CHAPTER 15.5. SMALL EMPLOYER INSURER VOLUNTARY REINSURANCE PROGRAM
IC 27-8-15.5
Chapter 15.5. Small Employer Insurer Voluntary ReinsuranceProgram
IC 27-8-15.5-1
Applicability of definitions
Sec. 1. The definitions set forth in IC 27-8-15 apply throughoutthis chapter.
As added by P.L.193-1996, SEC.1.
IC 27-8-15.5-2
"Board" defined
Sec. 2. As used in this chapter, "board" refers to the Indiana smallemployer health reinsurance board established by section 5 of thischapter.
As added by P.L.193-1996, SEC.1.
IC 27-8-15.5-3
"Program" defined
Sec. 3. As used in this chapter, "program" refers to the programof reinsurance established by section 6 of this chapter.
As added by P.L.193-1996, SEC.1.
IC 27-8-15.5-4
"Reinsuring carrier" defined
Sec. 4. As used in this chapter, "reinsuring carrier" means a smallemployer insurer that obtains reinsurance under this chapter.
As added by P.L.193-1996, SEC.1.
IC 27-8-15.5-5
Establishment of board
Sec. 5. The Indiana small employer health reinsurance board isestablished. The board shall supervise and control the program ofreinsurance established under this chapter.
As added by P.L.193-1996, SEC.1.
IC 27-8-15.5-6
Establishment of program
Sec. 6. The Indiana small employer health reinsurance program isestablished. Any small employer insurer that is doing or planning todo business in Indiana may become a member of the program asdescribed in section 12 of this chapter.
As added by P.L.193-1996, SEC.1.
IC 27-8-15.5-7
Members of board
Sec. 7. (a) The board consists of the commissioner or thecommissioner's designated representative, who serves as an exofficio member of the board, and ten (10) members. The members ofthe board shall be appointed by the commissioner, who shall name
a chairman of the board one (1) time every three (3) years.
(b) The members of the board appointed under subsection (a)must include the following:
(1) One (1) representative of health maintenance organizations.
(2) One (1) representative of providers (as defined inIC 27-13-1-28).
(3) Six (6) representatives of small employer insurers.
(4) Two (2) representatives of small employers.
(c) A member of the board is appointed for a term of three (3)years.
(d) The term of a board member appointed under subsection (a)continues until the board member's successor is appointed.
(e) The commissioner shall fill a vacancy in an appointivemember's position on the board.
(f) A board member may be removed by the commissioner forcause.
(g) At least six (6) members of the board must be present for theboard to conduct official business. The affirmative vote of at least six(6) members of the board is necessary for the board to take officialaction.
(h) The board shall meet at least one (1) time each calendarquarter at the call of the commissioner.
As added by P.L.193-1996, SEC.1.
IC 27-8-15.5-8
Plan of operation; submission; approval; amendments
Sec. 8. (a) Not later than two hundred seventy (270) days after theappointment of the initial board, the board shall submit to thecommissioner a plan of operation.
(b) The commissioner may adopt the plan of operation as a ruleunder IC 4-22-2 if the commissioner determines the plan will:
(1) ensure the fair, reasonable, and equitable administration ofthe program; and
(2) provide for the sharing of program gains or losses on anequitable and a proportionate basis in accordance with thischapter.
(c) After the adoption of a plan of operation under this section, theboard may submit to the commissioner any proposed amendments tothe plan the board considers necessary or suitable to ensure the fair,reasonable, and equitable administration of the program. Thecommissioner may adopt under IC 4-22-2 proposed amendmentssubmitted under this subsection as amendments to the rule adoptedunder subsection (b).
As added by P.L.193-1996, SEC.1.
IC 27-8-15.5-9
Plan of operation; temporary plan
Sec. 9. (a) If the board fails to submit a suitable plan of operationwithin the time allowed under section 8 of this chapter, thecommissioner shall adopt rules under IC 4-22-2 establishing a
temporary plan of operation.
(b) The commissioner shall amend or rescind under IC 4-22-2 anytemporary plan of operation adopted under this section when a planof operation is submitted by the board and approved by thecommissioner.
As added by P.L.193-1996, SEC.1.
IC 27-8-15.5-10
Plan of operation; requirements
Sec. 10. The plan of operation submitted and adopted undersection 8 of this chapter must do the following:
(1) Establish procedures for the handling and accounting ofprogram assets and money.
(2) Provide for an annual fiscal report to the commissioner.
(3) Establish procedures for selecting an insurer to administerthe program.
(4) Establish the powers and duties of the administering insurer,including:
(A) notifying all members regarding annual assessments; and
(B) collecting of assessments.
(5) Establish procedures for reinsuring risks under this chapter.
(6) Establish procedures for collecting assessments fromreinsuring carriers to fund claims and administrative expensesthat are incurred or estimated to be incurred by the program.
