action and not defer to any conduct or action, or proposed conduct or action, of a non-adopting State.

Federal financial incentives to encourage establishment of pooling mechanisms
No provision.

Administration and required studies
The Secretary of Labor would have to consult with the state recognized with respect to a SBHP as the domicile state with regard to exercising investigations related to and enforcement of the certification requirements. The Secretary would be required to ensure that only one state was recognized as a SBHP's domicile state.

Studies by the relevant federal agency (the Departments of HHS, Labor or Treasury) would be required of the impact of the bill's various provisions affecting SBHPs and insurance markets more generally in the states with reports due to Congress with recommendations, if any (see also "Other Provisions" below).

Effective date
Effective one year after enactment, with the Secretary first issuing all regulations needed to carry out the provision of the Act.

Other provisions

Other
Merging of Group and Individual Health Insurance Markets: The Secretary of HHS, in consultation with state insurance commissioners and the NAIC, would be required to issue regulations providing for the establishment in each state of a single market for all health plans (other than self-funded and federal and state governmental plans). Such regulations would extend HIPAA protections relating to group market rules to the individual insurance market. Each health insuring entity would be required to fully comply with the standards specified in this subsection and that, if not otherwise provided for under the bill,(1) provide for guaranteed issue for eligible individuals; (2) provide for guaranteed renewal; (3) ensure that there is no re-underwriting of such plan; and (4) comply with the portability provisions of HIPAA. Each state would have to provide for risk adjustment to reduce the effect of risk selection. Federal preemption of state law as it applies to self-funded plans would continue.

Reduction in Premium, Variation and Health Status Discrimination: The Secretary of HHS, in consultation with state insurance commissioners and the NAIC, would be required to issue regulations providing for the application by each state of new standards regarding the range of allowable premium variation for enrollees. For Qualified Core Plans (QCPs) offered in the state, such rules would be required to: (1) prohibit premium variation based on health status or any other factor, and (2) provide that the standard premium be the same for all enrollees. For Qualified Compatible Core Plans (QCCPs), the rules would: (1) prohibit premium variation based on health status and (2) allow for rate variation to be based on enrollee age only so long as total variation did not exceed a factor of 2:1. (QCPs and QCCPS would be qualified coverage for the Health Insurance Tax Credit established under title I of the bill (see separate side-by-side.)) For all other health insurance products offered in the state, the rules would have to prohibit premium variation based on health status. Otherwise, state law with respect to premium variation would apply (subject to the provisions above related to a combined individual and small group market). For all state regulated health insurance, other state rating discretion not specified would be permitted. States would have to establish risk adjustment mechanisms meeting requirements established by the Secretary to reduce the effect of material risk selection that might occur among QCPs, QCCPs, and other health plans (not including self-insured plans).

States would enforce these insurance standards with a federal fallback in the event that a state failed to conform its laws.

Market Relief: Within 6 months after enactment, the Secretary of HHS would have to issue regulations establishing the minimum standards for variation in premium rates and the use of risk factors used to vary those rates, both for the issuance of new policies and for renewals of plans other than QCPs and QCCPs. Insurers would have to apply the rating factor adjustments uniformly to the employer group (and not to individuals in the group).

Transitional Model Small Group Rating Rules: Within 6 months of enactment and to the extent necessary to provide for a graduated transition to the minimum rating standards just described, the Secretary would be required to issue (in consultation with the NAIC), state-specific transitional small group rating rules which would apply to non-adopting states and eligible insurers operating in non-adopting states for a period not to exceed 3 years. During this transition, a state that had in effect on the date of enactment a rating rules methodology that allowed for a variation less than specified standard would be deemed to be an adopting state if it complied with the transitional small group rating rules. Specifies transitional treatment of old and new books of business. Notwithstanding any other provision of law, an issuer that voluntarily withdrew from providing coverage in the small group market prior to the bill's enactment could not be excluded from re-entering the market for more than 180 days after enactment. This provision would no longer apply 2 years after enactment.

Regulatory Harmonization. This provision would provide for a process for harmonizing state laws relating to certain areas of health insurance regulation. Within 3 months of enactment, the Secretary of HHS, in consultation with the NAIC, would be required to establish the Health Insurance Consensus Board to develop recommendations that would harmonize inconsistent state health insurance laws in accordance with certain specified procedures. The Board would be composed of individuals appointed by the Secretary representing different stakeholders and political affiliations (as specified in the bill). An Advisory Panel would also be appointed to provide advice to the Board. Consistent with a process described in the bill, the Board would be required to identify and recommend nationally harmonized standards for each of the following: form filing and rate filing; market conduct review; prompt payment of claims; and internal review. Within each type of insurance (small, large, and individual), the Board would be required to consider in harmonizing each standard any relevant NAIC models acts or regulations, substantially similar standards followed by a plurality of states, and any federal law imposing a requirement relating to the markets. Within 18 months of the Board's selection, it would be required to recommend to the Secretary the certification of the harmonized standards. Within 120 days of receiving the Board's recommendations, the Secretary would have to certify the harmonized standards in an interim final rule. In so doing, the Secretary would be required to ensure that the standards achieve regulatory harmonization with respect to plans on a national basis, ensure that the standards are the minimum necessary to protect health insurance consumers and maintain a competitive regulatory environment; and ensure that the standards will not limit the range of group health plan designs and insurance products, such as catastrophic coverage only plans, HSAs, and HMOs, that might otherwise be available to consumers. The standards would be effective 18 months after the Board adopted them. The bill also provides for ongoing review of the standards by the Secretary, in consultation, with the NAIC and stakeholders. All harmonized standards would be published on the HHS website and kept up to date.

States would have up to 18 months after certification to adopt the standards. Eligible insurers could elect to operate under the harmonized standards in non-adopting states.

Authorization of appropriations. The bill authorizes such sums as may be needed to carry out the regulatory harmonization standards.