Chapter 599 Oregon Laws 2003

AN ACT

HB 2987

Relating to health benefit plans; creating new provisions; and amending ORS 743.737 and 746.600.

Be It Enacted by the People of the State of Oregon:

SECTION 1. Sections 2 and 3 of this 2003 Act are added to and made a part of ORS chapter 743.

SECTION 2. (1) Notwithstanding ORS 743.766 (2), if an individual is accepted for coverage under an individual health benefit plan, the carrier may impose a waiver of coverage for one or more preexisting conditions identified by the carrier at the time the individual is enrolled for the first time in the individual health benefit plan if the following requirements are met:

(a) Each preexisting condition must be identified on an addendum to the individual health benefit plan and must include the appropriate disease code from the International Classification of Diseases, Ninth Revision, Clinical Modification, including the disease category and a written description of the condition;

(b) Each addendum to the individual health benefit plan must be limited to the specific disease code identified in paragraph (a) of this subsection and may not be extended to include any other disease code or secondary condition that might be directly or indirectly related to the preexisting condition; and

(c) Each addendum to the individual health benefit plan must be agreed to in writing by both parties before or on the effective date of coverage.

(2) The carrier may not impose a waiver of coverage under subsection (1) of this section that is less than six months or greater than 24 months following the individual’s effective date of coverage.

(3) If an individual is accepted for coverage under an individual health benefit plan and the carrier imposes a waiver of coverage under subsection (1) of this section, the individual is eligible to apply for coverage under the Oregon Medical Insurance Pool.

SECTION 3. Each carrier offering individual health benefit plans or small employer health benefit plans shall submit to the Director of the Department of Consumer and Business Services any information requested by the director for the purpose of assessing the impact on the health insurance marketplace of section 2 of this 2003 Act and the amendments to ORS 743.737 and 746.600 by sections 4 and 5 of this 2003 Act.

SECTION 4. ORS 743.737 is amended to read:

743.737. Health benefit plans covering small employers shall be subject to the following provisions:

(1) A preexisting conditions provision in a small employer health benefit plan shall apply only to a condition for which medical advice, diagnosis, care or treatment was recommended or received during the six-month period immediately preceding the enrollment date of an enrollee or late enrollee. As used in this section, the enrollment date of an enrollee shall be the earlier of the effective date of coverage or the first day of any required group eligibility waiting period and the enrollment date of a late enrollee shall be the effective date of coverage.

(2) A preexisting conditions provision in a small employer health benefit plan shall terminate its effect as follows:

(a) For an enrollee, not later than the first of the following dates:

(A) Six months following the enrollee’s effective date of coverage; or

(B) Ten months following the start of any required group eligibility waiting period.

(b) For a late enrollee, not later than 12 months following the late enrollee’s effective date of coverage.

(3) In applying a preexisting conditions provision to an enrollee or late enrollee, except as provided in this subsection, all small employer health benefit plans shall reduce the duration of the provision by an amount equal to the enrollee’s or late enrollee’s aggregate periods of creditable coverage if the most recent period of creditable coverage is ongoing or ended within 63 days of the enrollment date in the new small employer health benefit plan. The crediting of prior coverage in accordance with this subsection shall be applied without regard to the specific benefits covered during the prior period. This subsection does not preclude, within a small employer health benefit plan, application of:

(a) An affiliation period that does not exceed two months for an enrollee or three months for a late enrollee; or

(b) An exclusion period for specified covered services, as established by the Health Insurance Reform Advisory Committee, applicable to all individuals enrolling for the first time in the small employer health benefit plan.

(4) Late enrollees may be excluded from coverage for up to 12 months or may be subjected to a preexisting conditions provision for up to 12 months. If both an exclusion from coverage period and a preexisting conditions provision are applicable to a late enrollee, the combined period shall not exceed 12 months.

(5) Each small employer health benefit plan shall be renewable with respect to all eligible enrollees at the option of the policyholder, small employer or contract holder except:

(a) For nonpayment of the required premiums by the policyholder, small employer or contract holder.

(b) For fraud or misrepresentation of the policyholder, small employer or contract holder or, with respect to coverage of individual enrollees, the enrollees or their representatives.

(c) When the number of enrollees covered under the plan is less than the number or percentage of enrollees required by participation requirements under the plan.

