To repeal sections 376.960, 376.961, 376.962, 376.964, 376.965, 376.966, 376.968, 376.970, 376.973, 376.975, 376.978, 376.980, 376.984, 376.986, 376.989, 379.930, 379.934, 379.936, 379.938, 379.940, 379.942, 379.943, 379.944, 379.948, and 379.952, RSMo 1994, and section 376.982, RSMo Supp. 1995, relating to certain health care coverage, and to enact in lieu thereof eight new sections relating to the same subject, with a contingent effective date for certain sections.

BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF MISSOURI, AS FOLLOWS:

Section A. Sections 376.960, 376.961, 376.962, 376.964, 376.965, 376.966, 376.968, 376.970, 376.973, 376.975, 376.978, 376.980, 376.984, 376.986, 376.989, 379.930, 379.934, 379.936, 379.938, 379.940, 379.942, 379.943, 379.944, 379.948, and 379.952, RSMo 1994, and section 376.982, RSMo Supp. 1995, are repealed and eight new sections enacted in lieu thereof, to be known as sections 379.930, 379.936, 379.940, 379.942, 379.943, 379.944, 379.948, and 379.952, to read as follows:

379.930. 1. Sections 379.930 to 379.952 shall be known and may be cited as the "Small Employer and Individual Health Insurance Availability Act".

2. For the purposes of sections 379.930 to 379.952, the following terms mean:

(1) "Actuarial certification" [means], a written statement by a member of the American Academy of Actuaries or other individual acceptable to the director that a small employer carrier is in compliance with the provisions of section 379.936, based upon the person's examination, including a review of the appropriate records and of the actuarial assumptions and methods used by the small employer carrier in establishing premium rates for applicable health benefit plans;

(2) "Affiliate" or "affiliated" [means], any entity or person who directly or indirectly through one or more intermediaries, controls or is controlled by, or is under common control with, a specified entity or person;

(3) "Agent" [means], an "insurance agent" as that term is defined in section 375.012, RSMo;

(4) ["Base premium rate" means, for each class of business as to a rating period, the lowest premium rate charged or that could have been charged under the rating system for that class of business, by the small employer carrier to small employers with similar case characteristics for health benefit plans with the same or similar coverage;

(5) "Basic health benefit plan" means a lower cost health benefit plan developed pursuant to section 379.944;

(6)] "Board" [means], the board of directors of the program established pursuant to sections 379.942 and 379.943;

[(7)] (5) "Broker" [means "broker"], as that term is defined in section 375.012, RSMo;

[(8)] (6) "Carrier" [means], any entity that provides health insurance or health benefits [in] to any resident of this state. For the purposes of sections 379.930 to 379.952, carrier includes an insurance company, health services corporation, fraternal benefit society, health maintenance organization, multiple employer welfare arrangement specifically authorized to operate in the state of Missouri, or any other entity providing a plan of health insurance or health benefits subject to state insurance regulation;

[(9) "Case characteristics" means demographic or other objective characteristics of a small employer that are considered by the small employer carrier in the determination of premium rates for the small employer, provided that claim experience, health status and duration of coverage since issue shall not be case characteristics for the purposes of sections 379.930 to 379.952;

(10) "Class of business" means all or a separate grouping of small employers established pursuant to section 379.934;

(11)] (7) "Committee" [means], the health benefit plan committee created pursuant to section 379.944;

(8) "Community rate", the rate charged by a carrier for the same coverage to all individuals of the same or similar age, family size and geographic location characteristics pursuant to subsection 1 of section 379.936;

[(12)] (9) "Control" shall be defined in manner consistent with chapter 382, RSMo;

[(13)] (10) "Dependent" [means], a spouse or an unmarried child under the age of nineteen years; an unmarried child who is a full-time student under the age of twenty-three years and who is financially dependent upon the parent; or an unmarried child of any age who is medically certified as disabled and dependent upon the parent;

[(14)] (11) "Director" [means], the director of the department of insurance of this state;

[(15)] (12) "Eligible employee" [means], an employee who works on a [full-time] year-round basis and has a normal work week of thirty or more hours. The term includes a sole proprietor, a partner of a partnership, and an independent contractor, if the sole proprietor, partner or independent contractor is included as an employee under a health benefit plan of a small employer, but does not include an employee who works on a part-time, temporary or substitute basis. For purposes of sections 379.930 to 379.952, a person, [his] the person's spouse and [his] minor children shall constitute only one eligible employee when they are employed by the same small employer;

[(16)] (13) "Established geographic service area" [means], a geographical area, as approved by the director and based on the carrier's certificate of authority to transact insurance in this state, within which the carrier is authorized to provide coverage;

[(17)] (14) "Health benefit plan" [means], any hospital or medical policy or certificate, health services corporation contract, or health maintenance organization subscriber contract. Health benefit plan does not include a policy of individual accident and sickness insurance or hospital supplemental policies having a fixed daily benefit, or accident-only, specified disease-only, credit, dental, vision, medicare supplement, long-term care, or disability income insurance, or coverage issued as a supplement to liability insurance, worker's compensation or similar insurance, or automobile medical payment insurance;

[(18) "Index rate" means, for each class of business as to a rating period for small employers with similar case characteristics, the arithmetic mean of the applicable base premium rate and the corresponding highest premium rate;

(19)] (15) "Late enrollee" [means], an [eligible employee or dependent] individual who requests enrollment in a health benefit plan [of a small employer following the initial] other than during an open enrollment period [for which such individual is entitled to enroll under the terms of the health benefit plan], provided that such [initial] open enrollment period is a period of at least thirty days[. However], or an eligible employee or dependent who requests enrollment in a health benefit plan of a small employer following the initial enrollment period for which such individual is entitled to enroll under the terms of the health benefit plan, provided that such initial enrollment period is a period of at least thirty days.

An individual, eligible employee or dependent shall not be considered a late enrollee if:

(a) [The individual] Such person meets each of the following:

a. [The individual] Such person was covered under qualifying previous coverage at the time of the initial enrollment;

b. [The individual] Such person lost coverage under qualifying previous coverage as a result of termination of employment or eligibility, the involuntary termination of the qualifying previous coverage, death of a spouse or divorce;

c. [The individual] Such person requests enrollment within thirty days after termination of the qualifying previous coverage;

(b) [The individual] Such person is employed by an employer that offers multiple health benefit plans and the [individual] person elects a different plan during an open enrollment period; or

(c) A court has ordered coverage be provided for a spouse or minor or dependent child under [a covered employee's] such person's health benefit plan and request for enrollment is made within thirty days after issuance of the court order;

[(20) "New business premium rate" means, for each class of business as to a rating period, the lowest premium rate charged or offered, or which could have been charged or offered, by the small employer carrier to small employers with similar case characteristics for newly issued health benefit plans with the same or similar coverage;

(21)] (16) "Plan of operation" [means], the plan of operation of the program established pursuant to sections 379.942 and 379.943;

[(22)] (17) "Premium" [means], all moneys paid by [a] an individual or small employer and eligible employees as a condition of receiving coverage from a [small employer] carrier, including any fees or other contributions associated with the health benefit plan;

[(23)] (18) "Producer" includes an insurance agent or broker;

[(24)] (19) "Program" [means], the Missouri small employer health reinsurance program created pursuant to sections 379.942 and 379.943;

[(25)] (20) "Qualifying previous coverage" [and "qualifying existing coverage" mean], benefits or coverage provided under:

(a) Medicare or medicaid;

(b) An employer-based health insurance or health benefit arrangement that provides benefits similar to or exceeding benefits provided under the [basic] least comprehensive health benefit plan; or

(c) An individual health insurance policy (including coverage issued by a health maintenance organization, health services corporation or a fraternal benefit society) that provides benefits similar to or exceeding the benefits provided under the basic health benefit plan[, provided that such policy has been in effect for a period of at least one year];

[(26)] (21) "Rating period" [means], the calendar period for which premium rates established by a [small employer] carrier are assumed to be in effect;

[(27)] (22) "Restricted network provision" [means], any provision of a health benefit plan that conditions the payment of benefits, in whole or in part, on the use of health care providers that have entered into a contractual arrangement with the carrier pursuant to [section] sections 354.400 to 354.550, RSMo, [et seq.] to provide health care services to covered individuals;

[(28)] (23) "Small employer" [means], any person, firm, corporation, partnership or association that is actively engaged in business that, on at least fifty percent of its working days during the preceding calendar quarter, employed not less than three nor more than [twenty-five] five hundred eligible employees, the majority of whom were employed within this state. In determining the number of eligible employees, companies that are affiliated companies, or that are eligible to file a combined tax return for purposes of state taxation, shall be considered one employer;

[(29)] (24) "Small employer carrier" [means], a carrier that offers health benefit plans covering eligible employees of one or more small employers in this state[;

(30) "Standard health benefit plan" means a health benefit plan developed pursuant to section 379.944].

[379.934. 1. A small employer carrier may establish a class of business only to reflect substantial differences in expected claims experience or administrative costs related to the following reasons:

(1) The small employer carrier uses more than one type of system for the marketing and sale of health benefit plans to small employers;

(2) The small employer carrier has acquired a class of business from another small employer carrier; or

(3) The small employer carrier provides coverage to one or more association groups that meet the requirements of subdivision (5) of subsection 1 of section 376.421, RSMo.

