By: McCall H.B. No. 56 73R511 PB-F A BILL TO BE ENTITLED 1-1 AN ACT 1-2 relating to the creation and operation of a program to provide 1-3 access to health insurance for employees of small groups. 1-4 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS: 1-5 SECTION 1. Subchapter E, Chapter 3, Insurance Code, is 1-6 amended by adding Article 3.50-7 to read as follows: 1-7 Art. 3.50-7. TEXAS SMALL EMPLOYER HEALTH INSURANCE ACCESS 1-8 PROGRAM 1-9 Sec. 1. DEFINITIONS. In this article: 1-10 (1) "Actuarial certification" means a written 1-11 statement by a member of the American Academy of Actuaries or by 1-12 another person acceptable to the commissioner that a small employer 1-13 carrier is in compliance with Section 3 of this article. 1-14 (2) "Affiliate" means a person who directly or 1-15 indirectly, through one or more intermediaries, controls, is 1-16 controlled by, or is under common control with a specified person. 1-17 (3) "Base premium rate" means, for each class of 1-18 business and for a specific rating period, the lowest premium rate 1-19 charged, or that could be charged under a rating system for that 1-20 class of business, by a small employer carrier to small employers 1-21 with similar case characteristics for health care benefit plans 1-22 with the same or similar coverage. 1-23 (4) "Basic plan" means a health care benefit plan for 1-24 small employers that meets the requirements of Section 4 of this 2-1 article. 2-2 (5) "Carrier" means an insurance company, group 2-3 hospital service corporation, health maintenance organization, or 2-4 other person who: 2-5 (A) provides a plan of health insurance or 2-6 health benefits; and 2-7 (B) is authorized by the Texas Department of 2-8 Insurance to transact accident and health insurance business in 2-9 this state. 2-10 (6) "Case characteristics" means the demographic or 2-11 other objective characteristics of a small employer, as determined 2-12 by a small employer carrier, that are considered by the small 2-13 employer carrier in setting premium rates for that small employer. 2-14 The term does not include claim experience, health status, or 2-15 duration of coverage since the date of issuance of a health care 2-16 benefit plan. 2-17 (7) "Class of business" means a distinct grouping of 2-18 small employers as shown on the records of a small employer 2-19 carrier. 2-20 (8) "Dependent" means the spouse or child of an 2-21 eligible employee as defined by any applicable terms of the health 2-22 care benefit plan covering that employee. 2-23 (9) "Employee" means an individual who provides 2-24 services for a small employer on a full-time basis for at least 30 2-25 hours a week. The term includes a partner, sole proprietor, 2-26 officer, director, or elected official who provides services for 2-27 the small employer on a full-time basis for at least 30 hours a 3-1 week. 3-2 (10) "Health care benefit plan" means a hospital or 3-3 medical insurance policy, a health, hospital, or medical service 3-4 corporation plan contract, or a health maintenance organization 3-5 subscriber contract. The term does not include: 3-6 (A) accident only insurance coverage; 3-7 (B) credit insurance coverage; 3-8 (C) disability insurance coverage; 3-9 (D) coverage of Medicare services under a 3-10 federal contract; 3-11 (E) long-term care insurance coverage; 3-12 (F) insurance coverage limited to dental care; 3-13 (G) insurance coverage limited to care of 3-14 vision; 3-15 (H) insurance coverage issued as a supplement to 3-16 liability insurance; 3-17 (I) insurance coverage arising out of a workers' 3-18 compensation system or similar statutory system; 3-19 (J) automobile medical payment insurance 3-20 coverage; or 3-21 (K) insurance coverage under which benefits are 3-22 payable without regard to fault and that is required by statute to 3-23 be included in a liability insurance policy or an analogous 3-24 self-insurance plan. 3-25 (11) "Index rate" means, for each class of business as 3-26 to a rating period for small employers with similar case 3-27 characteristics, the arithmetic average of the applicable base 4-1 premium rate and the corresponding highest premium rate. 4-2 (12) "Late enrollee" means an employee or dependent 4-3 who requests enrollment in a health care benefit plan of a small 4-4 employer after the expiration of the initial enrollment period set 4-5 under the terms of the health care benefit plan. 4-6 (13) "New business premium rate" means, for each class 4-7 of business as to a rating period, the premium rate charged or 4-8 offered by a small employer carrier to small employers with similar 4-9 case characteristics for newly issued health care benefit plans 4-10 that provide the same or similar coverage. 4-11 (14) "Person" means an individual, association, 4-12 corporation, partnership, or other public or private legal entity. 4-13 (15) "Preexisting condition provision" means a policy 4-14 or contract provision that excludes coverage for charges or 4-15 expenses incurred during a specified period following the effective 4-16 date of the coverage for: 4-17 (A) a condition that, during a specified period 4-18 preceding the effective date of the coverage, was manifested in 4-19 such manner as would cause an ordinarily prudent person to seek 4-20 medical advice, diagnosis, care, or treatment or a condition for 4-21 which medical advice, diagnosis, care, or treatment was recommended 4-22 or received; or 4-23 (B) a pregnancy existing on the effective date 4-24 of the coverage. 4-25 (16) "Program" means the Texas Small Employer Health 4-26 Insurance Access Program created under this article. 4-27 (17) "Rating period" means a calendar period 5-1 determined by a small employer carrier for which premium rates 5-2 established by that carrier are in effect. 5-3 (18) "Reinsuring carrier" means a small employer 5-4 carrier who participates in the system created under Section 21 of 5-5 this article. 5-6 (19) "Small employer" means a person that is actively 5-7 engaged in business and that, on at least 50 percent of its working 5-8 days during the preceding calendar year, employed at least four but 5-9 not more than 35 employees, the majority of whom were employed 5-10 within this state. 5-11 (20) "Small employer carrier" means a carrier that 5-12 offers a health care benefit plan that provides coverage for 5-13 employees of one or more small employers. 5-14 (21) "Standard plan" means a health care benefit plan 5-15 for small employers that meets the requirements of Section 5 of 5-16 this article. 5-17 (22) "System" means the Texas Small Employer Health 5-18 Reinsurance System created under Section 21 of this article. 5-19 Sec. 2. PROGRAM. (a) The Texas Small Employer Health 5-20 Insurance Access Program is created to: 5-21 (1) promote the availability of health insurance 5-22 coverage to small employers; 5-23 (2) prevent abusive rating practices; 5-24 (3) require disclosure of rating practices to 5-25 purchasers of insurance coverage; 5-26 (4) adopt rules for continuity of coverage; and 5-27 (5) reduce the number of uninsured individuals in this 6-1 state. 6-2 (b) Except as provided by Subsection (c) of this section, a 6-3 group health care benefit plan is under the program and is subject 6-4 to this article if: 6-5 (1) the plan provides health care benefits covering at 6-6 least one employee of a small employer; and 6-7 (2) the plan is treated by that employer or any 6-8 employee or dependent covered by the plan as part of: 6-9 (A) a group health plan subject to Section 106, 6-10 Internal Revenue Code of 1986 (26 U.S.C. Section 106); 6-11 (B) a cafeteria plan subject to Section 125, 6-12 Internal Revenue Code of 1986 (26 U.S.C. Section 125); or 6-13 (C) a group health plan subject to Section 162, 6-14 Internal Revenue Code of 1986 (26 U.S.C. Section 162). 