Committee Substitute for HB0032GUS

HOUSE HEALTH AND GOVERNMENT AFFAIRS COMMITTEE SUBSTITUTE FOR

HOUSE BILL 32

49th legislature - STATE OF NEW MEXICO - second session, 2010

AN ACT

RELATING TO HEALTH INSURANCE; ENACTING A NEW SECTION OF CHAPTER 59A, ARTICLE 22 NMSA 1978 TO PROVIDE FOR DISCLOSURES UPON APPLICATIONS FOR COVERAGE BY BUSINESS GROUPS OF ONE IN THE INDIVIDUAL MARKET; AMENDING AND ENACTING SECTIONS OF THE SMALL GROUP RATE AND RENEWABILITY ACT TO PROVIDE FOR THE PURCHASE OF COVERAGE BY BUSINESS GROUPS OF ONE; AMENDING AND ENACTING SECTIONS OF THE HEALTH MAINTENANCE ORGANIZATION LAW TO PROVIDE FOR DISCLOSURES UPON APPLICATIONS FOR INDIVIDUAL CONTRACTS BY BUSINESS GROUPS OF ONE; AMENDING AND ENACTING SECTIONS OF THE NONPROFIT HEALTH CARE PLAN LAW TO PROVIDE FOR DISCLOSURES UPON APPLICATIONS FOR INDIVIDUAL CONTRACTS BY BUSINESS GROUPS OF ONE.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF NEW MEXICO:

Section 1. A new section of Chapter 59A, Article 22 NMSA 1978 is enacted to read:

"[NEW MATERIAL] DETERMINATION OF ELIGIBILITY FOR COVERAGE AS BUSINESS GROUP OF ONE.--

A. If an individual applies for coverage under an individual contract, the carrier must make an initial determination whether the individual fits the definition of a business group of one. If a business group of one is accepted for coverage under an individual policy, the carrier shall provide the business group of one with a disclosure form, as approved by the superintendent, stating that, by purchasing an individual policy instead of a small group policy, the business group of one gives up what would otherwise be that business group of one's right to purchase coverage in the small group market for a period of three years after the date the individual health benefit plan is purchased, unless a small employer carrier voluntarily permits that business group of one to purchase small group coverage within that three-year period. The disclosure form shall briefly describe the cost differentials and factors used to set rates for the individual policy being purchased in comparison with the factors used to set rates for a business group of one in the small group market.

B. For purposes of determining whether an applicant meets the requirement of the definition of a business group of one, a carrier may require an applicant to submit to the carrier any of the following forms of documentation applicable to the applicant's current business or employment:

(1) employment-related tax and withholding information, including but not limited to a federal internal revenue service form 1099 or successor to that form; or

(2) relevant portions of the federal and state income tax returns or a certification by an attorney or certified public accountant that the applicant has filed federal and state tax returns as a business.

C. As used in this section:

(1) "business group of one" means an individual, a sole proprietor or a single full-time employee of an S corporation, C corporation, nonprofit corporation, limited liability company or partnership that:

(a) has carried on significant business activity for a period of at least one year prior to application for coverage;

(b) has gross income as indicated on federal internal revenue service form 1040, schedule C, F or SE or successor forms; and

(c) has gross income from which that individual, sole proprietor or single full-time employee has derived substantial income for one year out of the most recent consecutive three-year period;

(2) "C corporation" means a corporation that is not an S corporation in a taxable year;

(3) "nonprofit corporation" means a corporation of which no part of the income or profit is distributable to its members, directors or officers;

(4) "S corporation" means a small business corporation that makes an election in a taxable year to be taxed pursuant to Section 1362(a) of the federal Internal Revenue Code of 1986; and

(5) "substantial income" means income derived from the business activities of a business group of one that is sufficient to pay for annual health insurance premiums for that business group of one."