(d) For noncompliance with the small employer carrier’s employer contribution requirements under the health benefit plan.

(e) When the carrier discontinues offering or renewing, or offering and renewing, all of its small employer health benefit plans in this state or in a specified service area within this state. In order to discontinue plans under this paragraph, the carrier:

(A) Must give notice of the decision to the Director of the Department of Consumer and Business Services and to all policyholders covered by the plans;

(B) May not cancel coverage under the plans for 180 days after the date of the notice required under subparagraph (A) of this paragraph if coverage is discontinued in the entire state or, except as provided in subparagraph (C) of this paragraph, in a specified service area;

(C) May not cancel coverage under the plans for 90 days after the date of the notice required under subparagraph (A) of this paragraph if coverage is discontinued in a specified service area because of an inability to reach an agreement with the health care providers or organization of health care providers to provide services under the plans within the service area; and

(D) Must discontinue offering or renewing, or offering and renewing, all health benefit plans issued by the carrier in the small employer market in this state or in the specified service area.

(f) When the carrier discontinues offering and renewing a small employer health benefit plan in a specified service area within this state because of an inability to reach an agreement with the health care providers or organization of health care providers to provide services under the plan within the service area. In order to discontinue a plan under this paragraph, the carrier:

(A) Must give notice to the director and to all policyholders covered by the plan;

(B) May not cancel coverage under the plan for 90 days after the date of the notice required under subparagraph (A) of this paragraph; and

(C) Must offer in writing to each small employer covered by the plan, all other small employer health benefit plans that the carrier offers in the specified service area. The carrier shall issue any such plans pursuant to the provisions of ORS 743.733 to 743.737. The carrier shall offer the plans at least 90 days prior to discontinuation.

(g) When the carrier discontinues offering or renewing, or offering and renewing, a health benefit plan for all small employers in this state or in a specified service area within this state, other than a plan discontinued under paragraph (f) of this subsection. With respect to plans that are being discontinued, the carrier must:

(A) Offer in writing to each small employer covered by the plan, all health benefit plans that the carrier offers in the specified service area.

(B) Issue any such plans pursuant to the provisions of ORS 743.733 to 743.737.

(D) Act uniformly without regard to the claims experience of the affected policyholders or the health status of any current or prospective enrollee.

(h) When the director orders the carrier to discontinue coverage in accordance with procedures specified or approved by the director upon finding that the continuation of the coverage would:

(A) Not be in the best interests of the enrollees; or

(B) Impair the carrier’s ability to meet contractual obligations.

(i) When, in the case of a small employer health benefit plan that delivers covered services through a specified network of health care providers, there is no longer any enrollee who lives, resides or works in the service area of the provider network.

(j) When, in the case of a health benefit plan that is offered in the small employer market only through one or more bona fide associations, the membership of an employer in the association ceases and the termination of coverage is not related to the health status of any enrollee.

(k) For misuse of a provider network provision. As used in this paragraph, “misuse of a provider network provision” means a disruptive, unruly or abusive action taken by an enrollee that threatens the physical health or well-being of health care staff and seriously impairs the ability of the carrier or its participating providers to provide services to an enrollee. An enrollee under this paragraph retains the rights of an enrollee under ORS 743.804.

(L) A small employer carrier may modify a small employer health benefit plan at the time of coverage renewal. The modification is not a discontinuation of the plan under paragraphs (e) and (g) of this subsection.

(6) Notwithstanding any provision of subsection (5) of this section to the contrary, any small employer carrier health benefit plan subject to the provisions of ORS 743.733 to 743.737 may be rescinded by a small employer carrier for fraud, material misrepresentation or concealment by a small employer and the coverage of an enrollee may be rescinded for fraud, material misrepresentation or concealment by the enrollee.

(7) A small employer carrier may continue to enforce reasonable employer participation and contribution requirements on small employers applying for coverage. However, participation and contribution requirements shall be applied uniformly among all small employer groups with the same number of eligible employees applying for coverage or receiving coverage from the small employer carrier. In determining minimum participation requirements, a carrier shall count only those employees who are not covered by an existing group health benefit plan, Medicaid, Medicare, CHAMPUS, Indian Health Service or a publicly sponsored or subsidized health plan, including but not limited to the Oregon Health Plan.