6-15 (c) This article applies to a list-billed individual health 6-16 insurance policy. This article does not apply to an individual 6-17 health insurance policy that is underwritten individually. 6-18 (d) Until December 31, 1994, each small employer carrier 6-19 shall provide to a small employer either the basic plan or the 6-20 standard plan prescribed under Sections 4 and 5 of this article 6-21 without regard to claims experience, health status, or medical 6-22 history. The small employer is the policyholder. A health care 6-23 benefit plan may not be issued, sold, or offered for sale by any 6-24 carrier to a small employer except as provided by this article. A 6-25 small employer who desires coverage under the program for its 6-26 employees after December 31, 1994, is subject to normal 6-27 underwriting requirements. An employer who becomes a small 7-1 employer after December 31, 1994, has six months to seek coverage 7-2 under the program, after which normal underwriting requirements 7-3 apply to that employer. 7-4 (e) Except as provided by this article, a law requiring the 7-5 coverage of a health care service or benefit, the coverage of a 7-6 particular person or class of persons, specific contract 7-7 provisions, or the reimbursement, utilization, or consideration of 7-8 a specific category of health care practitioners or providers does 7-9 not apply to a health care benefit plan offered or delivered to a 7-10 small employer participating in the program. 7-11 (f) Except as provided by this article, a health care 7-12 benefit plan offered to a small employer is not subject to any law 7-13 that: 7-14 (1) inhibits a small employer carrier from contracting 7-15 with providers or groups of providers with respect to health care 7-16 services or benefits; 7-17 (2) imposes a restriction on a small employer 7-18 carrier's ability to negotiate with providers regarding the level 7-19 or method of reimbursing care or services provided under health 7-20 care benefit plans; or 7-21 (3) requires a small employer carrier to: 7-22 (A) include a specific provider or class of 7-23 providers in contracting for health care services or benefits; or 7-24 (B) exclude any class of provider that is 7-25 generally authorized by statute to provide the care. 7-26 (g) Plans operated under the program may not cover 7-27 experimental or investigative services or procedures or services or 8-1 supplies that are not medically necessary. 8-2 Sec. 3. HEALTH CARE BENEFIT PLANS; EMPLOYER ELECTION. (a) 8-3 Each small employer carrier approved by the commissioner to 8-4 participate in the program shall offer to small employers at least 8-5 two health care benefit plans. One plan must be the basic plan and 8-6 one plan must be the standard plan. Each small employer carrier 8-7 shall issue the plan chosen by the small employer to each small 8-8 employer that elects to be covered under one of those plans, agrees 8-9 to make the required premium payments, and agrees to satisfy the 8-10 other requirements of that plan. 8-11 (b) If the basic plan and the standard plan are rejected in 8-12 writing by a small employer, a small employer carrier may offer to 8-13 that small employer a health care benefit plan with more 8-14 comprehensive benefits than those contained in either the basic or 8-15 the standard plan, if the more comprehensive plan accepted by the 8-16 small employer is subject to the rating provisions of this article 8-17 and to Section 2(e) of this article. 8-18 (c) A small employer carrier is not required to offer 8-19 coverage or accept applications under this section if the 8-20 commissioner finds that the acceptance of an application would 8-21 place the small employer carrier in a financially impaired 8-22 condition. A small employer carrier that has not offered coverage 8-23 or accepted applications under this section may not offer coverage 8-24 or accept applications for any group health care benefit plan until 8-25 the expiration of 180 days after the date on which the commissioner 8-26 determines that the small employer carrier has ceased to be 8-27 financially impaired. 9-1 Sec. 4. BASIC HEALTH CARE BENEFIT PLAN REQUIREMENTS. (a) 9-2 The basic plan must have a deductible of $500 per covered 9-3 individual and $1,000 per family. A deductible is not applicable 9-4 to an immunization for a covered dependent child seven years of age 9-5 or younger or a mammography screening under Subsection (c) of this 9-6 section. 9-7 (b) An individual covered by the basic plan shall pay 9-8 coinsurance at a rate of 25 percent until an annual maximum amount 9-9 of $2,000 per individual or $4,000 per family is met. 9-10 (c) The basic plan must include coverage for: 9-11 (1) inpatient care in a hospital for an injury, 9-12 accident, or physical illness, including a mental illness or 9-13 chemical dependency, for not more than 21 days per calendar year; 9-14 (2) surgical services and physician services for care, 9-15 including psychiatric care or care for chemical dependency; 9-16 (3) outpatient hospital care; 9-17 (4) emergency care; 9-18 (5) maternity care; 9-19 (6) inpatient and outpatient radiology and laboratory 9-20 services; 9-21 (7) "well baby" examinations for a covered child until 9-22 the child is two years of age; 9-23 (8) immunizations for a covered child until the child 9-24 is eight years of age; 9-25 (9) one mammography screening per calendar year for a 9-26 covered woman 40 years of age or older; and 9-27 (10) services and supplies related to a lung, heart, 10-1 kidney, cornea, or liver transplant, not to exceed $100,000 per 10-2 calendar year. 10-3 (d) Coverage for surgical and physician services for 10-4 treatment for mental illness or chemical dependency may not exceed 10-5 $1,500 per calendar year. 10-6 (e) The basic plan must have a lifetime maximum benefit 10-7 amount per covered individual of $250,000. 10-8 (f) Instead of the deductible and coinsurance requirements 10-9 established under Subsections (a) and (b) of this section, a 10-10 managed care basic plan may use actuarially equivalent copayments. 10-11 Sec. 5. STANDARD HEALTH CARE BENEFIT PLAN REQUIREMENTS. (a) 10-12 The standard health care benefit plan must have a deductible of 10-13 $250 per covered individual and $750 per family. A deductible is 10-14 not applicable to an immunization for a covered dependent child 10-15 seven years of age or younger or a mammography screening under 10-16 Subsection (c) of this section. 10-17 (b) An individual covered by the standard plan shall pay 10-18 coinsurance at a rate of 20 percent until an annual maximum amount 10-19 of $1,500 per individual person or $3,000 per family is met. 10-20 (c) The standard plan must include coverage for: 10-21 (1) inpatient care in a hospital for an injury, 10-22 accident, or physical illness, including a mental illness or 10-23 chemical dependency, for not more than 45 days per calendar year; 10-24 (2) surgical services and physician services for care, 10-25 including psychiatric care or care for chemical dependency; 10-26 (3) outpatient hospital care; 10-27 (4) emergency care; 11-1 (5) maternity care; 11-2 (6) inpatient and outpatient radiology and laboratory 11-3 services; 11-4 (7) "well baby" examinations for a covered child until 11-5 the child is two years of age; 11-6 (8) immunizations for a covered child until the child 11-7 is eight years of age; 11-8 (9) one mammography screening per calendar year for a 11-9 covered woman 40 years of age or older; and 11-10 (10) services and supplies related to a heart, lung, 11-11 kidney, cornea, or liver transplant, not to exceed $100,000 per 11-12 calendar year. 11-13 (d) Coverage for surgical and physician services for 11-14 treatment for mental illness or chemical dependency may not exceed 11-15 $3,000 per calendar year. 11-16 (e) The standard plan must have a lifetime maximum benefit 11-17 amount per covered individual of $500,000. 