Section 2. Section 59A-23C-3 NMSA 1978 (being Laws 1991, Chapter 153, Section 3, as amended) is amended to read:

"59A-23C-3. DEFINITIONS.--As used in the Small Group Rate and Renewability Act:

A. "actuarial certification" means a written statement by a member of the American academy of actuaries or another individual acceptable to the superintendent that a small employer carrier is in compliance with the provisions of Section 59A-23C-5 NMSA 1978, based upon the person's examination, including a review of the appropriate records and of the actuarial assumptions and methods used by the carrier in establishing premium rates for applicable health benefit plans;

B. "base premium rate" means, for each class of business as to a rating period, the lowest premium rate charged under a 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;

C. "business group of one" means an individual, a sole proprietor or a single full-time employee of an S corporation, C corporation, nonprofit corporation, limited liability company or partnership that:

(1) has carried on significant business activity for a period of at least one year prior to application for coverage;

(2) has gross income as indicated on federal internal revenue service form 1040, schedule C, F or SE or successor forms; and

(3) has gross income from which that individual, sole proprietor or single full-time employee has derived substantial income for one year out of the most recent consecutive three-year period;

D. "C corporation" means a corporation that is not an S corporation in a taxable year;

[C.] E. "carrier" means any person who provides health insurance in this state. For the purposes of the Small Group Rate and Renewability Act, "carrier" or "insurer" includes a licensed insurance company, a licensed fraternal benefit society, a prepaid hospital or medical service plan, a health maintenance organization, a nonprofit health care organization, a multiple employer welfare arrangement or any other person providing a plan of health insurance subject to state insurance regulation;

[D.] F. "case characteristics" means demographic or other relevant characteristics of a small employer, as determined by a small employer carrier, that are considered by the carrier in the determination of premium rates for the small employer, but "case characteristics" does not include claim experience, health status and duration of coverage since issue;

[E.] G. "class of business" means all small employers as shown on the records of the small employer carrier. A separate class of business may be established by the small employer carrier on the basis that the applicable health benefit plans have been acquired from another small employer carrier as a distinct grouping of plans;

[F.] H. "creditable coverage" means, with respect to an individual, coverage of the individual pursuant to:

(1) a group health plan;

(2) health insurance coverage;

(3) Part A or Part B of Title 18 of the federal Social Security Act;

(4) Title 19 of the Social Security Act except coverage consisting solely of benefits pursuant to Section 1928 of that title;

(5) 10 USCA Chapter 55;

(6) a medical care program of the Indian health service or of an Indian nation, tribe or pueblo;

(7) the Comprehensive Health Insurance Pool Act;

(8) a health plan offered pursuant to 5 USCA Chapter 89;

(9) a public health plan as defined in federal regulations; or

(10) a health benefit plan offered pursuant to Section 5 (e) of the federal Peace Corps Act;

[G.] I. "department" means the department of insurance;

[H.] J. "group health plan" means an employee welfare benefit plan as defined Section 3(1) of the federal Employee Retirement Income Security Act of 1974 to the extent that the plan provides medical care and including items and services paid for as medical care to employees or their dependents as defined under the terms of the plan directly or through insurance, reimbursement or otherwise;

[I.] K. "health benefit plan" or "plan" means any hospital or medical expense-incurred policy or certificate, hospital or medical service plan contract or health maintenance organization subscriber contract. "Health benefit plan" does not include accident-only, credit, dental or disability income insurance, medicare supplement coverage, coverage issued as a supplement to liability insurance, workers' compensation or similar insurance or automobile medical-payment insurance;

[J.] L. "index rate" means, for each class of business for small employers with similar case characteristics, the arithmetic average of the applicable base premium rate and the corresponding highest premium rate;

[K.] M. "late enrollee" means, with respect to coverage under a group health plan, a participant or beneficiary who enrolls under the plan other than during:

(1) the first period in which the individual is eligible to enroll under the plan; or

(2) a special enrollment period pursuant to Sections [8 and 9 of the Health Insurance Portability Act] 59A-23E-8 and 59A-23E-9 NMSA 1978;

[L.] N. "new business premium rate" means, for each class of business as to a rating period, the premium rate 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;

O. "nonprofit corporation" means a corporation of which no part of the income or profit is distributable to its members, directors or officers;

[M.] P. "rating period" means the calendar period for which premium rates established by a small employer carrier are assumed to be in effect, as determined by the small employer carrier;

Q. "S corporation" means a small business corporation that makes an election in a taxable year to be taxed pursuant to Section 1362(a) of the federal Internal Revenue Code of 1986;

[N.] R. "small employer" means any person, firm, corporation, partnership or association actively engaged in business who, on at least fifty percent of its working days during either of the two preceding years, employed no [less] fewer than two and no more than fifty eligible employees; provided that:

(1) in determining the number of eligible employees, the spouse or dependent of an employee may, at the employer's discretion, be counted as a separate employee; (2) companies that are affiliated companies or that are eligible to file a combined tax return for purposes of state income taxation shall be considered one employer; and

(3) in the case of an employer that was not in existence throughout a preceding calendar year, the determination of whether the employer is a small or large employer shall be based on the average number of employees that it is reasonably expected to employ on working days in the current calendar year;

[O.] S. "small employer carrier" means any insurer that offers health benefit plans covering the employees of a small employer; [and]

T. "substantial income" means income derived from the business activities of a business group of one that is sufficient to pay for annual health insurance premiums for that business group of one; and

[P.] U. "superintendent" means the superintendent of insurance."

Section 3. A new section of the Small Group Rate and Renewability Act is enacted to read:

"[NEW MATERIAL] DETERMINATION OF ELIGIBILITY FOR COVERAGE AS BUSINESS GROUP OF ONE.--For purposes of determining whether an applicant meets the requirement of the definition of a business group of one, a carrier may require an applicant to submit to the carrier any of the following forms of documentation applicable to the applicant's current business or employment:

A. employment-related tax and withholding information, including but not limited to a federal internal revenue service form 1099 or successor to that form; or

B. relevant portions of federal and state tax returns or a certification by an attorney or certified public accountant that federal and state tax returns have been filed as a business."

Section 4. A new section of the Small Group Rate and Renewability Act is enacted to read:

"[NEW MATERIAL] BUSINESS GROUP OF ONE--ISSUANCE DURING OPEN ENROLLMENT OR AS ELIGIBLE LATE ENROLLEE.--A small employer carrier is not required to issue coverage to a business group of one unless the business group of one applies for coverage during an open enrollment period, which is defined as the thirty-one days following the birth date of a person who qualifies as the business group of one, or:

A. the business group of one was covered under a group health plan or had health insurance coverage at the time coverage was previously offered to that business group of one; B. the business group of one stated in writing at the time coverage was offered that coverage under a group health plan or health insurance coverage was the reason for declining enrollment, but only if the plan sponsor or issuer required such a statement at the time and provided the individual with notice of that requirement and the consequences of the requirement at the time;

C. the business group of one's coverage described in Subsection A of this section was pursuant to a continuation provision pursuant to:

(1) the federal Consolidated Omnibus Budget Reconciliation Act of 1985 and the coverage under that provision was exhausted; or

(2) Section 59A-18-16 NMSA 1978 and coverage under that provision was exhausted; and

D. under the terms of the plan, the business group of one requested enrollment not later than thirty days after the date of exhaustion of coverage described in Paragraph (1) of Subsection C of this section or termination of coverage or employer contribution described in Paragraph (2) of Subsection C of this section."

Section 5. A new section of the Small Group Rate and Renewability Act is enacted to read:

"[NEW MATERIAL] BUSINESS GROUP OF ONE--SPECIAL ENROLLMENT PERIODS FOR DEPENDENT BENEFICIARIES.--

A. A small employer carrier shall provide for a dependent special enrollment period described in Subsection B of this section during which a person may be enrolled under the plan as a dependent of an individual meeting the definition of a business group of one, and in the case of the birth or adoption of a child, the spouse of the individual meeting the definition of a business group of one may be enrolled as a dependent of the individual meeting the definition of a business group of one if the spouse is otherwise eligible for coverage, if:

(1) the plan makes coverage available to a dependent of an individual meeting the definition of a business group of one;

(2) the individual meeting the definition of a business group of one is a participant under the plan or has met any waiting period applicable to becoming a participant and is eligible to be enrolled under the plan but for a failure to enroll during a previous enrollment period; and

(3) the applicant for coverage as a dependent has become the dependent of the individual meeting the definition of a business group of one through marriage, birth, adoption or placement for adoption.

B. A dependent special enrollment period pursuant to this subsection shall be for a period of not less than thirty days and shall begin on the later of:

(1) the date dependent coverage is made available; or

(2) the date of the marriage, birth, adoption or placement for adoption described in Subsection A of this section.