(8) Premium rates for small employer health benefit plans subject to ORS 743.733 to 743.737 shall be subject to the following provisions:

(a) Each small employer carrier issuing health benefit plans to small employers must file its geographic average rate for a rating period with the director on or before March 15 of each year.

(b)(A) The premium rates charged during a rating period for health benefit plans issued to small employers [shall] may not vary from the geographic average rate by more than the following:

[(i) 50 percent on October 1, 1996; and]

[(ii)] (i) 33 percent on or after October 1, 1999; and

(ii) 43 percent on or after July 1, 2004.

(B) The variations in premium rates described in subparagraph (A) of this paragraph shall be based solely on differences in the ages of participating employees, except that the premium rate may be adjusted to reflect the provision of benefits not required to be covered by the basic health benefit plan and differences in family composition. In addition:

(i) A small employer carrier shall apply uniformly the carrier’s schedule of age adjustments for small employer groups as approved by the director; and

(ii) Except as otherwise provided in this section, the premium rate established for a health benefit plan by a small employer carrier shall apply uniformly to all employees of the small employer enrolled in that plan.

(c) The variation in premium rates between different small employer health benefit plans offered by a small employer carrier must be based solely on objective differences in plan design or coverage and must not include differences based on the risk characteristics of groups assumed to select a particular health benefit plan.

(d) A small employer carrier may not increase the rates of a health benefit plan issued to a small employer more than once in a 12-month period. Annual rate increases shall be effective on the plan anniversary date of the health benefit plan issued to a small employer. The percentage increase in the premium rate charged to a small employer for a new rating period may not exceed the sum of the following:

(A) The percentage change in the geographic average rate measured from the first day of the prior rating period to the first day of the new period; and

(B) Any adjustment attributable to changes in age, except an additional adjustment may be made to reflect the provision of benefits not required to be covered by the basic health benefit plan and differences in family composition.

(e) Premium rates for health benefit plans shall comply with the requirements of this section.

(f) A small employer carrier may apply a participation credit of five percent to the rates determined under paragraph (b) of this subsection for a small employer if all eligible employees enroll in the health benefit plan. If a carrier applies a participation credit under this paragraph, the carrier must apply the credit to each small employer that qualifies.

(9) In connection with the offering for sale of any health benefit plan to a small employer, each small employer carrier shall make a reasonable disclosure as part of its solicitation and sales materials of:

(a) The full array of health benefit plans that are offered to small employers by the carrier;

(b) The authority of the carrier to adjust rates, and the extent to which the carrier will consider age, family composition and geographic factors in establishing and adjusting rates;

(d) Provisions affecting any preexisting conditions provision.

(10)(a) Each small employer carrier 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 upon commonly accepted actuarial practices and are in accordance with sound actuarial principles.

(b) Each small employer carrier shall file with the director annually on or before March 15 an actuarial certification that the carrier is in compliance with ORS 743.733 to 743.737 and that the rating methods of the small employer carrier are actuarially sound. Each such certification shall be in a uniform form and manner and shall contain such information as specified by the director. A copy of such certification shall be retained by the small employer carrier at its principal place of business.

(c) A small employer carrier shall make the information and documentation described in paragraph (a) of this subsection available to the director upon request. Except in cases of violations of ORS 743.733 to 743.737, the information shall be considered proprietary and trade secret information and shall not be subject to disclosure by the director to persons outside the Department of Consumer and Business Services except as agreed to by the small employer carrier or as ordered by a court of competent jurisdiction.

(11) A small employer carrier shall not provide any financial or other incentive to any agent that would encourage such agent to market and sell health benefit plans of the carrier to small employer groups based on a small employer group’s anticipated claims experience.

(12) For purposes of this section, the date a small employer health benefit plan is continued shall be the anniversary date of the first issuance of the health benefit plan.

(13) A small employer carrier must include a provision that offers coverage to all eligible employees and to all dependents to the extent the employer chooses to offer coverage to dependents.

(14) All small employer health benefit plans shall contain special enrollment periods during which eligible employees and dependents may enroll for coverage, as provided in 42 U.S.C. 300gg as amended and in effect on July 1, 1997.

(15) All small employer health benefit plans must include the benefit provisions of the federal Women’s Health and Cancer Rights Act of 1998, P.L. 105-277.

