HBA-NRS C.S.H.B. 949 77(R)BILL ANALYSIS


Office of House Bill AnalysisC.S.H.B. 949
By: Averitt
Insurance
3/15/2001
Committee Report (Substituted)



BACKGROUND AND PURPOSE 

Currently, the Texas Administrative Code states that if a small employer
carrier varies the rates of small employer plans based on group size, the
highest rate factor is prohibited from exceeding the lowest rate factor by
more than 20 percent. However, this rule is difficult to enforce. The
Insurance Code contains no enabling statute for this rule and some small
employer carriers are using certain risk characteristics as the basis for
varying small employer premiums by a substantial premium percent. C.S.H.B.
949 codifies the 20 percent rating corridor rule and requires the risk load
for a particular small employer group to reflect the risk characteristics
of the group. 

RULEMAKING AUTHORITY

It is the opinion of the Office of House Bill Analysis that this bill does
not expressly delegate any additional rulemaking authority to a state
officer, department, agency, or institution. 

ANALYSIS

C.S.H.B. 949 amends the Insurance Code to prohibit a small employer carrier
from directly or indirectly using as a criteria for establishing a separate
class of business the number of employees and dependents of a small
employer or, except when the small employer carrier provides coverage to
one or more employer-based association groups, the trade or occupation of
the employees of a small employer or the industry or type of business of
the small employer. Furthermore, the bill requires small employer carriers
to develop premium rates for each small employer group through a two-step
process set forth in the bill. The bill requires the risk load assessed to
a particular group to reflect the risk characteristics of the group. The
bill authorizes a small employer carrier to use the number of employees and
dependents of a small employer as a case characteristic in establishing
premium rates for the group and prohibits the highest rate factor
associated with a classification based on the number of employees and
dependents of a small employer from exceeding by more than 20 percent the
lowest rate factor associated with a classification based on the number of
employees and dependents of a small employer.  

EFFECTIVE DATE

September 1, 2001.

COMPARISON OF ORIGINAL TO SUBSTITUTE

C.S.H.B. 949 modifies the original bill to remove a possible conflict with
current law by allowing an exception to the prohibition of a small employer
carrier directly or indirectly using as a criteria for establishing a
separate class of business the trade or occupation of the employees of a
small employer or the industry or type of business of the small employer
when the small employer carrier provides coverage to one or more
employer-based association groups. The substitute also modifies the
original bill by changing provisions referring to the group size of a small
employer to refer instead to the number of employees and dependents of a
small employer. The substitute removes the provision in the original bill
specifying the date on which the Act applies to certain premium rates.