C. If an individual meeting the definition of a business group of one seeks to enroll a person as a dependent during the first thirty days of a dependent special enrollment period, the coverage of the dependent becomes effective:

(1) in the case of marriage, not later than the first day of the first month beginning after the date the completed request for enrollment is received;

(2) in the case of birth, as of the date of the birth; or

(3) in the case of adoption or placement for adoption, the date of the adoption or placement."

Section 6. A new section of the Small Group Rate and Renewability Act is enacted to read:

"[NEW MATERIAL] PERMITTED REJECTION OF APPLICATION WHEN A BUSINESS GROUP OF ONE IS COVERED AS AN INDIVIDUAL WITHIN THE PAST THIRTY DAYS.--A small employer carrier may reject an application for coverage under a small group plan a business group of one that is otherwise eligible for small group coverage if, at the time of application for small group coverage, the small employer carrier determines that the business group of one has in place, or within the immediately preceding thirty days has had in place, an individual health insurance policy or plan of coverage and that the individual health insurance policy or plan of coverage has been in place for less than three years."

Section 7. Section 59A-46-2 NMSA 1978 (being Laws 1993, Chapter 266, Section 2, as amended) is amended to read:

"59A-46-2. DEFINITIONS.--As used in the Health Maintenance Organization Law:

A. "basic health care services":

(1) means medically necessary services consisting of preventive care, emergency care, inpatient and outpatient hospital and physician care, diagnostic laboratory, diagnostic and therapeutic radiological services and services of pharmacists and pharmacist clinicians; but

(2) does not include mental health services or services for alcohol or drug abuse, dental or vision services or long-term rehabilitation treatment;

B. "business group of one" means an individual, a sole proprietor or a single full-time employee of an S corporation, C corporation, nonprofit corporation, limited liability company or partnership that:

(1) has carried on significant business activity for a period of at least one year prior to application for coverage;

(2) has gross income as indicated on federal internal revenue service form 1040, schedule C, F or SE or successor forms; and

(3) has gross income from which that individual, sole proprietor or single full-time employee has derived substantial income for one year out of the most recent consecutive three-year period;

C. "C corporation" means a corporation that is not an S corporation in a taxable year;

[B.] D. "capitated basis" means fixed per member per month payment or percentage of premium payment wherein the provider assumes the full risk for the cost of contracted services without regard to the type, value or frequency of services provided and includes the cost associated with operating staff model facilities;

[C.] E. "carrier" means a health maintenance organization, an insurer, a nonprofit health care plan or other entity responsible for the payment of benefits or provision of services under a group contract;

[D.] F. "copayment" means an amount an enrollee must pay in order to receive a specific service that is not fully prepaid;

[E.] G. "deductible" means the amount an enrollee is responsible to pay out of pocket before the health maintenance organization begins to pay the costs associated with treatment;

[F.] H. "enrollee" means an individual who is covered by a health maintenance organization;

[G.] I. "evidence of coverage" means a policy, contract or certificate showing the essential features and services of the health maintenance organization coverage that is given to the subscriber by the health maintenance organization or by the group contract holder;

[H.] J. "extension of benefits" means the continuation of coverage under a particular benefit provided under a contract or group contract following termination with respect to an enrollee who is totally disabled on the date of termination;

[I.] K. "grievance" means a written complaint submitted in accordance with the health maintenance organization's formal grievance procedure by or on behalf of the enrollee regarding any aspect of the health maintenance organization relative to the enrollee;

[J.] L. "group contract" means a contract for health care services that by its terms limits eligibility to members of a specified group and may include coverage for dependents;

[K.] M. "group contract holder" means the person to whom a group contract has been issued;

[L.] N. "health care services" means any services included in the furnishing to any individual of medical, mental, dental, pharmaceutical or optometric care or hospitalization or nursing home care or incident to the furnishing of such care or hospitalization, as well as the furnishing to any person of any and all other services for the purpose of preventing, alleviating, curing or healing human physical or mental illness or injury;

[M.] O. "health maintenance organization" means any person who undertakes to provide or arrange for the delivery of basic health care services to enrollees on a prepaid basis, except for enrollee responsibility for copayments or deductibles;

