One of the best kept secrets few are aware of is a golden nugget imbedded in the Texas Insurance Code…………………..
One of the best kept secrets few are aware of is a golden nugget imbedded in the Texas Insurance Code which guarantees a district’s ability to obtain group health insurance from any admitted carrier participating in the small group market.
Texas school districts have until December 2021 to decide whether they want to terminate membership in the TRS ActiveCare program effective September 2022 or commit to another five years of bondage in an ailing government health plan many districts wish was better.
Many are concerned they may have difficulty in procuring a competitive commercial health plan should they provide TRS officials an irreversible notice of termination nine months in advance of the effective date. No insurance company will provide a firm rate that far in advance of an effective date which will leave districts who terminate in a state of uncertainty. Some are concerned they will not be able to get coverage at all due to high risk factors within their population and feel safe and secure being part of a large risk pool, a provably false sense of insecurity.
The Texas Insurance Code stipulates that school districts may elect to be considered a Small Group entitled to all mandates under Small Group Insurance provisions. That’s good news for districts seeking alternatives.
Frequently Asked Questions for Health Carriers – Texas
This means school districts are guaranteed coverage at market rates through admitted insurance companies participating in the small group market regardless of risk factors.
Below is a link to Insurance Code 1501. Following that are pertinent highlights copied from the Code.
NOTE: We advise districts to seek legal counsel regarding Insurance Code 1501 applicability specific to their district. Succeeding insurance code amendments may apply.
INSURANCE CODE CHAPTER 1501. HEALTH INSURANCE PORTABILITY AND AVAILABILITY ACT:
https://statutes.capitol.texas.gov/Docs/IN/htm/IN.1501.htm
Highlights:
Sec. 1501.009. SCHOOL DISTRICT ELECTION. (a) An independent school district may elect to participate as a small employer without regard to the number of employees in the district. An independent school district that makes the election is treated as a small employer under this chapter for all purposes.
Sec. 1501.108. RENEWABILITY OF COVERAGE; CANCELLATION. (a) Except as provided by this section and Section 1501.109, a small or large employer health benefit plan issuer shall renew the small or large employer health benefit plan for any covered small or large employer, as applicable, at the employer’s option….
SUBCHAPTER D. GUARANTEED ISSUE OF SMALL EMPLOYER HEALTH BENEFIT PLANS; CONTINUATION OF COVERAGE
Sec. 1501.151. GUARANTEED ISSUE. (a) A small employer health benefit plan issuer shall issue the small employer health benefit plan chosen by the small employer to each small employer that elects to be covered under the plan and agrees to satisfy the other requirements of the plan.
(b) A small employer health benefit plan issuer shall provide small employer health benefit plans without regard to health status related factors.
(c) This chapter does not require a small employer to purchase health coverage for the employer’s employees.
Added by Acts 2003, 78th Leg., ch. 1274, Sec. 3, eff. April 1, 2005.
Sec. 1501.154. MINIMUM PARTICIPATION REQUIREMENT. (a) Except as provided by Section 1501.155, coverage is available under a small employer health benefit plan if at least 75 percent of a small employer’s eligible employees elect to participate in the plan.
Sec. 1501.155. EXCEPTION TO MINIMUM PARTICIPATION REQUIREMENT. (a) A small employer health benefit plan issuer may offer a small employer health benefit plan to a small employer with a participation level of less than 75 percent of the employer’s eligible employees if the issuer permits the same qualifying participation level for each small employer health benefit plan offered by the issuer in this state.
SUBCHAPTER E. UNDERWRITING AND RATING OF SMALL EMPLOYER HEALTH BENEFIT PLANS
Sec. 1501.201. DEFINITIONS. In this subchapter:
(1) “Base premium rate” means, for each class of business and for a specific rating period, the lowest premium rate that is charged or that could be charged under a rating system for that class of business by a small employer health benefit plan issuer to small employers with similar case characteristics for small employer health benefit plans that provide the same or similar coverage.