2. A small employer carrier may establish up to nine separate classes of business under subsection 1 of this section. A small employer carrier which immediately prior to the effective date of sections 379.930 to 379.952 had established more than nine separate classes of business may, on the effective date of sections 379.930 to 379.952, establish no more than twelve separate classes of business, and shall reduce the number of such classes to eleven within one year after the effective date of sections 379.930 to 379.952; ten within two years after such date; and nine within three years after such date.

3. The director may promulgate rules to provide for a period of transition in order for a small employer carrier to come into compliance with subsection 2 of this section in the instance of acquisition of an additional class of business from another small employer carrier.

4. The director may approve the establishment of additional classes of business upon application to the director and a finding by the director that such action would enhance the efficiency and fairness of the small employer marketplace.]

379.936. 1. [Premium rates for health benefit plans subject to sections 379.930 to 379.952 shall be subject to the following provisions:

(1) The index rate for a rating period for any class of business shall not exceed the index rate for any other class of business by more than twenty percent;

(2) For a class of business, the premium rates charged during a rating period to small employers with similar case characteristics for the same or similar coverage, or the rates that could be charged to such employers under the rating system for that class of business shall not vary from the index rate by more than twenty-five percent of the index rate;

(3) 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 new business premium rate measured from the first day of the prior rating period to the first day of the new rating period. In the case of a health benefit plan into which the small employer carrier is no longer enrolling new small employers, the small employer carrier shall use the percentage change in the base premium rate, provided that such change does not exceed, on a percentage basis, the change in the new business premium rate for the most similar health benefit plan into which the small employer carrier is actively enrolling new small employers;

(b) Any adjustment, not to exceed fifteen percent annually and adjusted pro rata for rating periods of less than one year, due to the claim experience, health status or duration of coverage of the employees or dependents of the small employer as determined from the small employer carrier's rate manual for the class of business; and

(c) Any adjustment due to change in coverage or change in the case characteristics of the small employer, as determined from the small employer carrier's rate manual for the class of business;

(4) Adjustments in rates for claim experience, health status and duration of coverage shall not be charged to individual employees or dependents. Any such adjustment shall be applied uniformly to the rates charged for all employees and dependents of the small employer;

(5) Premium rates for health benefit plans shall comply with the requirements of this section notwithstanding any assessments paid or payable by small employer carriers pursuant to sections 379.942 and 379.943;

(6) A small employer carrier may utilize the employer's industry as a case characteristic in establishing premium rates, provided that the rate factor associated with any industry classification shall not vary by more than ten percent from the arithmetic mean of the highest and lowest rate factors associated with all industry classifications;

(7) In the case of health benefit plans issued prior to July 1, 1993, a premium rate for a rating period may exceed the ranges set forth in subdivisions (1) and (2) of this subsection for a period of three years following July 1, 1993. In such case, the percentage increase in the premium rate charged to a small employer for a new rating period shall not exceed the sum of the following:

(a) The percentage change in the new business premium rate measured from the first day of the prior rating period to the first day of the new rating period. In the case of a health benefit plan into which the small employer carrier is no longer enrolling new small employers, the small employer carrier shall use the percentage change in the base premium rate, provided that such change does not exceed, on a percentage basis, the change in the new business premium rate for the most similar health benefit plan into which the small employer carrier is actively enrolling new small employers;

(b) Any adjustment due to change in coverage or change in the case characteristics of the small employer, as determined from the carrier's rate manual for the class of business;

(8) (a) Small employer carriers shall apply rating factors, including case characteristics, consistently with respect to all small employers in a class of business. Rating factors shall produce premiums for identical groups which differ only by amounts attributable to plan design and do not reflect differences due to the nature of the groups assumed to select particular health benefit plans;

(b) A small employer carrier shall treat all health benefit plans issued or renewed in the same calendar month as having the same rating period;

(9) For the purposes of this subsection, a health benefit plan that utilizes a restricted provider network shall not be considered similar coverage to a health benefit plan that does not utilize such a network, provided that utilization of the restricted provider network results in substantial differences in claims costs;

(10) A small employer carrier shall not use case characteristics, other than age, sex, industry, geographic area, family composition, and group size without prior approval of the director;

(11)] Effective July 1, 1997, new or renewal premium rates for health benefit plans issued to an individual or a small employer shall be based on a community rate subject to the following conditions:

(1) A carrier may use the following risk classification factors in rating health benefit plan coverage for individuals or small employer groups: demographic rating of age, family size, and geographic rating;

(2) Each carrier shall establish its own community rate for each community as defined in subdivision (3) of this subsection. Such carrier may modify the community rate based on age by fifty percent above or below the community rate;

(3) Effective July 1, 1997, the entire state, excluding metropolitan statistical areas with a population greater than four hundred fifty thousand, shall be considered one community for purposes of community rating. Each metropolitan statistical area with a population in excess of four hundred fifty thousand persons shall be considered one community for purposes of community rating. On or after July 1, 1997, the health benefit plan committee shall designate three market service areas, of substantially equal population, within the community rating region which does not encompass a metropolitan statistical area with a population in excess of four hundred fifty thousand persons. Each such defined market service area established by rule shall be construed to be a single community for purposes of implementing community rating of premiums;

(4) Adjustments in rates due to risk classification factors may not be applied to individuals within small employer groups. Any such adjustment shall be applied uniformly to the rate charged for all participants of the small employer;

(5) The director may promulgate rules to implement the provisions of this section and to assure that rating practices used by [small employer] carriers are consistent with the purposes of sections 379.930 to 379.952, including[:

(a)] assuring that differences in rates charged for health benefit plans by [small employer] carriers are reasonable and reflect objective differences in plan design, not including differences due to the nature of the groups assumed to select particular health benefit plans[; and

(b) Prescribing the manner in which case characteristics may be used by small employer carriers].

2. [A small employer carrier shall not transfer a small employer involuntarily into or out of a class of business. A small employer carrier shall not offer to transfer a small employer into or out of a class of business unless such offer is made to transfer all small employers in the class of business without regard to case characteristics, claim experience, health status or duration of coverage.

3. The director may suspend for a specified period the application of subdivision (1) of subsection 1 of this section as to the premium rates applicable to one or more small employers included within a class of business of a small employer carrier for one or more rating periods upon a filing by the small employer carrier and a finding by the director either that the suspension is reasonable in light of the financial condition of the small employer carrier or that the suspension would enhance the efficiency and fairness of the marketplace for small employer health insurance.

4.] In connection with the offering for sale of any health benefit plan to an individual or a small employer, a [small employer] carrier shall make a reasonable disclosure, as part of its solicitation and sales materials, of all of the following:

(1) The extent to which premium rates for a specified individual or small employer are established or adjusted based upon the [actual or expected variation in claims costs or actual or expected variation in health status of] risk classification factors listed in subdivisions (1), (2) and (3) of subsection 1 of this section that are applicable to the individuals or employees of the small employer and their dependents;

(2) The provisions of the health benefit plan concerning the [small employer] carrier's right to change premium rates [and factors, other than claim experience, that affect changes in premium rates];

(3) The provisions relating to renewability of policies and contracts; and

(4) The provisions relating to any preexisting condition provision.

[5. (1) 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 assumptions and are in accordance with sound actuarial principles.

(2) Each small employer carrier shall file with the director annually on or before March fifteenth an actuarial certification certifying that the carrier is in compliance with sections 379.930 to 379.952 and that the rating methods of the small employer carrier are actuarially sound. Such certification shall be in a form and manner, and shall contain such information, as specified by the director. A copy of the certification shall be retained by the small employer carrier at its principal place of business.

(3) A small employer carrier shall make the information and documentation described in subdivision (1) of this section available to the director upon request.]

[379.938. 1. A health benefit plan subject to sections 379.930 to 379.952 shall be renewable with respect to all eligible employees and dependents, at the option of the small employer, except in any of the following cases:

(1) Nonpayment of the required premiums;

(2) Fraud or misrepresentation of the small employer or, with respect to coverage of individual insureds, the insureds or their representatives;

(3) Noncompliance with the carrier's minimum participation requirements;

(4) Noncompliance with the carrier's employer contribution requirements;

(5) Repeated misuse of a provider network provision; or

(6) The small employer carrier elects to nonrenew all of its health benefit plans delivered or issued for delivery to small employers in this state. In such a case the carrier shall:

(a) Provide advance notice of its decision under this subdivision to the insurance supervisory official in each state in which it is licensed; and

(b) Provide notice of the decision not to renew coverage to all affected small employers and to the insurance supervisory official in each state in which an affected covered individual is known to reside at least one hundred eighty days prior to the nonrenewal of any health benefit plan by the carrier. Notice to the insurance supervisory official under this paragraph shall be provided at least three working days prior to the notice to the affected small employers;

(7) The director finds that the continuation of the coverage would:

(a) Not be in the best interests of the policyholders or certificate holders; or

(b) Impair the carrier's ability to meet its contractual obligations.