[N.] P. "health maintenance organization agent" means a person who solicits, negotiates, effects, procures, delivers, renews or continues a policy or contract for health maintenance organization membership or who takes or transmits a membership fee or premium for such a policy or contract, other than for [himself] the person, or a person who advertises or otherwise [holds himself out] makes representation to the public as such;

[O.] Q. "individual contract" means a contract for health care services issued to and covering an individual and [it] may include dependents of the subscriber;

[P.] R. "insolvent" or "insolvency" means that the organization has been declared insolvent and placed under an order of liquidation by a court of competent jurisdiction;

[Q.] S. "managed hospital payment basis" means agreements in which the financial risk is related primarily to the degree of utilization rather than to the cost of services;

[R.] T. "net worth" means the excess of total admitted assets over total liabilities, but the liabilities shall not include fully subordinated debt;

U. "nonprofit corporation" means a corporation of which no part of the income or profit is distributable to its members, directors or officers;

[S.] V. "participating provider" means a provider as defined in Subsection [U] X of this section who, under an express contract with the health maintenance organization or with its contractor or subcontractor, has agreed to provide health care services to enrollees with an expectation of receiving payment, other than copayment or deductible, directly or indirectly from the health maintenance organization;

[T.] W. "person" means an individual or other legal entity;

[U.] X. "provider" means a physician, pharmacist, pharmacist clinician, hospital or other person licensed or otherwise authorized to furnish health care services;

[V.] Y. "replacement coverage" means the benefits provided by a succeeding carrier;

Z. "S corporation" means a small business corporation that makes an election in a taxable year to be taxed pursuant to Section 1362(a) of the federal Internal Revenue Code of 1986;

[W.] AA. "subscriber" means an individual whose employment or other status, except family dependency, is the basis for eligibility for enrollment in the health maintenance organization or, in the case of an individual contract, the person in whose name the contract is issued;

BB. "substantial income" means income derived from the business activities of a business group of one that is sufficient to pay for annual health insurance premiums for that business group of one;

[X.] CC. "uncovered expenditures" means the costs to the health maintenance organization for health care services that are the obligation of the health maintenance organization, for which an enrollee may also be liable in the event of the health maintenance organization's insolvency and for which no alternative arrangements have been made that are acceptable to the superintendent;

[Y.] DD. "pharmacist" means a person licensed as a pharmacist pursuant to the Pharmacy Act; and

[Z.] EE. "pharmacist clinician" means a pharmacist who exercises prescriptive authority pursuant to the Pharmacist Prescriptive Authority Act."

Section 8. A new section of the Health Maintenance Organization Law is enacted to read:

"[NEW MATERIAL] DISCLOSURE TO BUSINESS GROUPS OF ONE REGARDING INDIVIDUAL CONTRACTS--DETERMINATION OF ELIGIBILITY FOR COVERAGE AS BUSINESS GROUP OF ONE.--

A. If an individual applies for coverage under an individual contract, the carrier must make an initial determination whether the individual meets the definition of a business group of one. If a business group of one is accepted for coverage under an individual contract, the carrier shall provide the business group of one with a disclosure form, as approved by the superintendent, stating that, by purchasing an individual policy instead of a group health maintenance contract, the business group of one's gives up what would otherwise be that business group of one's right to purchase coverage in the small group market for a period of three years after the date the individual contract is purchased, unless a carrier voluntarily permits that business group of one to purchase a group health maintenance contract within that three-year period. The disclosure form shall briefly describe the cost differentials and factors used to set rates for the individual contract being purchased in comparison with the factors used to set rates for a business group of one in the small group market.

(1) employment-related tax and withholding information, including but not limited to a federal internal revenue service form 1099 or successor to that form; or

Section 9. Section 59A-47-3 NMSA 1978 (being Laws 1984, Chapter 127, Section 879.1, as amended) is amended to read:

"59A-47-3. DEFINITIONS.--As used in [Chapter 59A, Article 47 NMSA 1978] the Nonprofit Health Care Plan Law:

A. "health care" means the treatment of persons for the prevention, cure or correction of any illness or physical or mental condition, including optometric services;

B. "item of health care" includes any services or materials used in health care;

C. "health care expense payment" means a payment for health care to a purveyor on behalf of a subscriber, or such a payment to the subscriber;

D. "purveyor" means a person who furnishes any item of health care and charges for that item;

E. "service benefit" means a payment that the purveyor has agreed to accept as payment in full for health care furnished the subscriber;