(7) Establish a methodology for applying the dollar thresholdscontained in this chapter in the case of small employer insurersthat pay or reimburse health care providers through capitationor salary.
(8) Provide for any additional matters necessary for theimplementation and administration of the program.
As added by P.L.193-1996, SEC.1.
IC 27-8-15.5-11
Powers of board
Sec. 11. (a) The board, in supervising and controlling theprogram, has the general powers and authority granted under IC 27to insurance companies and health maintenance organizationsauthorized to transact business in Indiana, except the power to issuehealth insurance plans directly to groups or individuals.
(b) In addition to exercising the powers conferred by subsection(a), the board may do the following:
(1) Enter into contracts that are necessary or proper to carry outthe provisions and purposes of this chapter, including, with theapproval of the commissioner, contracts with:
(A) similar programs of other states for the jointperformance of common functions; or
(B) persons or other organizations for the performance ofadministrative functions.
(2) Sue or be sued, including taking any legal action necessaryor proper to recover assessments and penalties for, on behalf of,
or against the program or any reinsuring insurer.
(3) Take any legal action necessary to avoid the payment ofimproper claims against the program.
(4) Define the health insurance plans for which reinsurance isprovided.
(5) Issue reinsurance policies under this chapter.
(6) Establish rules, conditions, and procedures for reinsuringrisks under the program.
(7) Establish actuarial functions as appropriate for the operationof the program.
(8) Impose assessments on reinsuring carriers under thischapter, and make advance interim assessments that arereasonable and necessary for organizational and interimoperating expenses.
(9) Appoint appropriate legal, actuarial, and other committeesas necessary to provide technical assistance in the operation ofthe program, policy, and other contract design, and any otherfunction within the authority of the program.
(c) Any interim assessments imposed under subsection (b)(8) shallbe credited as offsets against any regular assessments due fromreinsuring carriers after the close of the fiscal year.
(d) Any notes or other evidence of indebtedness of the programthat are not in default:
(1) are legal investments for small employer insurers; and
(2) may be carried by small employer insurers as admittedassets.
As added by P.L.193-1996, SEC.1.
IC 27-8-15.5-12
Election to become member of program
Sec. 12. (a) A small employer insurer may elect to become amember of the program by filing a written intention to participatewith the commissioner not later than sixty (60) days after the:
(1) board submits a plan of operation to the commissioner andthe commissioner adopts the plan under section 8 of thischapter; or
(2) commissioner establishes a temporary plan of operation forthe program under section 9 of this chapter;
whichever occurs first.
(b) A small employer insurer that fails to become a member of theprogram under subsection (a) may only become a member by filinga written intention with the commissioner to participate in theprogram:
(1) three (3) years; or
(2) at the end of any three (3) year interval;
after the program begins under subsection (a)(1) or (a)(2).
(c) Notwithstanding subsections (a) and (b), the commissionermay permit a small employer insurer to become a member of theprogram at other times for reasons based on financial solvency.
As added by P.L.193-1996, SEC.1.
IC 27-8-15.5-13
Maximum level of coverage; other limits on coverage
Sec. 13. (a) The board may establish a maximum level ofcoverage up to which the program will reinsure a health insuranceplan and beyond which the program will not reinsure a healthinsurance plan.
(b) A member of the program must allow any employer insured bythe member to maintain the same health insurance plan and mayreinsure only that part of the health insurance plan that is consistentwith the program established by the board.
As added by P.L.193-1996, SEC.1.
IC 27-8-15.5-14
Time requirements for reinsurance
Sec. 14. (a) A small employer insurer may reinsure an entire smallemployer group not later than sixty (60) days after thecommencement of the coverage of the small employer group undera health insurance plan.
(b) A small employer insurer may reinsure coverage of an eligibleemployee or the dependent of an eligible employee under a healthinsurance plan issued to a small employer not later than sixty (60)days after the coverage of the eligible employee or dependent of theeligible employee commences.
As added by P.L.193-1996, SEC.1.
IC 27-8-15.5-15
Reimbursement of reinsuring carriers
Sec. 15. The program may not reimburse a reinsuring carrier withrespect to the claims of a reinsured employee or dependent until thereinsuring carrier has incurred an initial level of claims for theemployee or dependent of five thousand dollars ($5,000) in acalendar year for benefits covered by the program. In addition, thereinsuring carrier is responsible for ten percent (10%) of the nextfifty thousand dollars ($50,000) of benefit payments during acalendar year, and the program shall reinsure the remainder. Theliability of a reinsuring carrier under this section may not exceed tenthousand dollars ($10,000) in any calendar year with respect to anyreinsured individual.
As added by P.L.193-1996, SEC.1.