In such instance the director shall assist affected small employers in finding replacement coverage.

2. A small employer carrier that elects not to renew a health benefit plan under subdivision (6) of subsection 1 of this section shall be prohibited from writing new business in the small employer market in this state for a period of five years from the date of notice to the director.

3. In the case of a small employer carrier doing business in one established geographic service area of the state, the provisions of this section shall apply only to the carrier's operations in such service area.]

379.940. 1. (1) Every [small employer] carrier shall, as a condition of transacting business in this state with individuals or small employers, actively offer to individuals or small employers at least [two] one of five health benefit plans established pursuant to subsection 5 of section 379.944. [One plan offered by each small employer carrier shall be a basic health benefit plan and one plan shall be a standard health benefit plan.] Any carrier choosing to offer only one of the five plans shall offer the plan developed by the health benefit plan committee which contains, at a minimum, the health maintenance organization benefits contained in the Missouri consolidated plan for state employees; provided however, if the carrier restricts the choice of provider, then the carrier also shall offer the plan developed by the health benefit plan committee which is a point of service plan. Nothing in sections 379.930 to 379.952 shall be construed to require a carrier to issue both individual and small employer health benefit plans, but rather each carrier may decide to participate in either the individual markets, or both the small employer and individual markets, pursuant to the terms of sections 379.930 to 379.952.

(2) Effective July 1, 1997, no carrier may offer, renew or issue any health benefit plan other than those developed pursuant to subsection 5 of section 379.944, except a carrier may issue a supplemental health policy for benefits not included in the health benefit plans developed pursuant to subsection 5 of section 379.944. If a supplemental policy is offered or issued, the carrier shall make available consumer information in connection with such policy. No supplemental policy may duplicate any benefit of any health benefit plan developed pursuant to subsection 5 of section 379.944.

[(2)] (3) (a) A [small employer] carrier shall issue [a basic health benefit plan or a standard health benefit plan] any of the five health benefit plans described in subdivision (1) of this subsection to any [eligible] small employer or individual that applies for [either] such plan and agrees to make the required premium payments and to satisfy the other reasonable provisions of the health benefit plan not inconsistent with sections 379.930 to 379.952.

(b) [In the case of a small employer carrier that

establishes more than one class of business pursuant to section 379.934, the small employer carrier shall maintain and issue to eligible small employers at least one basic health benefit plan and at least one standard health benefit plan in each class of business so established. A small employer carrier may apply reasonable criteria in determining whether to accept a small employer into a class of business, provided that:

a. The criteria are not intended to discourage or prevent acceptance of small employers applying for a basic or standard health benefit plan;

b. The criteria are not related to the health status or claim experience of the small employer;

c. The criteria are applied consistently to all small employers applying for coverage in the class of business; and

d. The small employer carrier provides for the acceptance of all eligible small employers into one or more classes of business.

The provisions of this paragraph shall not apply to a class of business into which the small employer carrier is no longer enrolling new small employers.

(3) A small employer is eligible under subdivision (2) of this subsection if it employed at least three or more eligible employees within this state on at least fifty percent of its working days during the preceding calendar quarter.] A carrier shall issue any of the five health benefit plans described in subdivision (1) of this subsection to any individual who is not a late enrollee that applies for such plan and agrees to make the required premium payments and to satisfy the other provisions of the health benefit plan not inconsistent with sections 379.930 to 379.952.

(4) The provisions of this subsection shall be effective [one hundred eighty] ninety days after the director's approval of the [basic health benefit plan and the standard health benefit plan] health benefit plans developed pursuant to section 379.944[, provided that if the small employer health reinsurance program created pursuant to sections 379.942 and 379.943 is not yet in operation on such date, the provisions of this subsection shall be effective on the date that such program begins operation].

2. Health benefit plans [covering small employers] developed pursuant to section 379.944 shall comply with the following provisions:

(1) [A health benefit plan shall not deny, exclude or limit benefits for a covered individual for losses incurred more than twelve months following the effective date of the individual's coverage due to a preexisting condition. A health benefit plan shall not define a preexisting condition more restrictively than:

(a) A condition that would have caused an ordinarily prudent person to seek medical advice, diagnosis, care or

treatment during the six months immediately preceding the

effective date of coverage;

(b) A condition for which medical advice, diagnosis, care or treatment was recommended or received during the six months immediately preceding the effective date of coverage; or

(c) A pregnancy existing on the effective date of coverage.

(2) A health benefit plan shall waive any time period applicable to a preexisting condition exclusion or limitation period with respect to particular services for the period of time an individual was previously covered by qualifying previous coverage that provided benefits with respect to such services, provided that the qualifying previous coverage was continuous to a date not less than thirty days prior to the effective date of the new coverage. This subdivision does not preclude application of any waiting period applicable to all new enrollees under the health benefit plan.

(3) A health benefit plan may exclude coverage for late enrollees for the greater of eighteen months or provide for an eighteen-month preexisting condition exclusion, provided that if both a period of exclusion from coverage and a preexisting condition exclusion are applicable to a late enrollee, the combined period shall not exceed eighteen months from the date the individual enrolls for coverage under the health benefit plan.] No carrier shall impose upon an enrollee, who is not a late enrollee, a limitation or exclusion of benefits relating to treatment of a condition based on the fact that the condition preexisted the effective date of coverage. In no case shall an exclusion or limitation based on a preexisting condition exceed six months.

[(4) (a) Except as provided in paragraph (d) of this subdivision,] (2) Requirements used by a [small employer] carrier in determining whether to provide coverage to a small employer, including requirements for minimum percentage participation of eligible employees [and minimum employer contributions], shall be applied uniformly among all small employers [with the same number of eligible employees] applying for coverage or receiving coverage from the [small employer] carrier.

[(b) A small employer carrier may vary application of minimum participation requirements only by the size of the small employer group.

(c) a. Except as provided in paragraph (b) of this

subdivision, in applying minimum participation requirements with respect to a small employer, a small employer carrier shall not consider employees or dependents who have qualifying existing coverage in determining whether the applicable percentage of participation is met.

b. With respect to a small employer with ten or fewer eligible employees, a small employer carrier may consider

employees or dependents who have coverage under another health benefit plan sponsored by such small employer in applying minimum participation requirements.

(d) A small employer carrier shall not increase any

requirement for minimum employee participation or any requirement for minimum employer contribution applicable to a small employer at any time after the small employer has been accepted for coverage.

(5)] (3) (a) If a [small employer] carrier offers coverage to a small employer, the [small employer] carrier shall offer coverage to all of the eligible employees of a small employer and their dependents. A [small employer] carrier shall not offer coverage to only certain individuals in a small employer group or to only part of the group[, except in the case of late enrollees as provided in subdivision (3) of this subsection]. Nothing in sections 379.930 to 379.952 shall be held or construed in a manner inconsistent with the Omnibus Budget Reconciliation Act of 1993 (OBRA-1993).

(b) A [small employer] carrier shall not modify a [basic or standard] health benefit plan with respect to an individual or a small employer or any eligible employee or dependent through riders, endorsements or otherwise, to restrict or exclude coverage for certain diseases or medical conditions otherwise covered by the health benefit plan.

[3. (1) A small employer carrier shall not be required to offer coverage or accept applications pursuant to subsection 1 of this section in the case of the following:

(a) To a small employer, where the small employer is not physically located in the carrier's established geographic service area;

(b) To an employee, when the employee does not work or reside within the carrier's established geographic service area; or

(c) Within an area where the small employer carrier

reasonably anticipates, and demonstrates to the satisfaction of the director, that it will not have the capacity within its established geographic service area to deliver service adequately to the members of such groups because of its obligations to existing group policyholders and enrollees.

(2) A small employer carrier that cannot offer coverage pursuant to paragraph (c) of subdivision (1) of this subsection may not offer coverage in the applicable area to new cases of employer groups with more than twenty-five eligible employees or to any small employer groups until the later of one hundred eighty days following each such refusal or the date on which the carrier notifies the director that it has regained capacity to deliver services to small employer groups.

4.] 3. A [small employer] carrier shall not be required to provide coverage to individuals or small employers pursuant to subsection 1 of this section for any period of time for which the director determines that requiring the acceptance of individuals or small employers in accordance with the provisions of subsection 1 of this section would place the [small employer] carrier in a financially impaired condition.

[5. Sections 379.930 to 379.938 and sections 379.942 to 379.950 shall become effective July 1, 1993, this section and section 379.952 shall become effective July 1, 1994.]

4. In each community as defined in subsection 1 of section 379.936, an annual common open enrollment of thirty days shall be offered by carriers selling health benefit plans to individuals, except that no such open enrollment need be offered to any individual seeking an individual policy who has not continuously been a resident of this state for at least one year prior to the commencement of such open enrollment.

5. No carrier may terminate or cancel a health benefit plan, except in any of the following cases:

(1) Nonpayment of the required premiums; or

(2) Fraud or misrepresentation of the employer or, with respect to coverage of individual insureds, the insureds or their representatives.