F. "indemnity benefit" means a payment that the purveyor has not agreed to accept as payment in full for health care furnished the subscriber;

G. "subscriber" means any individual who, because of a contract with a health care plan entered into by or for the individual, is entitled to have health care expense payments made on the individual's behalf or to the individual by the health care plan;

H. "underwriting manual" means the health care plan's written criteria, approved by the superintendent, that defines the terms and conditions under which subscribers may be selected. The underwriting manual may be amended from time to time, but amendment will not be effective until approved by the superintendent. The superintendent shall notify the health care plan filing the underwriting manual or the amendment thereto of the superintendent's approval or disapproval thereof in writing within thirty days after filing or within sixty days after filing if the superintendent shall so extend the time. If the superintendent fails to act within such period, the filing shall be deemed to be approved;

I. "acquisition expenses" includes all expenses incurred in connection with the solicitation and enrollment of subscribers;

J. "administration expenses" means all expenses of the health care plan other than the cost of health care expense payments and acquisition expenses;

K. "health care plan" means a nonprofit corporation authorized by the superintendent to enter into contracts with subscribers and to make health care expense payments;

L. "agent" means a person appointed by a health care plan authorized to transact business in this state to act as its representative in any given locality for soliciting health care policies and other related duties as may be authorized;

M. "solicitor" means a person employed by the licensed agent of a health care plan for the purpose of soliciting health care policies and other related duties in connection with the handling of the business of the agent as may be authorized and paid for the person's services either on a commission basis or salary basis or part by commission and part by salary;

N. "chiropractor" means any person holding a license provided for in the Chiropractic Physician Practice Act;

O. "doctor of oriental medicine" means any person licensed as a doctor of oriental medicine under the Acupuncture and Oriental Medicine Practice Act;

P. "pharmacist" means a person licensed as a pharmacist pursuant to the Pharmacy Act; [and]

Q. "pharmacist clinician" means a pharmacist who exercises prescriptive authority pursuant to the Pharmacist Prescriptive Authority Act;

R. "business group of one" means an individual, a sole proprietor or a single full-time employee of an S corporation, C corporation, nonprofit corporation, limited liability company or partnership that:

(1) has carried on significant business activity for a period of at least one year prior to application for coverage;

(2) has gross income as indicated on federal internal revenue service form 1040, schedule C, F or SE or successor forms; and

(3) has gross income from which that individual, sole proprietor or single full-time employee has derived substantial income for one year out of the most recent consecutive three-year period;

S. "C corporation" means a corporation that is not an S corporation in a taxable year;

T. "nonprofit corporation" means a corporation of which no part of the income or profit is distributable to its members, directors or officers;

U. "S corporation" means a small business corporation that makes an election in a taxable year to be taxed pursuant to Section 1362(a) of the federal Internal Revenue Code of 1986; and

V. "substantial income" means income derived from the business activities of a business group of one that is sufficient to pay for annual health insurance premiums for that business group of one."

Section 10. A new section of Chapter 59A, Article 47 NMSA 1978 is enacted to read:

"[NEW MATERIAL] DETERMINATION OF ELIGIBILITY FOR COVERAGE AS BUSINESS GROUP OF ONE.--

A. If an individual applies for coverage under an individual contract, the health care plan must make an initial determination whether the individual may be a business group of one. If a business group of one is accepted for coverage under an individual contract, the health care plan shall provide the business group of one with a disclosure form, as approved by the superintendent, stating that, by purchasing an individual contract instead of a small group contract, the business group of one gives up what would otherwise be that business group of one's right to purchase coverage in the small group market for a period of three years after the date the individual contract is purchased, unless a health care plan voluntarily permits that business group of one to purchase a small group contract within that three-year period. The disclosure form shall briefly describe the cost differentials and factors used to set rates for the individual contract being purchased in comparison with the factors used to set rates for a business group of one in the small group market.

B. For purposes of determining whether an applicant meets the requirement of the definition of a business group of one, a health care plan may require an applicant to submit to the health care plan any of the following forms of documentation applicable to the applicant's current business or employment:

(1) employment-related tax and withholding information, including but not limited to a federal internal revenue service form 1099 or successor to that form; or

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