IC 27-8-15.5-16
Adjustments in initial level of claims and maximum limit to beretained
Sec. 16. The board may annually adjust the initial level of claimsand the maximum limit to be retained by a reinsuring carrier toreflect increases in costs and utilization within the standard marketfor health insurance plans in Indiana. The adjustment may not belower than the annual change in the medical component of the"Consumer Price Index for All Urban Consumers" of the Bureau ofLabor Statistics of the United States Department of Labor unless the
board proposes and the commissioner approves a lower adjustmentfactor.
As added by P.L.193-1996, SEC.1.
IC 27-8-15.5-17
Termination of reinsurance
Sec. 17. A small employer insurer that issues a health insuranceplan to a small employer and obtains reinsurance for the healthinsurance plan under this chapter may terminate the reinsurance forone (1) or more of the reinsured employees or dependents of thesmall employer:
(1) on any anniversary of the health insurance plan; or
(2) when the reinsured employee leaves the employment of thesmall employer.
As added by P.L.193-1996, SEC.1.
IC 27-8-15.5-18
Reduction of premium rates for reinsurance of federally qualifiedHMOs
Sec. 18. Premium rates charged under this chapter for reinsuranceto a health maintenance organization that is federally qualified under42 U.S.C. 300e et seq., and as such is subject to limits on the amountof risk that may be ceded to the program that are more restrictivethan those set forth in section 15 of this chapter, must be reduced toreflect the part of the risk, if any, that may not be ceded to theprogram due to the more restrictive limits.
As added by P.L.193-1996, SEC.1.
IC 27-8-15.5-19
Managed care and claims handling techniques
Sec. 19. A reinsuring carrier shall apply all managed care andclaims handling techniques, including:
(1) utilization review;
(2) individual case management;
(3) preferred provider provisions; and
(4) other managed care provisions or methods of operation;
consistently with respect to reinsured and nonreinsured business.
As added by P.L.193-1996, SEC.1.
IC 27-8-15.5-20
Methodology for determining premium rates
Sec. 20. (a) The board, as part of the plan of operation adoptedunder section 8 of this chapter, shall establish a methodology fordetermining premium rates to be charged by the program forreinsuring small employers and individuals under this chapter.
(b) The methodology established under this section must includea system for classification of small employers that reflects the typesof case characteristics commonly used by small employer insurers inIndiana.
(c) The methodology established under this section must provide
for the development of base reinsurance premium rates. The basereinsurance premium rates are multiplied by the factors set forth insection 21 of this chapter to determine the premium rates for theprogram.
(d) The base reinsurance premium rates referred to in subsection(c) shall be established by the board, subject to the approval of thecommissioner.
As added by P.L.193-1996, SEC.1.
IC 27-8-15.5-21
Multiplication factors for premium rates
Sec. 21. (a) Premiums charged by the program for reinsurance areas follows:
(1) An entire small employer group may be reinsured for a ratethat is one hundred fifty percent (150%) of the base reinsurancepremium rate for the group that is developed under section20(c) of this chapter.
(2) An eligible employee or the dependent of an eligibleemployee may be reinsured for a rate that is five hundredpercent (500%) of the base reinsurance premium rate for theindividual established under this section.
(b) The board shall periodically review the methodologyestablished under section 20 of this chapter, including the system ofclassification and any rating factors, to ensure that it reasonablyreflects the claims experience of the program. The board maypropose changes in the methodology. The changes proposed by theboard take effect upon approval by the commissioner.
(c) The board may consider adjustments to the premium ratescharged for reinsurance under the program to reflect the use ofeffective cost containment and managed care arrangements.
As added by P.L.193-1996, SEC.1.
IC 27-8-15.5-22
Premium rates for health insurance plans to comply withIC 27-8-15
Sec. 22. If a health insurance plan issued to a small employer isentirely or partially reinsured under the program, the premiumcharged to the small employer for any rating period for the coverageissued must meet the requirements relating to premium rates set forthin IC 27-8-15.
As added by P.L.193-1996, SEC.1.
IC 27-8-15.5-23
Determination and report of net loss
Sec. 23. (a) Before March 1 of each year, the board shalldetermine and report to the commissioner the program's net loss forthe previous calendar year, including administrative expenses andincurred losses for the year, taking into account investment incomeand other appropriate gains and losses.
(b) Any net loss for the year shall be recouped by assessments of
reinsuring carriers.
As added by P.L.193-1996, SEC.1.
IC 27-8-15.5-24
Determination of assessments against reinsuring carriers
Sec. 24. (a) The board, as part of the plan of operation adoptedunder section 8 of this chapter, shall establish a formula by which toimpose assessments against reinsuring carriers.