6. Nothing in sections 379.930 to 379.952 shall be construed to prohibit any carrier from nonrenewing all of its health benefit plans. If a carrier elects to nonrenew all of its health benefit plans delivered or issued in this state, the carrier shall:

(a) Provide advance notice of its decision under this subdivision to the director of the department of insurance; and

(b) Provide notice of the decision not to renew coverage to all affected small employers and individuals at least one hundred eighty days prior to the nonrenewal of any health benefit plan by the carrier. Notice to the director of the department of insurance shall be provided at least three working days prior to the notice to the affected small employers or individuals.

379.942. 1. There is hereby created a nonprofit entity to be known as the "Missouri Small Employer and Individual Health Reinsurance Program". All [small employer] carriers shall participate in the program as reinsuring carriers for a minimum of three years beginning July 1, [1993] 1997, or the effective date of the reinsurance program whichever is earlier. After the expiration of such three years, a [small employer] carrier may apply to the director to opt out of the program. The director shall decide whether to grant such an application to opt out, and shall consider in making such determination only: the carrier's financial condition and the financial condition of its guaranteeing or reinsuring corporation, if any; its history of assuming and managing risk; its ability to assume and manage the risk of enrolling small employers and individuals without the protection of the program; and its commitment to market fairly to all small employers and individuals in its service area. If the director grants such application, the [small employer] carrier shall participate in the program neither as a ceding nor reinsuring carrier.

2. (1) The program shall operate subject to the

supervision and control of the board. Subject to the provisions of subdivision (2) of this subsection, the board shall consist of nine members appointed by the director plus the director or his designated representative, who shall serve as an ex officio member of the board.

(2) (a) In selecting the members of the board, the

director shall include representatives of small employers, small employer employees or their representatives and small employer carriers and such other individuals determined to be qualified by the director. At least five of the members of the board shall be representatives of reinsuring carriers and at least one of the members of the board shall be a representative of a health maintenance organization which is a small employer carrier. All members shall be selected from individuals nominated by small employer carriers in this state pursuant to procedures and guidelines developed by the director, except that the director shall select two small employers' employees, including at least one representative of a labor organization.

(b) In the event that the program becomes eligible for additional financing pursuant to subdivision (3) of subsection 8 of section 379.943, the board shall be expanded to include two additional members who shall be appointed by the director. In selecting the additional members of the board, the director shall choose individuals who represent reinsuring carriers. The expansion of the board under this paragraph shall continue for the period that the program continues to be eligible for

additional financing under subdivision (3) of subsection 8 of section 379.943.

(3) The initial board members shall be appointed as

follows: one-third of the members to serve a term of two years; one-third of the members to serve a term of four years; and one-third of the members to serve a term of six years.

Subsequent board members shall serve for a term of three years. A board member's term shall continue until his successor is appointed.

(4) A vacancy in the board shall be filled by the director. A board member may be removed by the director for cause.

[3. Within sixty days of July 1, 1993, each small employer carrier shall make a filing with the director containing the carrier's net health insurance premium derived from health benefit plans delivered or issued for delivery to small employers in this state in the previous calendar year.]

379.943. 1. Within one hundred eighty days after the appointment of the initial board, the board shall submit to the director a plan of operation and thereafter any amendments thereto necessary or suitable, to assure the fair, reasonable and equitable administration of the program. The director may, after notice and hearing, approve the plan of operation if the director determines it to be suitable to assure the fair, reasonable and equitable administration of the program, and provides for the sharing of program gains or losses on an equitable and proportionate basis in accordance with the provisions of sections 379.942 and 379.943. The plan of operation shall become effective upon approval in writing by the director.

2. If the board fails to submit a suitable plan of operation within one hundred eighty days after its appointment, the director shall, after notice and hearing, promulgate and adopt a temporary plan of operation. The director shall amend or rescind any plan so adopted under this subsection at the time a plan of operation is submitted by the board and approved by the director.

3. The plan of operation shall:

(1) Establish procedures for handling and accounting of program assets and moneys and for an annual fiscal report to the director;

(2) Establish procedures for selecting an administering carrier and setting forth the powers and duties of the administering carrier;

(3) Establish [procedures for reinsuring risks in accordance with the provisions of sections 379.942 and 379.943] the method for determining the extent to which a carrier's payment per insured for each benefit plan provided for under the program exceeds the regional average payment per insured for each benefit plan provided for under the program;

(4) Establish [procedures for collecting assessments from reinsuring carriers to fund claims and administrative expenses incurred or estimated to be incurred by] the method for determining the extent to which a carrier whose average cost of insuring individuals covered by health benefit plans exceeds the threshold described in subsection 5 of this section may receive reimbursement from the program; [and]

(5) Establish the efficiency and risk management standards a carrier must meet before it may receive reimbursement from the program; and

(6) Provide for any additional matters necessary for the implementation and administration of the program.

4. The program shall have the general powers and authority granted under the laws of this state to insurance companies and health maintenance organizations licensed to transact business, except the power to issue health benefit plans directly to either groups or individuals. In addition thereto, the program shall have the specific authority to:

(1) Enter into contracts as necessary or proper to carry out the provisions and purposes of sections 379.930 to 379.952, including the authority, with the approval of the director, to enter into contracts with similar programs in other states for the joint performance of common functions or with persons or other organizations for the performance of administrative functions;

(2) Sue or be sued, including taking any legal actions necessary or proper to recover any assessments and penalties for, on behalf of, or against the program or any reinsuring carriers;

(3) Take any legal action necessary to avoid the payment of improper claims against the program;

(4) [Define the health benefit plans for which reinsurance will be provided, and to issue reinsurance policies, in accordance with the requirements of sections 379.930 to 379.952;

(5)] Establish rules, conditions and procedures for [reinsuring risks under] reimbursement and assessment of members by the program;

[(6)] (5) Establish actuarial functions as appropriate for the operation of the program;

[(7)] (6) Assess carriers in accordance with the provisions of subsection 8 of this section, and to make advance interim assessments as may be reasonable and necessary for organizational and interim operating expenses. Any interim assessments shall be credited as offsets against any regular assessments due following the close of the calendar year;

[(8)] (7) Appoint appropriate legal, actuarial and other committees as necessary to provide technical assistance in the operation of the program, policy and other contract design, and any other function within the authority of the program; and

[(9)] (8) Borrow money to effect the purposes of the program. Any notes or other evidence of indebtedness of the program not in default shall be legal investments for carriers and may be carried as admitted assets.

5. [A small employer carrier participating in the program may reinsure an entire small employer group with the program as provided for in this subsection:

(1) With respect to a basic health benefit plan or a standard health benefit plan, the program shall reinsure the level of coverage provided and, with respect to other plans, the program shall reinsure up to the level of coverage provided in a basic or standard health benefit plan.

(2) A small employer carrier may reinsure an entire small employer group within sixty days of the commencement of the group's coverage under a health benefit plan or within thirty days after an annual renewal of a small employer group.

(3) (a) The program shall not reimburse a small employer carrier with respect to the claims of an employee or dependent who is part of a reinsured small employer group until the carrier has incurred an initial level of claims for such employee or dependent of five thousand dollars in a calendar year for benefits covered by the program. In addition, the small employer carrier shall be responsible for ten percent of the remaining incurred claims during a calendar year and the program shall reinsure the remainder. A small employer carrier's liability under this paragraph shall not exceed a maximum limit of twenty-five thousand dollars in any one calendar year with respect to any individual who is part of a reinsured small employer group.

(b) The board annually shall adjust the initial level of claims and the maximum limit to be retained by the carrier to reflect increases in costs and utilization within the standard market for health benefit plans within the state. The adjustment shall not be less than the annual change in the medical component of the "Consumer Price Index for All Urban Consumers" of the federal Department of Labor, Bureau of Labor Statistics, unless the board proposes and the director approves a lower adjustment factor.

(4) A small employer carrier may terminate reinsurance for a small employer on any plan anniversary.

6. (1) The board, as part of the plan of operation, shall establish a methodology for determining premium rates to be charged by the program for reinsuring small employers and individuals pursuant to sections 379.942 and 379.943. The methodology shall include a system for classification of small employers that reflects the types of case characteristics commonly used by small employer carriers in the state. The methodology shall also include a system for classification of small employer carriers that reflects the degree to which the small employer carrier uses the cost containment features adopted by the health benefit plan committee under section 379.944. The methodology shall provide for the development of base reinsurance premium rates, which shall be multiplied by the factors set forth in subdivision (2) of this subsection to determine the premium rates for the program. The base reinsurance premium rates, shall be established by the board, subject to the approval of the director, and shall be set at levels which reasonably approximate gross premiums charged to small employers by small employer carriers for health benefit plans with benefits similar to the standard health benefit plan.

(2) Only an entire small employer group may be reinsured, and the rate for such reinsurance shall be one and one-half times the base reinsurance insurance premium rate for the group established pursuant to this subsection.

(3) The board periodically shall review the methodology established under subdivisions (1) and (2) of this subsection, including the system of classification and any rating factors, to assure that it reasonably reflects the claims experience of the program. The board may propose changes to the methodology which shall be subject to the approval of the director.

7. If a health benefit plan for a small employer is reinsured with the program, the premium charged to the small employer for any rating period for the coverage issued shall meet the requirements relating to premium rates set forth in section 379.936.