11-18 (f) Instead of the deductible and coinsurance requirements 11-19 established under Subsections (a) and (b) of this section, a 11-20 managed care standard plan may use actuarially equivalent 11-21 copayments. 11-22 Sec. 6. PRESCRIPTION DRUGS COVERAGE. (a) The basic plan 11-23 may provide coverage for prescription drugs not to exceed $500 per 11-24 covered individual per calendar year. 11-25 (b) Except as provided by Subsection (c) of this section, 11-26 the standard plan may provide coverage for prescription drugs not 11-27 to exceed $1,500 per covered individual per calendar year. 12-1 (c) The standard plan may use a prescription drug card 12-2 program. If a prescription drug card program is used, the $1,500 12-3 maximum annual benefit amount under Subsection (b) of this section 12-4 does not apply. 12-5 Sec. 7. POWERS AND DUTIES OF DEPARTMENT; RULES. (a) The 12-6 State Board of Insurance shall, after notice and hearing, adopt 12-7 rules requiring: 12-8 (1) registration with the department by each carrier 12-9 intending to operate as a small employer carrier under this 12-10 article; 12-11 (2) publication by the department of a list of all 12-12 small employer carriers; 12-13 (3) a broadly publicized toll-free telephone number 12-14 for access by small employers to information concerning the 12-15 program; and 12-16 (4) registration by insurance agents intending to 12-17 operate as agents for health care benefit plans marketed or issued 12-18 to small employers under this article. 12-19 (b) The department shall require periodic demonstration by 12-20 small employer carriers and agents that those carriers and agents 12-21 are marketing or issuing health care benefit plans to small 12-22 employers in fulfillment of the purposes of this article. 12-23 (c) To the extent considered necessary by the commissioner 12-24 to ensure the fair distribution of high-risk individuals and groups 12-25 among carriers, the department may require periodic reports by 12-26 carriers and agents regarding health care benefit plans issued by 12-27 those carriers and agents. The reporting requirements shall be 13-1 limited to information regarding case characteristics and the 13-2 numbers of health care benefit plans in various categories that are 13-3 marketed or issued to small employers. 13-4 Sec. 8. POLICY FORMS. (a) The commissioner shall approve 13-5 policy forms for the basic plan and the standard plan. 13-6 (b) A small employer carrier may certify to the 13-7 commissioner, in the form and manner prescribed by the 13-8 commissioner, that the basic plans and the standard plans used by 13-9 that carrier are in substantial compliance with the approved policy 13-10 forms. On receipt by the commissioner of the certification, the 13-11 carrier may use the forms until, after notice and an opportunity 13-12 for a hearing, the commissioner disapproves their continued use. 13-13 Sec. 9. SMALL EMPLOYER DETERMINATION. In computing the 13-14 number of employees to establish whether a person is a small 13-15 employer, companies that are affiliated, or that file a combined 13-16 tax return for purposes of state taxation, are considered one 13-17 employer. After the issuance of a health care benefit plan to a 13-18 small employer under this article, the eligibility of a small 13-19 employer based on the number of employees shall be determined and 13-20 certified annually. Except as otherwise specifically provided, the 13-21 provisions of this article that apply to a small employer continue 13-22 to apply until the contract anniversary after the date on which the 13-23 employer no longer meets the definition of small employer. 13-24 Sec. 10. ESTABLISHMENT OF DISTINCT GROUPINGS OF SMALL 13-25 EMPLOYERS. (a) A small employer carrier may establish a distinct 13-26 grouping of small employers only on the basis that the applicable 13-27 health care benefit plans: 14-1 (1) are marketed and sold through persons who are not 14-2 participating in the marketing or sale of other distinct groupings 14-3 of small employers for the small employer carrier; 14-4 (2) have been acquired from another small employer 14-5 carrier as a distinct grouping of plans; or 14-6 (3) are provided through an association of small 14-7 employers, with a membership of not less than 15, that is formed 14-8 for purposes other than obtaining insurance coverage. 14-9 (b) In addition to the distinct groupings of small employers 14-10 authorized under Subsection (a) of this section, a small employer 14-11 carrier may establish not more than two additional groupings under 14-12 each of the subdivisions in Subsection (a) of this section on the 14-13 basis of underwriting criteria expected to produce substantial 14-14 variation in the health care costs. 14-15 (c) The commissioner may approve the establishment of 14-16 additional distinct groupings on application to the commissioner 14-17 and a finding by the commissioner that the establishment of 14-18 additional groupings would enhance the efficiency and fairness of 14-19 the insurance market for small employers. 14-20 Sec. 11. EMPLOYER INFORMATION PROVIDED TO CARRIER; COVERAGE; 14-21 LIST. (a) A small employer shall provide on request to its small 14-22 employer carrier reports and documentation regarding the number of 14-23 its employees and the hours and wages of those employees to 14-24 determine initial eligibility and ensure continued eligibility. A 14-25 small employer carrier may not request the information more than 14-26 four times each year. 14-27 (b) The small employer shall provide the small employer 15-1 carrier a coverage application card for each employee. An employee 15-2 who declines coverage because the employee or dependent is covered 15-3 under another group health plan shall certify that coverage on a 15-4 form prescribed by the small employer carrier. 15-5 (c) Coverage under the program is not available unless a 15-6 small employer submits an application and maintains coverage for at 15-7 least 75 percent of its employees. An employee who certifies 15-8 coverage under another group health plan is included in the 15-9 computation of the number of employees for the participation 15-10 requirement, except that coverage is not available under the 15-11 program unless at least three employees are actually covered by the 15-12 health benefit plan of the small employer. 15-13 Sec. 12. COST CONTAINMENT. (a) A small employer carrier 15-14 may use home health services, skilled nursing facilities, 15-15 outpatient surgery facilities, and other methods of reducing the 15-16 number and length of hospital admissions. A small employer carrier 15-17 using those methods may offer benefit incentives regarding 15-18 deductibles, coinsurance, and copayments. 15-19 (b) Both the basic plan and the standard plan may use cost 15-20 containment provisions, including: 15-21 (1) precertification of covered services; 15-22 (2) preauthorization for specified services; 15-23 (3) the requirement of a second opinion before 15-24 surgery; 15-25 (4) concurrent utilization review and management; 15-26 (5) discharge planning; 15-27 (6) large case management; 16-1 (7) coordination of benefits in compliance with 16-2 guidelines established by the National Association of Insurance 16-3 Commissioners; and 16-4 (8) managed care and point of service and preferred 16-5 provider arrangements. 