(2) “Case characteristics” means, with respect to a small employer, the geographic area in which the employer’s employees reside, the age and gender of the individual employees and their dependents, the number of employees and dependents, the appropriate industry classification as determined by the small employer health benefit plan issuer, and other objective criteria established by the issuer that are considered by the issuer in setting premium rates for the employer.
Sec. 1501.204. INDEX RATES. Under a small employer health benefit plan:
(1) the index rate for a class of business may not exceed the index rate for any other class of business by more than 20 percent; and
(2) premium rates charged during a rating period to small employers in a class of business with similar case characteristics for the same or similar coverage, or premium rates that could be charged to those employers under the rating system for that class of business, may not vary from the index rate by more than 25 percent.
Added by Acts 2003, 78th Leg., ch. 1274, Sec. 3, eff. April 1, 2005.
Small employer health benefit plan issuers shall develop premium rates for each small employer group in a two-step process. In the first step, the small employer health benefit plan issuer shall develop a base premium rate for each small employer group without regard to any risk characteristic of the group. In the second step, the small employer health benefit plan issuer may adjust the resulting base premium rate by the risk load of the group, subject to this subchapter, to reflect the risk characteristics of the group.
Sec. 1501.206. PREMIUM RATES: ADJUSTMENTS. (a) The percentage increase in the premium rate charged to a small employer for a new rating period may not exceed the sum of:
(1) the percentage change in the new business premium rate, measured from the first day of the preceding rating period to the first day of the new rating period;
(2) any adjustment, not to exceed 15 percent annually and adjusted pro rata for a rating period of less than one year, due to the claims experience, health status, or duration of coverage of the employees or dependents of employees of the small employer, as determined under the small employer health benefit plan issuer’s rate manual for the class of business; and
(3) any adjustment due to change in coverage or change in the case characteristics of the small employer, as determined under the issuer’s rate manual for the class of business.
(b) An adjustment in the premium rate for claims experience, health status, or duration of coverage:
(1) may not be charged to individual employees or dependents; and
(2) must be applied uniformly to the rates charged for all employees and dependents of employees of the small employer.
Added by Acts 2003, 78th Leg., ch. 1274, Sec. 3, eff. April 1, 2005.
Sec. 1501.208. PREMIUM RATES: INDUSTRY CLASSIFICATION. A small employer health benefit plan issuer may use the industry classification to which a small employer belongs as a case characteristic in establishing the premium rate, but the highest rate factor associated with any industry classification may not exceed by more than 15 percent the lowest rate factor associated with any industry classification.
The highest rate factor associated with a classification based on the number of employees and dependents of a small employer may not exceed 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.
Each small employer health benefit plan issuer shall maintain at its principal place of business a complete and detailed description of its rating practices and renewal underwriting practices, including information and documentation that demonstrate that its rating methods and practices are based on commonly accepted actuarial assumptions and are in accordance with sound actuarial principles.
Sec. 1501.216. PREMIUM RATES: NOTICE OF INCREASE. (a) Not less than 60 days before the date on which a premium rate increase takes effect on a small employer health benefit plan delivered or issued for delivery in this state by an insurer
SUBCHAPTER H. MARKETING OF SMALL EMPLOYER HEALTH BENEFIT PLANS
Sec. 1501.351. MARKETING REQUIREMENTS. (a) Each small employer health benefit plan issuer shall market a small employer health benefit plan to eligible small employers in this state through properly licensed agents.
Sec. 1501.353. AGENT COMPENSATION. (a) A small employer health benefit plan issuer shall pay the same commission, percentage of premium, or other amount to an agent for renewal of a small employer health benefit plan as the issuer paid for original placement of the plan, except that the issuer may increase compensation for renewal of a plan to reflect an increase in the cost of living or similar factors.
Sec. 1501.358. APPLICABILITY TO THIRD-PARTY ADMINISTRATOR. If a small employer health benefit plan issuer enters into an agreement with a third-party administrator to provide administrative, marketing, or other services related to offering small employer health benefit plans to small employers in this state, the third-party administrator is subject to Sections 1501.111, 1501.351-1501.353, and 1501.355-1501.357.
Added by Acts 2003, 78th Leg., ch. 1274, Sec. 3, eff. April 1, 2005.
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