8. (1) Prior to March first of each year, the board shall determine and report to the director the program net loss for the previous calendar year, including administrative expenses and incurred losses for the year, taking into account investment income and other appropriate gains and losses.

(2) Any net loss for the year shall be recouped by assessments of reinsuring carriers.

(a) The board shall establish, as part of the plan of operation, a formula by which to make assessments against reinsuring carriers and small employer carriers. The assessment formula shall be based on:

a. The share of each reinsuring carrier which reinsures any small employer group with the program, of the program net loss described in this subsection shall be its proportionate share, determined by premiums earned in the preceding calendar year from health benefit plans which have been ceded to the program, times one-half of the total program net loss;

b. Each reinsuring carrier's share of the program net loss described in this subsection shall be its proportionate share, determined by premiums earned in the preceding calendar year from all health benefit plans delivered or issued for delivery to small employers in this state by all reinsuring carriers, times one-half of the total program net loss. An assessment levied or paid by a reinsuring carrier pursuant to subparagraph a of this paragraph shall not be credited or offset against any assessment levied pursuant to this subparagraph.

(b) The formula established pursuant to paragraph (a) of this subdivision shall not result in any reinsuring carrier having an assessment share that is less than fifty percent nor more than one hundred fifty percent of an amount which is based on the proportion of the small employer carrier's total premiums earned in the preceding calendar year from health benefit plans delivered or issued for delivery to small employers in this state by small employer carriers to total premiums earned in the preceding calendar year from health benefit plans delivered or issued for delivery to small employers in this state by all small employer carriers.

(c) The director by rule and after a hearing thereon, may change the assessment formula established pursuant to paragraph (a) of this subdivision from time to time as appropriate. The director may provide for the shares of the assessment base attributable to premiums from all health benefit plans and to premiums from health benefit plans ceded to the program to vary during a transition period.

(d) Subject to the approval of the director, the board shall make an adjustment to the assessment formula for reinsuring carriers that are approved health maintenance organizations which are federally qualified under 42 U.S.C. section 300, et seq., to the extent, if any, that restrictions are placed on them that are not imposed on other small employer carriers.

(e) Premiums and benefits payable by a reinsuring carrier that are less than an amount determined by the board to justify the cost of collection shall not be considered for purposes of determining assessments.

(3) (a) Prior to March first of each year, the board shall determine and file with the director an estimate of the assessments needed to fund the losses incurred by the program in the previous calendar year.

(b) If the board determines that the assessments needed to fund the losses incurred by the program in the previous calendar year will exceed the amount specified in paragraph (c) of this subdivision, the board shall evaluate the operation of the program and report its findings, including any recommendations for changes to the plan of operation, to the director within ninety days following the end of the calendar year in which the losses were incurred. The evaluation shall include: an estimate of future assessments, the administrative costs of the program, the appropriateness of the premiums charged and the level of insurer retention under the program and the costs of coverage for small employers. If the board fails to file a report with the director within ninety days following the end of the applicable calendar year, the director may evaluate the operations of the program and implement such amendments to the plan of operation the director deems necessary to reduce future losses and assessments.

(c) For any calendar year, the amount specified in this paragraph is five percent of total premiums earned in the previous year from health benefit plans delivered or issued for delivery to small employers in this state by reinsuring carriers.

(d) a. If assessments in each of two consecutive calendar years exceed the amount specified in paragraph (c) of subdivision (3) of this subsection, the program shall be eligible to receive additional financing as provided in subparagraph b of this paragraph.

b. The additional financing provided for in subparagraph a of this paragraph shall be obtained from additional assessments apportioned among all carriers which are not small employer carriers; the amount of the assessment for each carrier determined by the carrier's proportionate share of premiums earned in the preceding calendar year from all health benefit plans delivered, issued for delivery or continued in this state to individuals and groups, other than small employer groups subject to sections 379.930 to 379.952, by all carriers, times the total amount of additional financing to be obtained.

c. The additional assessment provided by subparagraph b of this paragraph shall not exceed an amount equal to one percent of the gross premium derived by that carrier from all health benefit plans delivered, issued for delivery or continued in this state to individuals and groups, other than small employer groups subject to sections 379.930 to 379.952.

d. Any loss sustained by the program which is not reimbursed by additional financing obtained pursuant to this paragraph shall be carried forward to the calendar year succeeding the year in which the loss is sustained, and shall be recouped by an increase in premiums charged by the board for reinsurance of small employer groups with the program.

e. Additional financing received by the program pursuant to this paragraph shall be distributed to reinsuring carriers in proportion to the assessments paid by such carriers over the previous two calendar years.] The board shall determine the regional average payment per insured for each individual or small employer benefit plan. Each carrier which satisfies the efficiency and risk management standards promulgated by the board and whose average cost of insuring individuals covered by health benefit plans exceeds the regional average cost by at least twenty percent shall be reimbursed by the program for eighty percent of its costs in excess thereof.

6. Any member which is a reinsuring carrier may receive reimbursement in accordance with the standards developed by the board.

7. Every member which is a reinsuring carrier shall apply its case management and claims handling techniques including, but not limited to, utilization review, individual case management, preferred provider provisions, and other methods of operation, in the same manner with respect to all its individual and small employer health business.

8. (1) Following the close of the calendar year, the administering carrier shall determine the total amount owed by the program in that calendar year to all carriers qualifying for reimbursement by the program. Such amount shall be known as the "net loss of the program".

(2) Any net loss for the year shall be recouped by assessments of members. Assessments shall first be apportioned by the board among all members who are reinsuring carriers in proportion to their respective shares of the plan premiums earned in this state from health benefit plans during the calendar year coinciding with or ending during the fiscal year of the program, or on any other equitable basis reflecting coverage of individuals and small employers as may be provided in the plan of operation.

(3) If the net loss is not recouped before assessments totaling four percent of the aggregate premiums from individual and small employer health benefit plans have been collected from members who are reinsuring carriers, additional assessments not to exceed one percent of the aggregate premiums from all group health benefit policies and contracts shall be apportioned by the board among all members in proportion to their respective shares of the total premium earned in each region from all individual and group health benefit policies and contracts during the preceding calendar year. A member shall receive a credit against this assessment to the extent the member can demonstrate that its assumption of high-risk individuals or small employers which are not reinsured is proportionate to its market share of individual and small employer health benefit plans, as such groups and market shares are defined by the board in its plan of operation.

(4) If assessments exceed net losses of the program, the excess shall be held at interest and used by the board to offset future losses or to reduce program premiums. As used in this subdivision, "future losses" includes reserves for incurred but not reported claims.

(5) Each carrier's proportion of the assessment shall be determined annually by the board based on annual statements and other reports deemed necessary by the board and filed by the carriers with the board.

(6) The plan of operation shall provide for the imposition of an interest penalty for late payment of assessments.

(7) A carrier may seek from the director a deferment from all or part of an assessment imposed by the board. The director may defer all or part of the assessment of a carrier if the director determines that the payment of the assessment would place the carrier in a financially impaired condition. If all or part of an assessment against a carrier is deferred, the amount deferred shall be assessed against the other participating carriers in a manner consistent with the basis for assessment set forth in this subsection. The carrier receiving such deferment shall remain liable to the program for the amount deferred and the interest penalty provided in subdivision (6) of this subsection [and shall be prohibited from reinsuring any groups in the program until such time as it pays such assessments].

9. Neither the participation in the program as reinsuring carriers, the establishment of rates, forms or procedures, nor any other joint or collective action required by sections 379.930 to 379.952 shall be the basis of any legal action, criminal or civil liability, or penalty against the program or any of its reinsuring carriers either jointly or separately, other than any action by the director to enforce the provisions of sections 379.930 to 379.952.

10. [The board, as part of the plan of operation, shall develop standards setting forth the manner and levels of compensation to be paid to producers for the sale of basic and standard health benefit plans. In establishing such standards, the board shall take into the consideration: the need to assure the broad availability of coverages; the objectives of the program; the time and effort expended in placing the coverage; the need to provide ongoing service to the small employer; the levels of compensation currently used in the industry; and the overall costs of coverage to small employers selecting these plans.

11.] The program shall be exempt from any and all taxes.

[12.] 11. The director shall make an initial assessment of one thousand dollars on each insurance company authorized to transact accident or health insurance, each health services corporation, and each health maintenance organization. Initial assessments shall be made during January, 1993, and shall be paid before April 1, 1993. Initial assessments shall be deposited into the department of insurance dedicated fund. Within ten days after the effective date of the program's plan of operation, the total amount of the initial assessments shall be transferred at the request of the director to the Missouri small employer health reinsurance program. The program may use such initial assessment in the same manner and for the same purposes as other assessments pursuant to sections 379.942 and 379.943.

12. The board shall establish guidelines to ensure that carriers are assuming their share of high-risk individuals and small employer groups in proportion to their market share of individual and small employer health benefit plan business. In the event that any carrier does not assume its reasonable share of the high-risk individual and small employer market, the board may adjust the assessment formula, with the approval of the director, to require a proportionally higher assessment for the carrier.

379.944. 1. The [director] governor shall appoint [a seven-member] a fourteen-member "Health Benefit Plan Committee". The committee shall be composed of one representative from each of the following categories: an insurance company [which is a small employer carrier], a health services corporation [which is a small employer carrier], a health maintenance organization [which is a small employer carrier, a], two health care [provider,] providers, one of which shall be a physician in private practice licensed to practice medicine and one of which shall be licensed to practice osteopathy, one administrator of a hospital licensed pursuant to the provisions of chapter 197, RSMo, one independent insurance agent, [and a] two small [employer. The director shall select two representatives of employees of small employers, including at least one representative of a labor organization.

2. The committee shall recommend the form and level of coverages to be made available by small employer carriers pursuant to sections 379.942 and 379.943.

3. The committee shall recommend benefit levels, cost sharing levels, exclusions and limitations for the basic health benefit plan and the standard health benefit plan. The committee shall also design a basic health benefit plan and a standard health benefit plan which contain benefit and cost sharing levels that are consistent with the basic method of operation and the benefit plans of health maintenance organizations, including any restrictions imposed by federal law.

(1) The plans recommended by the committee shall include cost containment features such as:

(a) Utilization review of health care services, including review of medical necessity of hospital and physician services;

(b) Case management;

(c) Selective contracting with hospitals, physicians and other health care providers;

(d) Reasonable benefit differentials applicable to providers that participate or do not participate in arrangements using restricted network provisions; and

(e) Other managed care provisions.

(2)] employers, three consumers neither of whom have any financial interests in any carrier, except as a policy holder, and the directors of the department of health and the department of insurance. The department of insurance shall provide office space, equipment, supplies and technical assistance to the committee. All gubernatorial appointments to the committee shall be subject to the advice and consent of the senate, except for the appointment of the duly confirmed directors of the department of health and the department of insurance.

2. The committee members shall serve three-year terms, except that the first members of the committee shall serve as follows: four members shall serve a one-year term, four members shall serve a two-year term and four members shall serve a three-year term. The directors of the department of health and the department of insurance shall serve as long as they hold such offices. The governor shall designate one of the twelve members of the committee who are not department directors as the chair.

3. The committee shall from time to time appoint such advisory committees as the committee deems advisable to render advice to the committee on issues related to the delivery of health care services, use of appropriate technologies, establishing appropriate health information systems and such other matters as the committee determines. Such advisory committees shall, as appropriate, have balanced representation from consumers, business, health educators, legislators, health care providers, health insurers, health care professionals, and health care facilities.

4. The committee shall have the following powers and duties to:

(1) Employ and prescribe the duties of additional employees all of whom shall be exempt from the provisions of chapter 36, RSMo;

(2) Enter into contracts, sue and be sued;

(3) Determine the components of health benefit plans pursuant to the provisions of sections 379.930 to 379.956;

(4) Accept and expend gifts, donations, grants and other nongovernmental funds received by the committee and, subject to appropriation, expend state and federal funds;

(5) Undertake studies, research and analysis necessary to support the activities of the committee;

(6) Establish procedures and promulgate rules and regulations to carry out the duties and functions given to the committee pursuant to the provisions of sections 379.930 to 379.952.

5. On or before March 31, 1997, the health benefit plan committee shall formulate the five health benefit plans. One of the health benefit plans shall provide, at a minimum, the health maintenance organization benefits prescribed by the Missouri consolidated plan board of trustees for state employees, except that any health benefit plan shall provide at a minimum the health benefits as set forth in sections 376.810 to 376.814, RSMo, for mental illness and chemical dependency.

6. One health benefit plan formulated by the committee shall be a point of service plan. The director of the department of insurance shall monitor the premiums charged for point of service options offered pursuant to this section to ensure that additional premiums assessed for using the point of service plan are based on an actuarial determination. A point of service plan may require an enrollee copayment of up to twenty percent of the amount which would have been paid to an in-network provider for an item or service if the enrollee uses an out-of-network provider.

7. The directors of the departments of insurance and revenue shall develop a plan which permits health care services to be purchased using a medical savings account or other such plan with tax incentives. The plan shall be presented to the general assembly by January 1, 1997.

8. The committee shall submit the health benefit plans described in this [subsection] section to the director of the department of insurance for approval [within one hundred eighty days after the appointment of the committee] by March 31, 1997.

379.948. Except for the coverages specified in subsection 3 of section 376.995, RSMo, and subsection 5 of section 379.944, no law requiring the coverage of a particular health care service or benefit, or requiring the reimbursement, utilization or inclusion of a specific category of licensed health care practitioner shall apply to [a basic] any health benefit plan issued pursuant to sections 379.930 to 379.952.

379.952. 1. Each [small employer] carrier shall actively market each health benefit plan [coverage, including the basic and standard health benefit plans], to [eligible] all individuals and small employers in [the state. If a small employer carrier denies coverage to a small employer on the basis of the health status or claims experience of the small employer or its employees or dependents, the small employer carrier shall offer the small employer the opportunity to purchase a basic health benefit plan or a standard health benefit plan] any of the market service areas established in section 379.936 in which it sells any health benefit plan.

2. (1) Except as provided in subdivision (2) of this subsection, no [small employer] carrier or agent or broker shall, directly or indirectly, engage in the following activities:

(a) Encouraging or directing individuals or small employers to refrain from filing an application for coverage with the [small employer] carrier because of the health status, claims experience, industry, occupation or geographic location of the individual or small employer;

(b) Encouraging or directing individuals or small employers to seek coverage from another carrier because of the health status, claims experience, industry, occupation or geographic location of the individual or small employer.

(2) The provisions of subdivision (1) of this subsection shall not apply with respect to information provided by a [small employer] carrier or agent or broker to an individual or a small employer regarding the [established geographic] market service area established under subdivision (3) of subsection 1 of section 379.936 or a restricted network provision of a [small employer] carrier.

3. (1) Except as provided in subdivision (2) of this subsection, no [small employer] carrier shall, directly or indirectly, enter into any contract, agreement or arrangement with an agent or broker that provides for or results in the compensation paid to an agent or broker for the sale of a health benefit plan to be varied because of the health status, claims experience, industry, occupation or geographic location of the individual or small employer.

(2) Subdivision (1) of this subsection shall not apply with respect to a compensation arrangement that provides compensation to an agent or broker on the basis of percentage of premium, provided that the percentage shall not vary because of the health status, claims experience, industry, occupation or geographic area of the individual or small employer.

4. A [small employer] carrier shall provide reasonable compensation, as provided under the plan of operation of the program, to an agent or broker, if any, for the sale of a basic or standard health benefit plan.

5. No [small employer] carrier shall terminate, fail to renew or limit its contract or agreement of representation with an agent or broker for any reason related to the health status, claims experience, occupation, or geographic location of the individuals or small employers placed by the agent or broker with the [small employer] carrier.

6. No [small employer] carrier or producer shall induce or otherwise encourage a small employer to separate or otherwise exclude an employee from health coverage or benefits provided in connection with the employee's employment.

7. Denial by a [small employer] carrier of an application for coverage from an individual or a small employer shall be in writing and shall state the reason or reasons for the denial with specificity.

8. The director may promulgate rules setting forth additional standards to provide for the fair marketing and broad availability of health benefit plans to individuals or small employers in this state.

9. (1) A violation of this section by a [small employer] carrier or a producer shall be an unfair trade practice under sections 375.930 to 375.949, RSMo.

(2) If a [small employer] carrier enters into a contract, agreement or other arrangement with a third-party administrator to provide administrative marketing or other services related to the offering of health benefit plans to small employers in this state, the third-party administrator shall be subject to this section as if it were a [small employer] carrier.

[376.960. As used in sections 376.960 to 376.989, the following terms mean:

(1) "Benefit plan", the coverages to be offered by the pool to eligible persons pursuant to the provisions of section 376.986;

(2) "Board", the board of directors of the pool;

(3) "Director", the director of the Missouri division of insurance;

(4) "Department", the Missouri department of insurance;

(5) "Health insurance", any hospital and medical expense incurred policy, nonprofit health care service for benefits other than through an insurer, nonprofit health care service plan contract, health maintenance organization subscriber contract, preferred provider arrangement or contract, or any other similar contract or agreement for the provisions of health care benefits. The term "health insurance" does not include short-term, accident, fixed indemnity, limited benefit or credit insurance, coverage issued as a supplement to liability insurance, insurance arising out of a workers' compensation or similar law, automobile medical-payment insurance, or insurance under which benefits are payable with or without regard to fault and which is statutorily required to be contained in any liability insurance policy or equivalent self-insurance;

(6) "Health maintenance organization", any person which undertakes to provide or arrange for basic and supplemental health care services to enrollees on a prepaid basis, or which meets the requirements of section 1301 of the United States Public Health Service Act;

(7) "Hospital", a place devoted primarily to the maintenance and operation of facilities for the diagnosis, treatment or care for not less than twenty-four hours in any week of three or more nonrelated individuals suffering from illness, disease, injury, deformity or other abnormal physical condition; or a place devoted primarily to provide medical or nursing care for three or more nonrelated individuals for not less than twenty-four hours in any week. The term "hospital" does not include convalescent, nursing, shelter or boarding homes, as defined in chapter 198, RSMo;

(8) "Insurance arrangement", any plan, program, contract or other arrangement under which one or more employers, unions or other organizations provide to their employees or members, either directly or indirectly through a trust or third party administration, health care services or benefits other than through an insurer;

(9) "Insured", any individual resident of this state who is eligible to receive benefits from any insurer or insurance arrangement, as defined in this section;

(10) "Insurer", any insurance company authorized to transact health insurance business in this state, any nonprofit health care service plan act, or any health maintenance organization;

(11) "Medicare", coverage under both part A and part B of Title XVIII of the Social Security Act, 42 USC 1395 et seq., as amended;

(12) "Member", all insurers and insurance arrangements participating in the pool;

(13) "Physician", physicians and surgeons licensed under chapter 334, RSMo, or by state board of healing arts in the state of Missouri;

(14) "Plan of operation", the plan of operation of the pool, including articles, bylaws and operating rules, adopted by the board pursuant to the provisions of sections 376.961, 376.962 and 376.964;

(15) "Pool", the state health insurance pool created in sections 376.961, 376.962 and 376.964.]

[376.961. 1. There is hereby created a nonprofit entity to be known as the "Missouri Health Insurance Pool". All insurers issuing health insurance in this state and insurance arrangements providing health plan benefits in this state on and after January 1, 1991, shall be members of the pool.

2. The director shall give notice to all insurers and insurance arrangements of the time and place for the initial organizational meetings. The board of directors shall be selected by the pool participants, and shall consist of seven members: one member each from the three largest domestic insurance companies participating in the pool, based on premium income in Missouri; one member each from the two largest domestic health services corporations participating in the pool, based on premium income in Missouri; one member from an independent domestic health maintenance organization participating in the pool; and one member from the general public who is not an insurer, or any officer, director, or employee of an insurer. Two members of the board of directors shall be of minority groups and at least one such member shall be an African-American. The board shall appoint one or more insurers to serve as administrator. Both the selection of the board of directors and the administering insurer shall be subject to approval by the director.

3. If, within sixty days of the organizational meeting, the board of directors is not selected or the administering insurer is not appointed, the director shall appoint the initial board and appoint an administering insurer.]

[376.962. 1. The board of directors on behalf of the pool shall submit to the director a plan of operation for the pool and any amendments thereto necessary or suitable to assure the fair, reasonable and equitable administration of the pool. After notice and hearing, the director shall approve the plan of operation, provided it is determined to be suitable to assure the fair, reasonable and equitable administration of the pool, and it provides for the sharing of pool gains or losses on an equitable proportionate basis. The plan of operation shall become effective upon approval in writing by the director consistent with the date on which the coverage under sections 376.960 to 376.989 becomes available. If the pool fails to submit a suitable plan of operation within one hundred eighty days after the appointment of the board of directors, or at any time thereafter fails to submit suitable amendments to the plan, the director shall, after notice and hearing, adopt and promulgate such reasonable rules as are necessary or advisable to effectuate the provisions of this section. Such rules shall continue in force until modified by the director or superseded by a plan submitted by the pool and approved by the director.

2. In its plan, the board of directors of the pool shall:

(1) Establish procedures for the handling and accounting of assets and moneys of the pool;

(2) Select an administering insurer in accordance with section 376.968;

(3) Establish procedures for filling vacancies on the board of directors;

(4) Establish procedures for the collection of assessments from all members to provide for claims paid under the plan and for administrative expenses incurred or estimated to be incurred during the period for which the assessment is made. The level of payments shall be established by the board pursuant to the provisions of section 376.973. Assessment shall occur at the end of each calendar year and shall be due and payable within thirty days of receipt of the assessment notice;

(5) Develop and implement a program to publicize the existence of the plan, the eligibility requirements, and procedures for enrollment, and to maintain public awareness of the plan.]

[376.964. The board of directors and administering insurers of the pool shall have the general powers and authority granted under the laws of this state to insurance companies licensed to transact health insurance as defined in section 376.960, and, in addition thereto, the specific authority to:

(1) Enter into contracts as are necessary or proper to carry out the provisions and purposes of sections 376.960 to 376.989, including the authority, with the approval of the director of insurance, to enter into contracts with similar pools of other states for the joint performance of common administrative functions, or with persons or other organizations for the performance of administrative functions;

(2) Sue or be sued, including taking any legal actions necessary or proper for recovery of any assessments for, on behalf of, or against pool members;

(3) Take such legal actions as necessary to avoid the payment of improper claims against the pool or the coverage provided by or through the pool;

(4) Establish appropriate rates, rate schedules, rate adjustments, expense allowances, agents' referral fees, claim reserve formulas and any other actuarial function appropriate to the operation of the pool. Rates shall not be unreasonable in relation to the coverage provided, the risk experience and expenses of providing the coverage. Rates and rate schedules may be adjusted for appropriate risk factors such as age and area variation in claim costs and shall take into consideration appropriate risk factors in accordance with established actuarial and underwriting practices;

(5) Assess members of the pool in accordance with the provisions of this section, and to make advance interim assessments as may be reasonable and necessary for the organizational and interim operating expenses. Any such interim assessments are to be credited as offsets against any regular assessments due following the close of the fiscal year;

(6) Issue policies of insurance in accordance with the requirements of sections 376.960 to 376.989;

(7) Appoint, from among members, appropriate legal, actuarial and other committees as necessary to provide technical assistance in the operation of the pool, policy or other contract design, and any other function within the authority of the pool;

(8) Establish rules, conditions and procedures for reinsuring risks of pool members desiring to issue pool plan coverages in their own name. Such reinsurance facility shall not subject the pool to any of the capital or surplus requirements, if any, otherwise applicable to reinsurers;

(9) Negotiate rates of reimbursement with health care providers on behalf of the association and its members.]

[376.965. No member of the board of directors of the Missouri health insurance pool shall be civilly liable, either jointly or separately, as a result of any act, omission or decision in performance of his duties as specifically required by sections 376.960 to 376.989. Such immunity shall not attach for any intentional or reckless act affecting the property or rights of any person.]

[376.966. 1. No employee shall involuntarily lose his group coverage by decision of his employer on the grounds that such employee may subsequently enroll in the pool. The department of insurance shall have authority to promulgate rules and regulations to enforce this subsection.

2. Any individual who is a resident of this state shall be eligible for pool coverage, except the following:

(1) Persons who have, on the date of issue of coverage by the pool, coverage under health insurance or an insurance arrangement except that this exclusion shall not apply to a person who has such coverage but whose premiums have increased to three hundred percent or more of rates established by the board as applicable for individual standard risks;

(2) Any person who is at the time of pool application receiving health care benefits under section 208.151, RSMo;

(3) Any person having terminated coverage in the pool unless twelve months have elapsed since such termination;

(4) Any person on whose behalf the pool has paid out one million dollars in benefits;

(5) Inmates of public institutions and persons eligible for public programs;

(6) Any person whose medical condition which precludes other insurance coverage is directly due to alcohol or drug abuse or self-inflicted injury;

(7) Any person who is eligible for continuation or conversion of insurance coverage under 29 U.S.C. 1161 to 29 U.S.C. 1168, 42 U.S.C. 300bb-1 to 42 U.S.C. 300bb-8, sections 376.395 to 376.404, or section 376.428, except that this exclusion shall not apply to a person who has such coverage but whose premiums have increased to three hundred percent or more of rates established by the board as applicable for individual standard risks; or

(8) Any person who is eligible for Medicare coverage.

3. Any person who ceases to meet the eligibility requirements of this section may be terminated at the end of his policy period.

4. Any person whose health insurance coverage is involuntarily terminated for any reason other than nonpayment of premium or any person whose premiums have increased to three hundred percent or more of rates established by the board as applicable for individual standard risks, may apply for coverage under the plan. If such coverage is applied for within sixty days after the involuntary termination and the application is approved and if premiums are paid for the entire coverage period, the effective date of the coverage shall be the date of termination of the previous coverage.]

[376.968. The board shall select an insurer or insurers through a competitive bidding process to administer the pool. The board shall evaluate bids submitted based on criteria established by the board which shall include:

(1) The insurer's proven ability to handle individual accident and health insurance;

(2) The efficiency of the insurer's claim-paying procedures;

(3) An estimate of total charges for administering the plan;

(4) The insurer's ability to administer the pool in a cost-efficient manner.]

[376.970. 1. The administering insurer shall serve for a period of three years subject to removal for cause. At least one year prior to the expiration of each three-year period of service by an administering insurer, the board shall invite all insurers, including the current administering insurer, to submit bids to serve as the administering insurer for the succeeding three-year period. Selection of the administering insurer for the succeeding period shall be made at least six months prior to the end of the current three-year period.

2. The administering insurer shall:

(1) Perform all eligibility and administrative claim-payment functions relating to the pool;

(2) Establish a premium billing procedure for collection of premium from insured persons. Billings shall be made on a period basis as determined by the board;

(3) Perform all necessary functions to assure timely payment of benefits to covered persons under the pool including:

(a) Making available information relating to the proper manner of submitting a claim for benefits to the pool and distributing forms upon which submission shall be made;

(b) Evaluating the eligibility of each claim for payment by the pool;

(4) Submit regular reports to the board regarding the operation of the pool. The frequency, content and form of the report shall be determined by the board;

(5) Following the close of each calendar year, determine net written and earned premiums, the expense of administration, and the paid and incurred losses for the year and report this information to the board and the department on a form prescribed by the director;

(6) Be paid as provided in the plan of operation for its expenses incurred in the performance of its services.]

[376.973. 1. Following the close of each fiscal year, the pool administrator shall determine the net premiums (premiums less administrative expense allowances), the pool expenses of administration and the incurred losses for the year, taking into account investment income and other appropriate gains and losses. Health insurance premiums and benefits paid by an insurance arrangement that are less than an amount determined by the board to justify the cost of collection shall not be considered for purposes of determining assessments. The total cost of pool operation shall be the amount by which all program expenses, including pool expenses of administration, incurred losses for the year, and other appropriate losses exceeds all program revenues, including net premiums, investment income, and other appropriate gains.

2. Each insurer's assessment shall be determined by multiplying the total cost of pool operation by a fraction, the numerator of which equals that insurer's premium and subscriber contract charges for health insurance written in the state during the preceding calendar year and the denominator of which equals the total of all premiums, subscriber contract charges written in the state and one hundred ten percent of all claims paid by insurance arrangements in the state during the preceding calendar year; provided, however, that the assessment for each health maintenance organization shall be determined through the application of an equitable formula based upon the value of services provided in the preceding calendar year.

3. Each insurance arrangement's assessment shall be determined by multiplying the total cost of pool operation calculated under subsection 1 of this section by a fraction, the numerator of which equals one hundred ten percent of the benefits paid by that insurance arrangement on behalf of insureds in this state during the preceding calendar year and the denominator of which equals the total of all premiums, subscriber contract charges and one hundred ten percent of all benefits paid by insurance arrangements made on behalf of insureds in this state during the preceding calendar year. Insurance arrangements shall report to the board claims payments made in this state on an annual basis on a form prescribed by the director.

4. If assessments exceed actual losses and administrative expenses of the pool, the excess shall be held at interest and used by the board to offset future losses or to reduce pool premiums. As used in this subsection, "future losses" include reserves for incurred but not paid claims.]

[376.975. Each member's proportion of participation in the pool shall be determined annually by the board based on annual statements and other reports deemed necessary by the board and filed by the member with it. Any deficit incurred by the pool shall be recouped by assessments apportioned as provided in subsections 1, 2, and 3 of section 376.973 by the board among members. The amount of assessments incurred by each member of the pool shall be allowed as an offset against certain taxes, and shall be subject to certain limitations, as follows: Each pool member subject to chapter 148, RSMo, may deduct from premium taxes payable for any calendar year to the state any and all assessments paid for the same year pursuant to sections 376.960 to 376.989. All assessments, for a fiscal year, shall not exceed the net premium tax due and payable by such member in the previous year. If the assessment exceeds any premium tax due or payable in such year, the excess shall be a credit or offset carried forward against any premium tax due or payable in succeeding years until the excess is exhausted.]

[376.978. The director of revenue shall determine the difference between the amount of money the state treasurer, pursuant to sections 148.350 and 148.380, RSMo, is required to credit to the county foreign insurance tax fund under the provisions of sections 376.960 to 376.989 and the amount of money the state treasurer, pursuant to sections 148.350 and 148.380, RSMo, would be required to credit to the county foreign insurance tax fund if sections 376.960 to 376.989 were not law. If the director determines that sections 376.960 to 376.989 reduce the amount of money that will be credited to the county foreign insurance tax fund, then the director shall inform the state treasurer of such amount and, notwithstanding sections 148.350 and 148.380, RSMo, the state treasurer shall reimburse the county foreign insurance tax fund in an amount equal to such difference by reducing by the same amount the portion that would otherwise be credited to the general revenue fund.]

[376.980. Each pool member exempt from chapter 148, RSMo, shall be allowed to offset against any sales or use tax on purchases due, paid, or payable in the calendar year in which such assessments are made. Further, such assessment, for any fiscal year, shall not exceed one percent of nongroup premium income, exclusive of medicare supplement programs, received in the previous year. If the assessment exceeds the part of any sales tax or use tax due or payable in such year, the excess shall be a credit or offset carried forward against the part of any sales tax or use tax due or payable in succeeding years until the excess is exhausted. The director of revenue, in consultation with the board, shall promulgate and enforce reasonable rules and regulations and prescribe forms for the administration and enforcement of this law.]

[376.982. No rule or portion of a rule promulgated under the authority of this chapter shall become effective unless it has been promulgated pursuant to the provisions of section 536.024, RSMo.]

[376.984. The board may abate or defer, in whole or in part, the assessment of a member if, in the opinion of the board, payment of the assessment would endanger the ability of the member to fulfill its contractual obligations. In the event an assessment against a member is abated or deferred in whole or in part, the amount by which such assessment is abated or deferred may be assessed against the other members in a manner consistent with the basis for assessment set forth in subsections 1, 2, and 3 of section 376.973. The member receiving such abatement or deferment shall remain liable to the pool for the deficiency for four years.]

[376.986. 1. The pool shall offer major medical expense coverage to every person eligible for coverage under section 376.966. The coverage to be issued by the pool and its schedule of benefits, exclusions and other limitations, shall be established by the board with the advice and recommendations of the pool members, and such plan of pool coverage shall be submitted to the director for approval. The pool shall also offer coverage for drugs and supplies requiring a medical prescription and coverage for patient education services, to be provided at the direction of a physician, encompassing the provision of information, therapy, programs, or other services on an inpatient or outpatient basis, designed to restrict, control, or otherwise cause remission of the covered condition, illness or defect.

2. In establishing the pool coverage the board shall take into consideration the levels of health insurance provided in this state and medical economic factors as may be deemed appropriate, and shall promulgate benefit levels, deductibles, coinsurance factors, exclusions and limitations determined to be generally reflective of and commensurate with health insurance provided through a representative number of insurers in this state.

3. Premiums charged for pool coverage may not be unreasonable in relation to the benefits provided, the risk experience and the reasonable expenses of providing the coverage. Separate schedules of premium rates based on age, sex and geographical location may apply for individual risks.

4. The pool shall determine the standard risk rate by calculating the average individual standard rate charged by the five insurers with the largest number of individual contracts in force. In the event five insurers do not offer comparable coverage, the standard risk rate shall be established using reasonable actuarial techniques and shall reflect anticipated experience and expenses for such coverage. Initial rates for pool coverage shall not be less than one hundred fifty percent of rates established as applicable for individual standard risks. Subsequent rates shall be established to provide fully for the expected costs of claims including recovery of prior losses, expenses of operation, investment income of claim reserves, and any other cost factors subject to the limitations described herein. In no event shall pool rates exceed two hundred percent of rates applicable to individual standard risks. All rates and rate schedules shall be submitted to the director for approval.

5. Pool coverage established pursuant to this section shall provide an appropriate high and low deductible to be selected by the pool applicant. The deductibles and coinsurance factors may be adjusted annually in accordance with the medical component of the consumer price index.

6. Pool coverage shall exclude charges or expenses incurred during the first twelve months following the effective date of coverage as to any condition which, during the six-month period immediately preceding the effective date of coverage, had manifested itself in such a manner as would cause an ordinarily prudent person to seek diagnosis, care or treatment or for which medical advice, care or treatment was recommended or received as to such condition. Such preexisting condition exclusions shall be waived to the extent to which similar exclusions, if any, have been satisfied under any prior health insurance coverage which was involuntarily terminated, if that application for pool coverage is made not later than sixty days following such involuntary termination and, in such case, coverage in the pool shall be effective from the date on which such prior coverage was terminated.

7. Benefits otherwise payable under pool coverage shall be reduced by all amounts paid or payable through any other health insurance, or insurance arrangement, and by all hospital and medical expense benefits paid or payable under any workers' compensation coverage, automobile medical payment or liability insurance whether provided on the basis of fault or nonfault, and by any hospital or medical benefits paid or payable under or provided pursuant to any state or federal law or program except medicaid. The insurer or the pool shall have a cause of action against an eligible person for the recovery of the amount of benefits paid which are not for covered expenses. Benefits due from the pool may be reduced or refused as a setoff against any amount recoverable under this subsection.

8. Medical expenses shall include expenses for comparable benefits for those who rely solely on spiritual means through prayer for healing.]

[376.989. Neither the participation in the pool as members, the establishment of rates, forms or procedures, nor any other joint or collective action required or permitted by the provisions of sections 376.960 to 376.989 shall be the basis of any legal action, criminal or civil liability or penalty against the pool or any of its members.]

Section B. The repeal of sections 376.960, 376.961, 376.962, 376.964, 376.965, 376.966, 376.968, 376.970, 376.973, 376.975, 376.978, 376.980, 376.982, 376.984, 376.986, and 376.989, of this act shall be effective upon the notification to the revisor of statutes by the director of the department of insurance of establishment of common open enrollment periods for carriers doing business in this state as provided in section 379.940, RSMo.