16-6 Sec. 13. REQUIREMENTS RELATING TO ENROLLMENT PERIODS. (a) 16-7 The initial enrollment period for a health care benefit plan under 16-8 the program must be at least 30 days. 16-9 (b) An employee or dependent is not a late enrollee if that 16-10 individual: 16-11 (1) was covered under another employer health care 16-12 benefit plan at the time the individual was eligible to enroll in a 16-13 health care benefit plan under the program; 16-14 (2) declined coverage under the program during the 16-15 initial enrollment period and certified during the initial 16-16 enrollment period that coverage under another employer health care 16-17 benefit plan was the reason for declining coverage under the 16-18 program; 16-19 (3) lost coverage under another employer health care 16-20 benefit plan as a result of termination of employment, termination 16-21 of the other plan's coverage, death of a spouse, or divorce; and 16-22 (4) requests enrollment in a health care benefit plan 16-23 under the program not later than the 30th day after the date of 16-24 termination of the coverage provided under another employer health 16-25 care benefit plan. 16-26 Sec. 14. PREEXISTING CONDITION REQUIREMENTS. (a) A 16-27 preexisting condition provision in a small employer health care 17-1 benefit plan may not exclude coverage for a period longer than 12 17-2 months after the effective date of the coverage, and may only 17-3 relate to: 17-4 (1) a condition manifested in such a manner as would 17-5 cause an ordinarily prudent person to seek medical advice, 17-6 diagnosis, care, or treatment; 17-7 (2) a condition for which medical advice, diagnosis, 17-8 care, or treatment was recommended or received during the six 17-9 months preceding the effective date of the coverage; or 17-10 (3) a pregnancy existing on the effective date of the 17-11 coverage. 17-12 (b) In determining whether a preexisting condition provision 17-13 applies to an employee or dependent, each health care benefit plan 17-14 must credit the time the person was covered under a previous 17-15 employer-based health care benefit plan if: 17-16 (1) the previous coverage was continuous; and 17-17 (2) a gap in coverage did not occur between the 17-18 coverage under the previous plan and employment with the small 17-19 employer. 17-20 (c) For purposes of this section, the use of a prescription 17-21 drug or the renewal of a prescription constitutes the receipt of 17-22 medical advice and medical treatment. 17-23 Sec. 15. ELIGIBILITY CONDITIONS. (a) A new employee of a 17-24 small employer may not be denied coverage if the application is 17-25 received by the small employer carrier not later than the 31st day 17-26 after the date on which the employment begins. 17-27 (b) A small employer who participates in the program shall 18-1 pay at least 75 percent of the insurance premium for the employee's 18-2 coverage. A small employer who pays the entire amount of the 18-3 premium may require a waiting period for coverage not to exceed 30 18-4 days after the first day of the month following the date of 18-5 employment. An employee of a small employer who pays less than the 18-6 entire amount of the premium shall have an effective date of 18-7 coverage of not later than the first day of the next month 18-8 following the date of employment. 18-9 (c) A small employer may provide coverage for eligible 18-10 dependents of the employee. Eligible dependents include the 18-11 employee's spouse or children. If a small employer allows coverage 18-12 of a child, the coverage may not exclude or limit coverage of the 18-13 child solely because the child is adopted. A dependent may not be 18-14 covered before the effective date of the employee's coverage. 18-15 (d) A small employer plan may not limit or exclude initial 18-16 coverage of a newborn, natural child of the employee, except that 18-17 the plan may require that the employee cover the employee's spouse 18-18 and children as a condition precedent to coverage of a newborn 18-19 child. Any coverage of a newborn, natural child of an employee 18-20 under this subsection terminates on the 31st day after the birth 18-21 date of the child unless: 18-22 (1) dependent children are eligible for coverage; and 18-23 (2) timely application and any required additional 18-24 premium is received by the insurer not later than the 31st day 18-25 after the date of birth. 18-26 (e) If the Consolidated Omnibus Budget Reconciliation Act of 18-27 1985, as amended (Pub. L. No. 99-272, 100 Stat. 222), is not 19-1 applicable to a small employer, a dependent who has been covered by 19-2 that small employer for at least one year or is younger than one 19-3 year of age may elect to continue coverage with the small employer 19-4 if the dependent loses eligibility for coverage because of the 19-5 death, divorce, or retirement of the employee. The continuation is 19-6 conditioned on notice to the small employer, not later than the 19-7 30th day after the death, divorce, or retirement date, of the 19-8 intent to continue the coverage and the timely payment of the 19-9 applicable premium to the small employer. The small employer may 19-10 require a dependent to pay a monthly fee not to exceed $10 for 19-11 administrative costs. The continuation coverage continues until: 19-12 (1) the dependent fails to pay the required premium 19-13 not later than the 10th day after the date on which the premium is 19-14 due; 19-15 (2) the dependent obtains other group health insurance 19-16 or is covered by Medicare; 19-17 (3) a period of three years has elapsed since the 19-18 death, divorce, or retirement of the employee; or 19-19 (4) the employer is no longer eligible to participate 19-20 in the program. 19-21 (f) A new employee must apply for coverage not later than 19-22 the 31st day after the date of the employment. A late enrollee may 19-23 be excluded from coverage for 24 months from the date of 19-24 application or may be subject to a 24-month preexisting condition 19-25 exclusion. If both a period of exclusion from coverage and a 19-26 preexisting condition exclusion are applicable to a late enrollee, 19-27 the combined period of exclusion may not exceed 24 months from the 20-1 date of the late application. 20-2 (g) Small employer carrier requirements for minimum 20-3 participation of employees and minimum employer contributions in 20-4 determining whether to accept a small employer group shall be 20-5 applied uniformly among all small employer groups with the same 20-6 number of eligible employees applying for coverage or receiving 20-7 coverage from the small employer carrier. A small employer carrier 20-8 may vary application of minimum participation requirements and 20-9 minimum employer contribution requirements only by the size of the 20-10 small employer group. This subsection may not be construed to 20-11 reduce the minimum employer contribution of 75 percent of the 20-12 employee premium or three covered employees. 20-13 Sec. 16. DISCLOSURE REQUIREMENTS; ANNUAL CERTIFICATION. (a) 20-14 Each small employer carrier that offers for sale any health care 20-15 benefit plan to a small employer shall make a reasonable 20-16 disclosure, as part of its solicitation and sales materials, of: 20-17 (1) the extent to which premium rates for a specified 20-18 small employer are established or adjusted in part based on the 20-19 actual or expected variation in claims costs or the health 20-20 condition of the employees and dependents of the small employer; 20-21 (2) provisions concerning the small employer carrier's 20-22 right to change premium rates and the factors, including case 20-23 characteristics, that affect changes in premium rates; 20-24 (3) a description of the class of business to which 20-25 the small employer is assigned, including the applicable grouping 20-26 of plans; 20-27 (4) provisions relating to termination of coverage; 21-1 and 21-2 (5) provisions relating to the effect of any 21-3 preexisting condition. 