(b) The assessment formula established under subsection (a) mustresult in assessments apportioned by the board among all smallemployer insurers participating in the program in proportion to:
(1) the small employer insurers' respective shares of the totalpremiums;
(2) the net of reinsurance premiums paid for coverage under theprogram earned from health insurance plans covering smallemployers that are issued by participating small employerinsurers during the calendar year coinciding with or endingduring the fiscal year of the program; or
(3) any other equitable basis reflecting coverage of smallemployers as may be provided in the plan of operation.
(c) Health insurance plan premiums and benefits paid by areinsuring carrier that are less than an amount determined by theboard to justify the cost of collection shall not be considered forpurposes of determining assessments.
(d) An assessment determined under this section may not exceedone percent (1%) of total net premiums annually. If an excess isactuarially projected, the commissioner may take any actionnecessary to lower the assessment to the maximum level of onepercent (1%) of total net premiums.
(e) The board, with the approval of the commissioner, may changethe assessment formula established under this section from time totime as appropriate.
(f) Subject to the approval of the commissioner, the board shallmake an adjustment to the assessment formula for reinsuring carriersthat are approved health maintenance organizations and federallyqualified under 42 U.S.C. 300e et seq., to the extent that restrictionsare placed on them that are not imposed on other small employerinsurers.
As added by P.L.193-1996, SEC.1.
IC 27-8-15.5-25
Estimates of assessments needed to fund losses
Sec. 25. (a) Before March 1 of each year the board shalldetermine and file with the commissioner an estimate of theassessments needed to fund the losses incurred by the program in theprevious calendar year.
(b) If the board determines that the assessments needed to fundthe losses incurred by the program in the previous calendar year willexceed two percent (2%) of total premiums earned in the previouscalendar year from health insurance plans delivered or issued for
delivery to small employers by reinsuring carriers, the board shallevaluate the operation of the program and report the board's findings,including any recommendations for changes in the plan of operationadopted under section 8 of this chapter, to the commissioner notmore than ninety (90) days after the end of the calendar year inwhich the losses were incurred. The evaluation must:
(1) include an estimate of future assessments; and
(2) consider the:
(A) administrative costs of the program;
(B) appropriateness of the premiums charged;
(C) level of insurer retention under the program; and
(D) costs of coverage for small employers.
(c) If the board fails to file a report with the commissioner undersubsection (b) not later than ninety (90) days after the end of thecalendar year, the commissioner may:
(1) evaluate the operation of the program; and
(2) implement the amendments to the plan of operation adoptedunder section 8 of this chapter that the commissioner considersnecessary to reduce future losses and assessments.
As added by P.L.193-1996, SEC.1.
IC 27-8-15.5-26
Use of excess assessments
Sec. 26. If assessments paid by reinsuring carriers under thischapter exceed the net losses of the program, the excess is held atinterest and used by the board to:
(1) offset future losses, including reserves for incurred but notreported claims; or
(2) reduce program premiums.
As added by P.L.193-1996, SEC.1.
IC 27-8-15.5-27
Determination of reinsuring carrier's proportion of assessments
Sec. 27. (a) The board shall annually determine each reinsuringcarrier's proportion of the assessment for reinsurance under thischapter based on annual statements and other reports considerednecessary by the board and filed with the board by the reinsuringcarriers.
(b) The plan of operation adopted under section 8 of this chaptermust provide for the imposition of an interest penalty on reinsuringcarriers for late payment of assessments.
As added by P.L.193-1996, SEC.1.
IC 27-8-15.5-28
Deferments from assessments
Sec. 28. (a) A reinsuring carrier may seek from the commissionera deferment from all or part of an assessment imposed by the board.The commissioner may defer all or part of the assessment of areinsuring carrier if the commissioner determines that the paymentof the assessment would place the reinsuring carrier in a financially
impaired condition.
(b) If all or part of an assessment against a reinsuring carrier isdeferred under subsection (a), the amount deferred is assessedagainst the other reinsuring carriers in a manner consistent with thebasis for assessment under this chapter.
(c) A reinsuring carrier that receives a deferment under thissection:
(1) remains liable to the program for the amount deferred; and
(2) may not reinsure an individual or a group with the programuntil the reinsuring carrier pays the assessment.
As added by P.L.193-1996, SEC.1.
IC 27-8-15.5-29
Participation not to be basis for legal action, liability, or penalty
Sec. 29. The participation of small employer insurers in theprogram as reinsuring carriers, the establishment of rates, forms, orprocedures under this chapter, or any other joint or collective actionrequired by this chapter may not be the basis of any legal action,criminal or civil liability, or penalty against the program or any of theprogram's reinsuring carriers, either jointly or separately.
As added by P.L.193-1996, SEC.1.
IC 27-8-15.5-30
Tax exemption
Sec. 30. The program is exempt from all taxes imposed by thestate.
As added by P.L.193-1996, SEC.1.