California Health and Safety Code 1357.12 – Premiums for contracts offered or delivered by plans on or after the …
Premiums for contracts offered or delivered by plans on or after the effective date of this article shall be subject to the following requirements:
(a) (1) The premium for new business shall be determined for an eligible employee in a particular risk category after applying a risk adjustment factor to the plan‘s standard employee risk rates. The risk adjusted employee risk rate may not be more than 120 percent or less than 80 percent of the plan’s applicable standard employee risk rate until July 1, 1996. Effective July 1, 1996, this factor may not be more than 110 percent or less than 90 percent.
Terms Used In California Health and Safety Code 1357.12
- Contract: A legal written agreement that becomes binding when signed.
- Eligible employee: means either of the following:
California Health and Safety Code 1357
- In force business: means an existing health benefit plan contract issued by the plan to a small employer. See California Health and Safety Code 1357
- New business: means a health care service plan contract issued to a small employer that is not the plan's in force business. See California Health and Safety Code 1357
- plan: refers to health care service plans and specialized health care service plans. See California Health and Safety Code 1345
- Rating period: means the period for which premium rates established by a plan are in effect and shall be no less than six months. See California Health and Safety Code 1357
- Risk adjusted employee risk rate: means the rate determined for an eligible employee of a small employer in a particular risk category after applying the risk adjustment factor. See California Health and Safety Code 1357
- Risk adjustment factor: means the percentage adjustment to be applied equally to each standard employee risk rate for a particular small employer, based upon any expected deviations from standard cost of services. See California Health and Safety Code 1357
- Risk category: means the following characteristics of an eligible employee: age, geographic region, and family composition of the employee, plus the health benefit plan selected by the small employer. See California Health and Safety Code 1357
- Small employer: means either of the following:
California Health and Safety Code 1357
- Standard employee risk rate: means the rate applicable to an eligible employee in a particular risk category in a small employer group. See California Health and Safety Code 1357
(2) The premium charged a small employer for new business shall be equal to the sum of the risk adjusted employee risk rates.
(3) The standard employee risk rates applied to a small employer for new business shall be in effect for no less than six months.
(b) (1) The premium for in force business shall be determined for an eligible employee in a particular risk category after applying a risk adjustment factor to the plan’s standard employee risk rates. The risk adjusted employee risk rates may not be more than 120 percent or less than 80 percent of the plan’s applicable standard employee risk rate until July 1, 1996. Effective July 1, 1996, this factor may not be more than 110 percent or less than 90 percent. The factor effective July 1, 1996, shall apply to in force business at the earlier of either the time of renewal or July 1, 1997. The risk adjustment factor applied to a small employer may not increase by more than 10 percentage points from the risk adjustment factor applied in the prior rating period. The risk adjustment factor for a small employer may not be modified more frequently than every 12 months.
(2) The premium charged a small employer for in force business shall be equal to the sum of the risk adjusted employee risk rates. The standard employee risk rates shall be in effect for no less than six months.
(3) For a contract that a plan has discontinued offering, the risk adjustment factor applied to the standard employee risk rates for the first rating period of the new contract that the small employer elects to purchase shall be no greater than the risk adjustment factor applied in the prior rating period to the discontinued contract. However, the risk adjusted employee risk rate may not be more than 120 percent or less than 80 percent of the plan’s applicable standard employee risk rate until July 1, 1996. Effective July 1, 1996, this factor may not be more than 110 percent or less than 90 percent. The factor effective July 1, 1996, shall apply to in force business at the earlier of either the time of renewal or July 1, 1997. The risk adjustment factor for a small employer may not be modified more frequently than every 12 months.
(c) (1) For any small employer, a plan may, with the consent of the small employer, establish composite employee and dependent rates for either new business or renewal of in force business. The composite rates shall be determined as the average of the risk adjusted employee risk rates for the small employer, as determined in accordance with the requirements of subdivisions (a) and (b). The sum of the composite rates so determined shall be equal to the sum of the risk adjusted employee risk rates for the small employer.
(2) The composite rates shall be used for all employees and dependents covered throughout a rating period of no less than six months nor more than 12 months, except that a plan may reserve the right to redetermine the composite rates if the enrollment under the contract changes by more than a specified percentage during the rating period. Any redetermination of the composite rates shall be based on the same risk adjusted employee risk rates used to determine the initial composite rates for the rating period. If a plan reserves the right to redetermine the rates and the enrollment changes more than the specified percentage, the plan shall redetermine the composite rates if the redetermined rates would result in a lower premium for the small employer. A plan reserving the right to redetermine the composite rates based upon a change in enrollment shall use the same specified percentage to measure that change with respect to all small employers electing composite rates.
(Amended by Stats. 1996, Ch. 50, Sec. 1. Effective May 24, 1996.)