SECTION 5. ORS 746.600 is amended to read:

746.600. As used in ORS 746.600 to 746.690 and 750.055:

(1) “Adverse underwriting decision” means, except as provided in subsection (2) of this section, any of the following actions with respect to insurance transactions involving insurance coverage which is individually underwritten:

(a) A declination of insurance coverage.

(b) A termination of insurance coverage.

(c) Failure of an agent to apply for insurance coverage with a specific insurer which the agent represents and which is requested by an applicant.

(d) In the case of life or health insurance coverage, an offer to insure at higher than standard rates.

(e) In the case of individual health insurance coverage, an offer to insure the applicant under a health benefit plan that imposes a waiver of coverage for one or more preexisting conditions for a period of time that is greater than six months and less than 24 months following the applicant’s effective date of coverage.

[(e)] (f) In the case of other kinds of insurance coverage:

(A) Placement by an insurer or agent of a risk with a residual market mechanism, an unauthorized insurer or an insurer which specializes in substandard risks.

(B) The charging of a higher rate on the basis of information which differs from that which the applicant or policyholder furnished.

(2) “Adverse underwriting decision” does not include the following actions, but the insurer or agent responsible for the occurrence of the action shall nevertheless provide the applicant or policyholder with the specific reason or reasons for the occurrence:

(a) The termination of an individual policy form on a class or statewide basis.

(b) A declination of insurance coverage solely because the coverage is not available on a class or statewide basis.

(3) “Affiliate of” a specified person or “person affiliated with” a specified person means a person who directly, or indirectly, through one or more intermediaries, controls, or is controlled by, or is under common control with, the person specified.

(4) “Agent” means a person licensed by the Director of the Department of Consumer and Business Services as a resident or nonresident insurance agent.

(5) “Applicant” means a person who seeks to contract for insurance coverage, other than a person seeking group insurance coverage which is not individually underwritten.

(6) “Consumer report” means any written, oral or other communication of information bearing on a natural person’s creditworthiness, credit standing, credit capacity, character, general reputation, personal characteristics or mode of living which is used or expected to be used in connection with an insurance transaction.

(7) “Consumer reporting agency” means a person who:

(a) Regularly engages, in whole or in part, in assembling or preparing consumer reports for a monetary fee;

(b) Obtains information primarily from sources other than insurers; and

(8) “Control” means, and the terms “controlled by” or “under common control with” refer to, the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a person, whether through the ownership of voting securities, by contract other than a commercial contract for goods or nonmanagement services, or otherwise, unless the power of the person is the result of a corporate office held in, or an official position held with, the controlled person.

(9) “Declination of insurance coverage” means a denial, in whole or in part, by an insurer or agent of requested insurance coverage.

(10) “Individual”:

(a) Means, for purposes of ORS 746.600 to 746.690 and 750.055, except as provided in paragraph (b) of this subsection, a natural person who:

(A) In the case of life or health insurance, is a past, present or proposed principal insured or certificate holder;

(B) In the case of other kinds of insurance, is a past, present or proposed named insured or certificate holder;

(D) Is a past or present applicant;

(E) Is a past or present claimant; or

(F) Derived, derives or is proposed to derive insurance coverage under an insurance policy or certificate which is subject to ORS 746.600 to 746.690 and 750.055.

(b) Comprises, for purposes of ORS 746.620, 746.630 and 746.665, and for purposes of terms defined in this section as those terms are used in ORS 746.620, 746.630 and 746.665, the following categories of natural persons:

(A) “Consumer,” which means an individual, or the individual’s representative, who seeks to obtain, obtains or has obtained an insurance product or service from a licensee that is to be used primarily for personal, family or household purposes, and about whom the licensee has personal information.

(B) “Customer,” which means a consumer who has a continuing relationship with a licensee under which the licensee provides one or more insurance products or services to the consumer that are to be used primarily for personal, family or household purposes.

(11) “Institutional source” means a person or governmental entity which provides information about an individual to an insurer, agent or insurance-support organization, other than:

(a) An agent;

(b) The individual who is the subject of the information; or

(12) “Insurance-support organization” means, except as provided in subsection (13) of this section, a person who regularly engages, in whole or in part, in assembling or collecting information about natural persons for the primary purpose of providing the information to an insurer or agent for insurance transactions, including:

(a) The furnishing of consumer reports to an insurer or agent for use in connection with insurance transactions; and

(b) The collection of personal information from insurers, agents or other insurance-support organizations for the purpose of detecting or preventing fraud, material misrepresentation or material nondisclosure in connection with insurance underwriting or insurance claim activity.

