By Averitt                                             H.B. No. 949
         77R3276 DLF-F                           
                                A BILL TO BE ENTITLED
 1-1                                   AN ACT
 1-2     relating to premium rates for certain small employer health benefit
 1-3     plans.
 1-4           BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
 1-5           SECTION 1. Article 26.31, Insurance Code, is amended by
 1-6     adding Subsection (g) to read as follows:
 1-7           (g)  A small employer carrier may not directly or indirectly
 1-8     use as a criteria for establishing a separate class of business:
 1-9                 (1)  the group size; or
1-10                 (2)  the trade or occupation of the employees of a
1-11     small employer or the industry or type of business of the small
1-12     employer.
1-13           SECTION 2. Subchapter D, Chapter 26, Insurance Code, is
1-14     amended by adding Article 26.315 to read as follows:
1-15           Art. 26.315. DEVELOPMENT OF PREMIUM RATES. (a)  In this
1-16     article:
1-17                 (1)  "Risk characteristic" means:
1-18                       (A)  a health status related factor;
1-19                       (B)  the duration of coverage; or
1-20                       (C)  any characteristic similar to a
1-21     characteristic described by Paragraph (A) or (B) of this
1-22     subdivision that is related to the health status or experience of a
1-23     small employer group or of any member of a small employer group.
1-24                 (2)  "Risk load" means the percentage above the
 2-1     applicable base premium rate that is charged by a small employer
 2-2     carrier to a small employer to reflect the risk characteristics
 2-3     associated with that particular small employer group.
 2-4           (b)  Premium rates shall be developed for each small employer
 2-5     group in a two-step process.  In the first step, a base premium
 2-6     rate shall be developed for each small employer group without
 2-7     regard to any risk characteristic of the group.  In the second
 2-8     step, the resulting base premium rate may be adjusted by the risk
 2-9     load of the group to reflect the risk characteristics of the group.
2-10           (c)  The risk load assessed to a particular group shall
2-11     reflect the risk characteristics of the particular group.
2-12           SECTION 3. Article 26.33, Insurance Code, is amended by
2-13     amending Subsection (d) and adding Subsection (e) to read as
2-14     follows:
2-15           (d)  A small employer carrier may use the group size of a
2-16     small employer as a case characteristic in establishing premium
2-17     rates  for the group. The highest rate factor associated with a
2-18     group size classification may not exceed the lowest rate factor
2-19     associated with a group size classification by more than 20
2-20     percent.
2-21           (e)  A small employer carrier may establish premium
2-22     discounts, rebates, or a reduction in otherwise applicable
2-23     copayments or deductibles in return for adherence to programs of
2-24     health promotion and disease prevention.  A discount, rebate, or
2-25     reduction established under this subsection does not violate
2-26     Section 4(8), Article 21.21, of this code.
2-27           SECTION 4. This Act takes effect September 1, 2001, and
 3-1     applies only to premium rates applicable to a small employer health
 3-2     benefit plan that is delivered, issued for delivery, or renewed on
 3-3     or after January 1, 2002.  A small employer health benefit plan
 3-4     that is delivered, issued for delivery, or renewed before January
 3-5     1, 2002,  is governed by the law as it existed immediately before
 3-6     the effective date of this Act, and that law is continued in effect
 3-7     for this purpose.