21-4 (b) Each small employer carrier shall maintain at its 21-5 principal place of business a complete and detailed description of 21-6 its rating practices and renewal underwriting practices, including 21-7 information and documentation that demonstrate that its rating 21-8 methods and practices are based on commonly accepted actuarial 21-9 assumptions and are in accordance with sound actuarial principles. 21-10 The small employer carrier shall make the information and 21-11 documentation available to the commissioner on request. The 21-12 information is proprietary trade secret information and is not 21-13 subject to disclosure by the commissioner to persons outside of the 21-14 department except as agreed to by the small employer carrier or as 21-15 ordered by a court of competent jurisdiction. 21-16 (c) Each small employer carrier shall file with the 21-17 commissioner annually on or before March 15 an actuarial 21-18 certification certifying that the carrier is in compliance with 21-19 this article and that the rating methods of the small employer 21-20 carrier are actuarially sound. A copy of the certification shall 21-21 be retained by the small employer carrier at its principal place of 21-22 business. A person who performs an actuarial certification shall 21-23 review the appropriate records of a small employer carrier and 21-24 shall examine the actuarial assumptions and methods used by the 21-25 small employer carrier in establishing premium rates for applicable 21-26 health care benefit plans. 21-27 Sec. 17. HEALTH MAINTENANCE ORGANIZATIONS. (a) A health 22-1 maintenance organization is not required to offer coverage or 22-2 accept applications under Section 3 of this article for: 22-3 (1) a small employer who is not physically located in 22-4 the health maintenance organization's approved service areas; 22-5 (2) an employee who does not work or reside within the 22-6 health maintenance organization's approved service areas; or 22-7 (3) an area in which the health maintenance 22-8 organization reasonably anticipates and demonstrates to the 22-9 satisfaction of the commissioner that it will not have the ability 22-10 in its network of providers to deliver adequate service to the 22-11 members of those small employer groups because of obligations to 22-12 existing group contract holders and enrollees. 22-13 (b) A health maintenance organization that is unable to 22-14 offer coverage under Subsection (a)(3) of this section may not 22-15 offer coverage in the affected area to new employer groups with 22-16 more than 35 eligible employees or to small employer groups until 22-17 the expiration of 180 days after: 22-18 (1) the date of the refusal to provide coverage; or 22-19 (2) the date on which the health maintenance 22-20 organization notifies the commissioner that it has regained the 22-21 ability to deliver adequate services to small employer groups. 22-22 Sec. 18. TERMINATION OF COVERAGE. (a) A health care 22-23 benefit plan under the program may not be terminated by the small 22-24 employer carrier except: 22-25 (1) for nonpayment of the required premiums or 22-26 contributions toward the premiums by the policyholder or employer; 22-27 (2) for fraud or misrepresentation by the 23-1 policyholder, contract holder, or employer; 23-2 (3) for noncompliance with renewability provisions 23-3 approved by the commissioner; 23-4 (4) if the number of enrollees covered under the 23-5 health care benefit plan is less than the number or percentage of 23-6 employees required by this article; or 23-7 (5) for noncompliance with the carrier's employer 23-8 contribution requirements. 23-9 (b) Coverage under a health care benefit plan of an employee 23-10 or dependent may not be terminated except: 23-11 (1) for nonpayment of a required premium or 23-12 contribution; 23-13 (2) for fraud or misrepresentation; or 23-14 (3) for misuse of a provider network provision or a 23-15 prescription drug program. 23-16 (c) A small employer carrier may cease to renew all plans 23-17 provided to a particular class of business if notice is provided to 23-18 all affected small employers and to the commissioner at least 90 23-19 days before the date of termination of the coverage. A small 23-20 employer carrier that exercises its right to terminate all plans 23-21 for a class of business may not: 23-22 (1) establish a new class of business before the 23-23 expiration of five years after the termination date without the 23-24 prior approval of the commissioner; or 23-25 (2) transfer or otherwise provide coverage to a 23-26 terminated small employer from the terminated class of business 23-27 unless the small employer carrier offers to transfer or provide 24-1 coverage to all affected small employers and eligible employees and 24-2 dependents without regard to case characteristics, claim 24-3 experience, health status, or duration of coverage. 24-4 (d) If a health maintenance organization does business in 24-5 the small employer market in one service area of the state, the 24-6 termination requirements under this section apply to the operations 24-7 of that health maintenance organization in that service area. 24-8 (e) Except as provided by Section 15(e) of this article, 24-9 termination of an employee's coverage terminates the coverage of 24-10 that employee's dependents. 24-11 Sec. 19. PREMIUM RATE LIMITATIONS. (a) The premium rates 24-12 for a health care benefit plan subject to this article are subject 24-13 to this section. 24-14 (b) The index rate for a rating period for any class of 24-15 business may not exceed the index rate for any other class of 24-16 business by more than 20 percent. 24-17 (c) For a class of business, the premium rates charged 24-18 during a rating period to small employers with similar case 24-19 characteristics for the same or similar coverage, or the rates that 24-20 could be charged to those employers under the rating system for 24-21 that class of business, may not vary from the index rate by more 24-22 than 25 percent of the index rate. 24-23 (d) The percentage increase in the premium rate charged to a 24-24 small employer for a new rating period may not exceed the sum of: 24-25 (1) the percentage change in the new business premium 24-26 rate measured from the first day of the prior rating period to the 24-27 first day of the new rating period; 25-1 (2) any adjustment, not to exceed 15 percent annually 25-2 and adjusted pro rata for rating periods of less than one year, due 25-3 to the claim experience, health status, or duration of coverage of 25-4 the employees or dependents of the small employer as determined 25-5 from the small employer carrier's rate manual for the class of 25-6 business; and 25-7 (3) any adjustment due to change in coverage or change 25-8 in the case characteristics of the small employer as determined 25-9 from the small employer carrier's rate manual for the class of 25-10 business. 25-11 (e) If a small employer carrier uses an industry 25-12 classification as a case characteristic in establishing premium 25-13 rates, the rate factor associated with the industry classification 25-14 may not vary from the arithmetic average of the rate factors 25-15 associated with all industry classifications by more than 15 25-16 percent of that average. 25-17 (f) A small employer carrier shall apply rating factors, 25-18 including case characteristics, consistently with respect to all 25-19 small employers in a class of business. Rating factors must 25-20 produce premiums for identical groups that differ only by the 25-21 amounts attributable to plan design and that do not reflect 25-22 differences due to the nature of the groups assumed to select 25-23 particular health care benefit plans. A small employer carrier 25-24 shall treat each health care benefit plan issued or renewed in the 25-25 same calendar month as having the same rating period. 25-26 (g) A small employer carrier may not transfer a small 25-27 employer involuntarily into or out of a class of business. A small 26-1 employer carrier may not offer to transfer a small employer into or 26-2 out of a class of business unless the offer is made to transfer all 26-3 small employers in that class of business without regard to case 26-4 characteristics, claim experience, health status, or duration of 26-5 coverage since the issuance of the coverage. 26-6 (h) For purposes of this section, a health care benefit plan 26-7 that uses a restricted provider network may not be considered 26-8 similar coverage to a health care benefit plan that does not use 26-9 such a network. 26-10 (i) A small employer plan may not use case characteristics, 26-11 other than benefit plan design, age, sex, industry, geographic 26-12 area, family composition, and group size, without the prior 26-13 approval of the commissioner. 26-14 (j) For a health care benefit plan issued before September 26-15 1, 1993, a premium rate for a rating period may exceed the ranges 26-16 set forth in Subsections (b) and (c) of this section until 26-17 September 1, 1998. In that case, the percentage increase in the 26-18 premium rate charged to a small employer in that class of business 26-19 for a new rating period may not exceed the sum of the percentage 26-20 change in the new business premium rate measured from the first day 26-21 of the prior rating period to the first day of the new rating 26-22 period, and any adjustment due to change in coverage or change in 26-23 the case characteristics of the small employer as determined from 26-24 the carrier's rate manual for the class of business. This 26-25 subsection expires September 30, 1998. 26-26 Sec. 20. STUDY; RATE REVISIONS. (a) The commissioner shall 26-27 conduct a study for submission to the legislature and the State 27-1 Board of Insurance of the effectiveness of this article and may 27-2 recommend further improvements to achieve greater stability, 27-3 accessibility, and affordability in the small employer marketplace 27-4 in that study. The commissioner shall submit the study not later 27-5 than September 1, 1996. 27-6 (b) If, in conducting the study, the commissioner finds that 27-7 a further reduction in the rate limitations under Section 19 of 27-8 this article will not have a deleterious impact on the 27-9 accessibility and affordability of health coverage to small 27-10 employers, the commissioner shall recommend revised limitations and 27-11 transition rules for their implementation to the board. If the 27-12 board concurs with the commissioner's recommendation, the 27-13 commissioner and board shall take appropriate steps to notify all 27-14 small employer carriers and implement the recommendation. 27-15 (c) This section expires September 30, 1996. 27-16 Sec. 21. TEXAS SMALL EMPLOYER HEALTH REINSURANCE SYSTEM. 27-17 (a) The Texas Small Employer Health Reinsurance System is created. 27-18 The system is a nonprofit entity. 27-19 (b) The system is administered by a board of directors and 27-20 shall operate subject to the supervision and control of the 27-21 commissioner. 27-22 (c) The board of directors is composed of nine members, 27-23 eight persons appointed by the governor plus the commissioner or 27-24 the commissioner's designated representative, who serves as an ex 27-25 officio member. In selecting the members of the board, the 27-26 governor shall include representatives of small employers and small 27-27 employer carriers and other individuals determined to be qualified 28-1 by the commissioner. At least five members must be representatives 28-2 of reinsuring carriers and shall be selected from individuals 28-3 nominated by small employer carriers in this state according to 28-4 procedures and guidelines developed by the commissioner. The 28-5 directors appointed by the governor serve two-year terms. The 28-6 terms expire on December 31 of each odd-numbered year. A member's 28-7 term continues until a successor is appointed and qualifies. 28-8 (d) If the system becomes eligible for additional financing 28-9 under Subsection (v) of this section, the board of directors shall 28-10 be expanded to include two additional ex officio members, one each 28-11 representing the treasurer and the comptroller. The expansion of 28-12 the board under this subsection shall continue for the period that 28-13 the program continues to be eligible for the additional financing. 28-14 (e) Not later than November 1, 1993, each small employer 28-15 carrier shall file a report with the commissioner that states the 28-16 carrier's net health insurance premiums derived from health care 28-17 benefit plans delivered or issued for delivery to small employers 28-18 in this state during the previous calendar year. 28-19 (f) Not later than the 180th day after the date on which a 28-20 majority of the board of directors has qualified, the board shall 28-21 submit to the commissioner a plan of operation and thereafter any 28-22 amendments necessary or suitable to ensure the fair, reasonable, 28-23 and equitable administration of the system. The commissioner may, 28-24 after notice and hearing, approve the plan of operation if the 28-25 commissioner determines the plan is suitable to ensure the fair, 28-26 reasonable, and equitable administration of the system and provides 28-27 for the sharing of system gains or losses on an equitable and 29-1 proportionate basis in accordance with the provisions of this 29-2 section. The plan of operation is effective on the written 29-3 approval of the commissioner. 29-4 (g) If the board of directors fails to timely submit a 29-5 suitable plan of operation, the commissioner shall, after notice 29-6 and hearing, adopt a temporary plan of operation. The commissioner 29-7 shall amend or rescind any plan adopted under this subsection at 29-8 the time a plan of operation is submitted by the board and approved 29-9 by the commissioner. 29-10 (h) The plan of operation must: 29-11 (1) establish procedures for the handling and 29-12 accounting of system assets and money and for an annual fiscal 29-13 reporting to the commissioner; 29-14 (2) establish procedures for the selection of an 29-15 administering carrier and establish the powers and duties of that 29-16 administering carrier; 29-17 (3) establish procedures for reinsuring risks in 29-18 accordance with the provisions of this section; 29-19 (4) establish procedures for collecting assessments 29-20 from reinsuring carriers to fund claims and administrative expenses 29-21 incurred or estimated to be incurred by the system, including the 29-22 imposition of an interest penalty for late payment of an 29-23 assessment; and 29-24 (5) provide for any additional matters necessary for 29-25 the implementation and administration of the system. 29-26 (i) The system has the general powers and authority granted 29-27 under the laws of this state to insurance companies and health 30-1 maintenance organizations licensed to transact business, except 30-2 that the system may not issue health care benefit plans directly to 30-3 groups or individuals. The system is exempt from all taxes. The 30-4 system may: 30-5 (1) enter into contracts necessary or proper to carry 30-6 out the provisions and purposes of this section and may, with the 30-7 approval of the commissioner, enter into contracts with similar 30-8 programs of other states for the joint performance of common 30-9 functions or with persons or other organizations for the 30-10 performance of administrative functions; 30-11 (2) sue or be sued, including taking legal actions 30-12 necessary or proper to recover assessments and penalties for, on 30-13 behalf of, or against the system or a reinsuring carrier; 30-14 (3) take legal action necessary to avoid the payment 30-15 of improper claims against the system; 30-16 (4) define the health care benefit plans for which 30-17 reinsurance will be provided, and issue reinsurance policies, in 30-18 accordance with the requirements of this section; 30-19 (5) establish rules, conditions, and procedures for 30-20 reinsuring risks under the system; 30-21 (6) establish actuarial functions as appropriate for 30-22 the operation of the system; 30-23 (7) assess reinsuring carriers in accordance with the 30-24 provisions of Subsection (s) of this section and make advance 30-25 interim assessments as may be reasonable and necessary for 30-26 organizational and interim operating expenses, provided that any 30-27 interim assessments shall be credited as offsets against any 31-1 regular assessments due following the close of the fiscal year; 31-2 (8) appoint appropriate legal, actuarial, and other 31-3 committees as necessary to provide technical assistance in the 31-4 operation of the system, policy and other contract design, and any 31-5 other function within the authority of the system; and 31-6 (9) borrow money to effect the purposes of the system, 31-7 provided that any notes or other evidence of indebtedness of the 31-8 system not in default shall be legal investments for carriers and 31-9 may be carried as admitted assets. 31-10 (j) A small employer carrier may reinsure with the system as 31-11 provided by this subsection. With respect to a basic plan or a 31-12 standard plan, the system shall reinsure the level of coverage 31-13 provided. With respect to other plans, the system shall reinsure 31-14 up to the level of coverage provided in a basic or standard plan. 31-15 A small employer carrier may reinsure an entire employer group not 31-16 later than the 60th day after the date on which the group's 31-17 coverage under a health care benefit plan takes effect. A small 31-18 employer carrier may reinsure an eligible employee or dependent not 31-19 later than the 60th day after the date on which the coverage with 31-20 the small employer takes effect. A newly eligible employee or 31-21 dependent of the reinsured small employer may be reinsured not 31-22 later than the 60th day after the date on which that person's 31-23 coverage takes effect. 31-24 (k) The system may not reimburse a reinsuring carrier with 31-25 respect to the claims of a reinsured employee or dependent until 31-26 the carrier has incurred an initial level of claims for that 31-27 employee or dependent in a calendar year of $5,000 for benefits 32-1 covered by the system. In addition, the reinsuring carrier is 32-2 responsible for 10 percent of the next $50,000 of benefit payments 32-3 during a calendar year, and the system shall reinsure the 32-4 remainder. A reinsuring carrier's liability under this subsection 32-5 may not exceed a maximum of $10,000 in any one calendar year with 32-6 respect to any reinsured individual. 32-7 (l) The board of directors annually shall adjust the initial 32-8 level of claims and the maximum to be retained by the carrier 32-9 established under Subsection (k) of this section to reflect 32-10 increases in costs and utilization within the standard market for 32-11 health care benefit plans within this state. The adjustment may 32-12 not be less than the annual change in the medical component of the 32-13 Consumer Price Index for All Urban Consumers published by the 32-14 Bureau of Labor Statistics of the United States Department of 32-15 Labor, unless the board proposes and the commissioner approves a 32-16 lower adjustment factor. 32-17 (m) A small employer carrier may terminate reinsurance with 32-18 the system for one or more of the reinsured employees or dependents 32-19 of a small employer on any contract anniversary of the health care 32-20 benefit plan. 32-21 (n) A reinsuring carrier shall apply consistently with 32-22 respect to reinsured and nonreinsured business all managed care and 32-23 claims handling techniques, including utilization review, 32-24 individual case management, preferred provider provisions, and 32-25 other managed care provisions or methods of operation. 32-26 (o) As part of the plan of operation, the board of directors 32-27 shall adopt a method to determine premium rates to be charged by 33-1 the system for reinsuring small employers and individuals under 33-2 this section. The method adopted must include a classification 33-3 system for small employers that reflects the types of case 33-4 characteristics commonly used by small employer carriers in this 33-5 state, and must provide for the development of base reinsurance 33-6 premium rates that shall be multiplied by the factors set forth in 33-7 Subsection (p) of this section to determine the premium rates for 33-8 the system. The base reinsurance premium rates shall be 33-9 established by the board, subject to the approval of the 33-10 commissioner, and shall be set at levels that reasonably 33-11 approximate the gross premiums charged to small employers by small 33-12 employer carriers for health care benefit plans with benefits 33-13 similar to those provided by the standard plan, adjusted to reflect 33-14 retention levels required under this article. The board 33-15 periodically shall review the method adopted under this subsection, 33-16 including the classification system and any rating factors, to 33-17 ensure that the method reasonably reflects the claims experience of 33-18 the system. The board may propose changes to the method. The 33-19 changes are subject to the approval of the commissioner. 33-20 (p) An entire small employer group may be reinsured at a 33-21 rate that is one and one-half times the base reinsurance premium 33-22 rate for that group. An eligible employee or dependent may be 33-23 reinsured at a rate that is five times the base reinsurance premium 33-24 rate for that individual. 33-25 (q) The board of directors may consider adjustments to the 33-26 premium rates charged by the system to reflect the use of effective 33-27 cost containment and managed care arrangements. 34-1 (r) If a health care benefit plan for a small employer is 34-2 entirely or partially reinsured with the system, the premium 34-3 charged to the small employer for any rating period for the 34-4 coverage issued must meet the premium rate limitations established 34-5 under Section 19 of this article. 34-6 (s) Not later than March 1 of each year, the board of 34-7 directors shall determine and report to the commissioner the system 34-8 net loss for the previous calendar year, including administrative 34-9 expenses and incurred losses for the year, taking into account 34-10 investment income and other appropriate gains and losses. Any net 34-11 loss for the year must be recouped by assessments of reinsuring 34-12 carriers. Each reinsuring carrier's assessment shall be determined 34-13 annually by the board based on annual statements and other reports 34-14 required by the board and filed with the board. The board shall 34-15 establish, as part of the plan of operation, a formula by which to 34-16 make assessments against reinsuring carriers. With the approval of 34-17 the commissioner, the board may change the assessment formula from 34-18 time to time as appropriate. The board shall base the assessment 34-19 formula on each reinsuring carrier's share of: 34-20 (1) the total premiums earned in the preceding 34-21 calendar year from health care benefit plans delivered or issued 34-22 for delivery by reinsuring carriers to small employers in this 34-23 state; and 34-24 (2) the premiums earned in the preceding calendar year 34-25 from newly issued health care benefit plans delivered or issued for 34-26 delivery during the calendar year by reinsuring carriers to small 34-27 employers in this state. 35-1 (t) The formula established under Subsection (s) of this 35-2 section may not result in an assessment share for a reinsuring 35-3 carrier that is less than 50 percent or more than 150 percent of an 35-4 amount based on the proportion of the total premium earned in the 35-5 preceding calendar year from health care benefit plans delivered or 35-6 issued for delivery to small employers in this state by that 35-7 reinsuring carrier to the total premiums earned in the preceding 35-8 calendar year from health care benefit plans delivered or issued 35-9 for delivery to small employers in this state by all reinsuring 35-10 carriers. Premiums earned by a reinsuring carrier that are less 35-11 than an amount determined by the board of directors to justify the 35-12 cost of collection of an assessment based on those premiums shall 35-13 not be considered by the board in determining assessments. 35-14 (u) With the approval of the commissioner, the board of 35-15 directors may adjust the assessment formula for reinsuring carriers 35-16 that are approved health maintenance organizations that are 35-17 federally qualified under Subchapter XI, Public Health Service Act 35-18 (42 U.S.C. Section 300e et seq.) to the extent that any 35-19 restrictions are imposed on those health maintenance organizations 35-20 that are not imposed on other small employer carriers. 35-21 (v) Not later than March 1 of each year, the board of 35-22 directors shall file with the commissioner an estimate of the 35-23 assessments necessary to fund the losses incurred by the system 35-24 during the previous calendar year. If the board determines that 35-25 the necessary assessments exceed five percent of the total premiums 35-26 earned in the previous calendar year from health care benefit plans 35-27 delivered or issued for delivery by reinsuring carriers to small 36-1 employers in this state, the board shall evaluate the operation of 36-2 the system and shall report its findings, including any 36-3 recommendations for changes to the plan of operation, to the 36-4 commissioner not later than the 90th day after December 31st of the 36-5 calendar year in which the losses were incurred. The evaluation 36-6 must include an estimate of future assessments and must consider 36-7 the administrative costs of the system, the appropriateness of the 36-8 premiums charged, the level of insurer retention under the system, 36-9 and the costs of coverage for small employers. If the board fails 36-10 to timely file a report, the commissioner may evaluate the 36-11 operations of the system and may implement amendments to the plan 36-12 of operation as considered necessary by the commissioner to reduce 36-13 future losses and assessments. If assessments in each of two 36-14 consecutive calendar years exceed the amount specified by this 36-15 subsection, the system is eligible to receive additional financing 36-16 from the general revenue of the state as provided by Subsection (w) 36-17 of this section. 36-18 (w) The amount of additional financing to be provided to the 36-19 system is equal to the amount by which total assessments in the 36-20 preceding two calendar years exceed five percent of the total 36-21 premiums earned during that period from small employers from health 36-22 care benefit plans delivered or issued for delivery in this state 36-23 by reinsuring carriers. If the system has received additional 36-24 financing from the general revenue of the state in either of the 36-25 two previous calendar years, the amount of that additional 36-26 financing shall be subtracted from the amount of total assessments. 36-27 Additional financing received by the system under this subsection 37-1 shall be distributed to reinsuring carriers in proportion to the 37-2 assessments paid by those carriers during the preceding two 37-3 calendar years. If assessments exceed the net losses of the 37-4 system, the excess amount shall be held in an interest-bearing 37-5 account and used by the board of directors to offset future losses 37-6 or to reduce system premiums. In this subsection, "future losses" 37-7 includes reserves for incurred but not reported claims. 37-8 (x) A reinsuring carrier may petition the commissioner for a 37-9 deferment in whole or in part of an assessment imposed by the board 37-10 of directors. The commissioner may defer all or part of the 37-11 assessment of a reinsuring carrier if the commissioner determines 37-12 that the payment of the assessment would place the reinsuring 37-13 carrier in a financially impaired condition. If an assessment 37-14 against a reinsuring carrier is deferred, the amount deferred shall 37-15 be assessed against the other participating carriers in a manner 37-16 consistent with the basis for assessment established by this 37-17 section. The reinsuring carrier receiving the deferment is liable 37-18 to the system for the amount deferred and is prohibited from 37-19 reinsuring any individual or group with the system until it pays 37-20 the outstanding assessment. 37-21 (y) Participation in the system as a reinsuring carrier, the 37-22 establishment of rates, forms, or procedures, or any other joint or 37-23 collective action required by this article may not be the basis of 37-24 any criminal or civil liability or penalty against the system or 37-25 its reinsuring carriers, either jointly or separately. 37-26 (z) The board of directors, as part of the plan of 37-27 operation, shall develop standards setting forth the manner and 38-1 levels of compensation to be paid for the sale of basic and 38-2 standard health care benefit plans. In establishing the standards, 38-3 the board shall consider: 38-4 (1) the need to ensure the broad availability of 38-5 coverages; 38-6 (2) the objectives of the system; 38-7 (3) the time and effort expended in placing the 38-8 coverage; 38-9 (4) the need to provide continuing service to the 38-10 small employer; 38-11 (5) the levels of compensation used in the industry; 38-12 and 38-13 (6) the overall costs of coverage to small employers 38-14 selecting those plans. 38-15 SECTION 2. The commissioner of insurance shall approve 38-16 policy forms under Section 8, Article 3.50-7, Insurance Code, as 38-17 added by this Act, not later than December 1, 1993. 38-18 SECTION 3. This Act takes effect September 1, 1993. 38-19 SECTION 4. The importance of this legislation and the 38-20 crowded condition of the calendars in both houses create an 38-21 emergency and an imperative public necessity that the 38-22 constitutional rule requiring bills to be read on three several 38-23 days in each house be suspended, and this rule is hereby suspended.