(13) “Insurance-support organization” does not include insurers, agents, governmental institutions, medical care institutions or medical professionals.

(14) “Insurance transaction” means any transaction involving insurance primarily for personal, family or household needs rather than business or professional needs and which entails:

(a) The determination of an individual’s eligibility for an insurance coverage, benefit or payment; or

(b) The servicing of an insurance application, policy or certificate.

(15) “Insurer,” as defined in ORS 731.106, includes every person engaged in the business of entering into policies of insurance.

(16) “Investigative consumer report” means a consumer report, or portion of a consumer report, for which information about a natural person’s character, general reputation, personal characteristics or mode of living is obtained through personal interviews with the person’s neighbors, friends, associates, acquaintances or others who may have knowledge concerning such items of information.

(17) “Licensee” means an insurer, agent or other person authorized or required to be authorized, or licensed or required to be licensed, pursuant to the Insurance Code.

(18) “Medical care institution” means a facility or institution which is licensed to provide health care services to natural persons, and includes but is not limited to health maintenance organizations, home health agencies, hospitals, medical clinics, public health agencies, rehabilitation agencies and skilled nursing facilities.

(19) “Medical professional” means a person licensed or certified to provide health care services to natural persons, and includes but is not limited to chiropractors, clinical dieticians, clinical psychologists, dentists, naturopaths, nurses, occupational therapists, optometrists, pharmacists, physical therapists, physicians, podiatrists, psychiatric social workers and speech therapists.

(20) “Medical record information” means personal information except age or gender, whether oral or recorded in any form or medium, created by or derived from a health care provider or the consumer that relates to:

(a) The past, present or future physical, mental or behavioral health or condition of an individual;

(b) The provision of health care to an individual; or

(21) “Nonaffiliated third party” means any person except:

(a) An affiliate of a licensee;

(b) A person that is employed jointly by a licensee and by a person that is not an affiliate of the licensee; and

(22) “Personal information” means information which is identifiable with an individual, which is gathered in connection with an insurance transaction and from which information judgments can be made about the individual’s character, habits, avocations, finances, occupations, general reputation, credit, health or any other personal characteristics. “Personal information” includes an individual’s name and address, an individual’s policy number or similar form of access code for the individual’s policy and “medical record information” but does not include “privileged information” except for privileged information which has been disclosed in violation of ORS 746.665. “Personal information” does not include information that a licensee has a reasonable basis to believe is lawfully made available to the general public from federal, state or local government records, widely distributed media or disclosures to the public that are required by federal, state or local law.

(23) “Policyholder” means a person who:

(a) In the case of individual policies of life or health insurance, is a current policyowner;

(b) In the case of individual policies of other kinds of insurance, is currently a named insured; or

(c) In the case of group policies of insurance under which coverage is individually underwritten, is a current certificate holder.

(24) “Pretext interview” means an interview wherein the interviewer, in an attempt to obtain information about a natural person, does one or more of the following:

(a) Pretends to be someone the interviewer is not.

(b) Pretends to represent a person the interviewer is not in fact representing.

(d) Refuses upon request to identify the interviewer.

(25) “Privileged information” means information which is identifiable with an individual and which:

(a) Relates to a claim for insurance benefits or a civil or criminal proceeding involving the individual; and

(b) Is collected in connection with or in reasonable anticipation of a claim for insurance benefits or a civil or criminal proceeding involving the individual.

(26) “Residual market mechanism” means an association, organization or other entity involved in the insuring of risks under ORS 735.005 to 735.145, 737.312 or other provisions of the Insurance Code relating to insurance applicants who are unable to procure insurance through normal insurance markets.

(27) “Termination of insurance coverage” or “termination of an insurance policy” means either a cancellation or a nonrenewal of an insurance policy, in whole or in part, for any reason other than the failure of a premium to be paid as required by the policy.

SECTION 6. ORS 743.737, as amended by section 4 of this 2003 Act, is amended to read: