This bulletin and attachment is intended to remind regulated entities of the requirements of state law contained in Chapter 26, Texas Insurance Code (TIC) and Chapter 26, Texas Administrative Code (TAC). This bulletin, as well as Bulletin No. B-0021-96 issued by the Department in 1996, clarify legal requirements related to rating of small employer health benefit plans. The attachment to this bulletin outlines frequently asked questions pertaining to Article 26.32(c), and can assist small employer carriers in complying with the small employer rating requirements. Small employer carriers and their agents should refer to Chapter 26 TIC and TAC for complete definitions and requirements.
Requirements for rating contained in the statues and rules are meant to ensure the availability and affordability of health care coverage for small employers. These rating requirements limit the use of health status in establishing rates, limit the amount of any increase in rates, limit the spread between the lowest and highest rate charged to small employers and limit the spread between factors associated with case characteristics pertaining to the industry and the size of a small employer group.
The Department believes some small employer carriers may be applying the maximum 67% rate-up related to the risk load (Article 26.32(c), TIC) to "baby groups" (e.g. groups of 2-5 employees) based solely on the size of the group.
A small employer carrier which is rating-up a "baby group" 67% based on the size of the group is not in compliance with the following laws and rules that apply to small group rating:
- 28 TAC §26.11(d) states that if group size is used as a case characteristic, the highest factor associated with group size cannot exceed the lowest factor associated with group size by more than 20%.
- Article 26.32(c), TIC states that the premium rates charged to small employers with similar case characteristics and the same or similar coverage, or the rates that could be charged to those employers, may not vary from the index rate by more than 25%.
Carriers must reflect any factor associated with the size of a group through the group size case characteristic, subject to the 20% limitation found in 28 TAC §26.11(d). A small employer carrier may not evade this requirement by reflecting any additional costs associated with the size of a group through the risk load
Legal requirements for marketing are intended to ensure the availability of health care coverage to small employers.
28 TAC §26.13(d) requires a small employer carrier to provide a price quote to a small employer (directly or through an authorized agent) within ten working days of receiving a request for a quote and such information as is necessary to provide the quote. In addition, a small employer carrier shall notify a small employer (directly or through an authorized agent), within five working days of receiving a request for a price quote, of any additional information needed by the small employer carrier to provide the quote.
A small employer carrier may not decline to provide a price quote to a small employer directly or through an authorized agent. There are no exceptions to this requirement. For example, a small employer carrier´s belief that its rates would not be competitive would not excuse its failure to provide a price quote to a small employer.
All carriers affected by this bulletin should review their marketing and rating practices, procedures and underwriting criteria to verify compliance with all applicable laws and, if necessary, make modifications to comply. The Department will investigate and take prompt action as necessary to resolve complaints or information concerning allegations of violations.
If you have any questions regarding this bulletin or the requirements of Chapter 26, TIC or Chapter 26, TAC, please contact the Life/Health Division at 512-322-3409.
Commissioner of Insurance