II 109th CONGRESS 1st Session S. 1015 IN THE SENATE OF THE UNITED STATES May 12, 2005 Mr. DeMint introduced the following bill; which was read twice and referred to the Committee on Health, Education, Labor, and Pensions A BILL To amend the Public Health Service Act to provide for cooperative governing of individual health insurance coverage offered in interstate commerce.
1.
Short title
This Act may be cited as Health Care Choice Act of 2005.
2.
Specification of constitutional authority for enactment of law
This Act is enacted pursuant to the power granted Congress under article I, section 8, clause 3, of the United States Constitution.
3.
Findings
Congress finds the following: (1)The application of numerous and significant variations in State law impacts the ability of insurers to offer, and individuals to obtain, affordable individual health insurance coverage, thereby impeding commerce in individual health insurance coverage. (2)Individual health insurance coverage is increasingly offered through the Internet, other electronic means, and by mail, all of which are inherently part of interstate commerce. (3)In response to these issues, it is appropriate to encourage increased efficiency in the offering of individual health insurance coverage through a collaborative approach by the States in regulating this coverage. (4)The establishment of risk-retention groups has provided a successful model for the sale of insurance across State lines, as the acts establishing those groups allow insurance to be sold in multiple States but regulated by a single State.
4.
Cooperative governing of individual health insurance coverage
(a)
In general
Title XXVII of the Public Health Service Act (42 U.S.C. 300gg et seq.) is amended by adding at the end the following new part: D
Cooperative governing of individual health insurance coverage
2795.
Definitions
In this part: (1)
Primary State
The term primary State means, with respect to individual health insurance coverage offered by a health insurance issuer, the State designated by the issuer as the State whose covered laws shall govern the health insurance issuer in the sale of such coverage under this part. An issuer, with respect to a particular policy, may only designate one such State as its primary State with respect to all such coverage it offers. Such an issuer may not change the designated primary State with respect to individual health insurance coverage once the policy is issued, except that such a change may be made upon renewal of the policy. With respect to such designated State, the issuer is deemed to be doing business in that State. (2)
Secondary State
The term secondary State means, with respect to individual health insurance coverage offered by a health insurance issuer, any State that is not the primary State. In the case of a health insurance issuer that is selling a policy in, or to a resident of, a secondary State, the issuer is deemed to be doing business in that secondary State. (3)
Health insurance issuer
The term health insurance issuer has the meaning given such term in section 2791(b)(2), except that such an issuer must be licensed in the primary State and be qualified to sell individual health insurance coverage in that State. (4)
Individual health insurance coverage
The term individual health insurance coverage means health insurance coverage offered in the individual market, as defined in section 2791(e)(1). (5)
Applicable State authority
The term applicable State authority means, with respect to a health insurance issuer in a State, the State insurance commissioner or official or officials designated by the State to enforce the requirements of this title for the State with respect to the issuer. (6)
Hazardous financial condition
The term hazardous financial condition means that, based on its present or reasonably anticipated financial condition, a health insurance issuer is unlikely to be able— (A)to meet obligations to policyholders with respect to known claims and reasonably anticipated claims; or (B)to pay other obligations in the normal course of business. (7)
Covered laws
The term covered laws means the laws, rules, regulations, agreements, and orders governing the insurance business pertaining to— (A)individual health insurance coverage issued by a health insurance issuer; (B)the offer, sale, and issuance of individual health insurance coverage to an individual; and (C)the provision to an individual in relation to individual health insurance coverage of— (i)health care and insurance related services; (ii)management, operations, and investment activities of a health insurance issuer; and (iii)loss control and claims administration for a health insurance issuer with respect to liability for which the issuer provides insurance. (8)
State
The term State means only the 50 States and the District of Columbia. (9)
Unfair claims settlement practices
The term unfair claims settlement practices means only the following practices: (A)Knowingly misrepresenting to claimants and insured individuals relevant facts or policy provisions relating to coverage at issue. (B)Failing to acknowledge with reasonable promptness pertinent communications with respect to claims arising under policies. (C)Failing to adopt and implement reasonable standards for the prompt investigation and settlement of claims arising under policies. (D)Failing to effectuate prompt, fair, and equitable settlement of claims submitted in which liability has become reasonably clear. (E)Refusing to pay claims without conducting a reasonable investigation. (F)Failing to affirm or deny coverage of claims within a reasonable period of time after having completed an investigation related to those claims. (10)
Fraud and abuse
The term fraud and abuse means an act or omission committed by a person who, knowingly and with intent to defraud, commits, or conceals any material information concerning, one or more of the following: (A)Presenting, causing to be presented or preparing with knowledge or belief that it will be presented to or by an insurer, a reinsurer, broker or its agent, false information as part of, in support of or concerning a fact material to one or more of the following: (i)An application for the issuance or renewal of an insurance policy or reinsurance contract. (ii)The rating of an insurance policy or reinsurance contract. (iii)A claim for payment or benefit pursuant to an insurance policy or reinsurance contract. (iv)Premiums paid on an insurance policy or reinsurance contract. (v)Payments made in accordance with the terms of an insurance policy or reinsurance contract. (vi)A document filed with the commissioner or the chief insurance regulatory official of another jurisdiction. (vii)The financial condition of an insurer or reinsurer. (viii)The formation, acquisition, merger, reconsolidation, dissolution or withdrawal from one or more lines of insurance or reinsurance in all or part of a State by an insurer or reinsurer. (ix)The issuance of written evidence of insurance. (x)The reinstatement of an insurance policy. (B)Solicitation or acceptance of new or renewal insurance risks on behalf of an insurer reinsurer or other person engaged in the business of insurance by a person who knows or should know that the insurer or other person responsible for the risk is insolvent at the time of the transaction. (C)Transaction of the business of insurance in violation of laws requiring a license, certificate of authority or other legal authority for the transaction of the business of insurance. (D)Attempt to commit, aiding or abetting in the commission of, or conspiracy to commit the acts or omissions specified in this paragraph.
2796.
Application of law
(a)
In general
The covered laws of the primary State shall apply to individual health insurance coverage offered by a health insurance issuer in the primary State and in any secondary State, but only if the coverage and issuer comply with the conditions of this section with respect to the offering of coverage in any secondary State. (b)
Exemptions from covered laws in a secondary State
Except as provided in this section, a health insurance issuer with respect to its offer, sale, renewal, and issuance of individual health insurance coverage in any secondary State is exempt from any covered laws of the secondary State (and any rules, regulations, agreements, or orders sought or issued by such State under or related to such covered laws) to the extent that such laws would— (1)make unlawful, or regulate, directly or indirectly, the operation of the health insurance issuer operating in the secondary State, except that any secondary State may require such an issuer— (A)to pay, on a nondiscriminatory basis, applicable premium and other taxes (including high risk pool assessments) which are levied on insurers and surplus lines insurers, brokers, or policyholders under the laws of the State; (B)to register with and designate the State insurance commissioner as its agent solely for the purpose of receiving service of legal documents or process; (C)to submit to an examination of its financial condition by the State insurance commissioner in any State in which the issuer is doing business to determine the issuer’s financial condition, if— (i)the State insurance commissioner of the primary State has not done an examination within the period recommended by the National Association of Insurance Commissioners; and (ii)any such examination is conducted in accordance with the examiners’ handbook of the National Association of Insurance Commissioners and is coordinated to avoid unjustified duplication and unjustified repetition; (D)to comply with a lawful order issued— (i)in a delinquency proceeding commenced by the State insurance commissioner if there has been a finding of financial impairment under subparagraph (C); or (ii)in a voluntary dissolution proceeding; (E)to comply with an injunction issued by a court of competent jurisdiction, upon a petition by the State insurance commissioner alleging that the issuer is in hazardous financial condition; (F)to participate, on a nondiscriminatory basis, in any insurance insolvency guaranty association or similar association to which a health insurance issuer in the State is required to belong; (G)to comply with any State law regarding fraud and abuse (as defined in section 2795(10)), except that if the State seeks an injunction regarding the conduct described in this subparagraph, such injunction must be obtained from a court of competent jurisdiction; or (H)to comply with any State law regarding unfair claims settlement practices (as defined in section 2795(9)); (2)require any individual health insurance coverage issued by the issuer to be countersigned by an insurance agent or broker residing in that Secondary State; or (3)otherwise discriminate against the issuer issuing insurance in both the primary State and in any secondary State. (c)
Clear and conspicuous disclosure
A health insurance issuer shall provide the following notice, in 12-point bold type, in any insurance coverage offered in a secondary State under this part by such a health insurance issuer and at renewal of the policy, with the 5 blank spaces therein being appropriately filled with the name of the health insurance issuer, the name of primary State, the name of the secondary State, the name of the secondary State, and the name of the secondary State, respectively, for the coverage concerned: ‘This policy is issued by _____ and is governed by the laws and regulations of the State of _____, and it has met all the laws of that State as determined by that State’s Department of Insurance. This policy may be less expensive than others because it is not subject to all of the insurance laws and regulations of the State of _____, including coverage of some services or benefits mandated by the law of the State of _____. Additionally, this policy is not subject to all of the consumer protection laws or restrictions on rate changes of the State of _____. As with all insurance products, before purchasing this policy, you should carefully review the policy and determine what health care services the policy covers and what benefits it provides, including any exclusions, limitations, or conditions for such services or benefits.’.(d)
Prohibition on certain reclassifications and premium increases
(1)
In general
For purposes of this section, a health insurance issuer that provides individual health insurance coverage to an individual under this part in a primary or secondary State may not upon renewal— (A)move or reclassify the individual insured under the health insurance coverage from the class such individual is in at the time of issue of the contract based on the health-status related factors of the individual; or (B)increase the premiums assessed the individual for such coverage based on a health status-related factor or change of a health status-related factor or the past or prospective claim experience of the insured individual. (2)
Construction
Nothing in paragraph (1) shall be construed to prohibit a health insurance issuer— (A)from terminating or discontinuing coverage or a class of coverage in accordance with subsections (b) and (c) of section 2742; (B)from raising premium rates for all policy holders within a class based on claims experience; (C)from changing premiums or offering discounted premiums to individuals who engage in wellness activities at intervals prescribed by the issuer, if such premium changes or incentives— (i)are disclosed to the consumer in the insurance contract; (ii)are based on specific wellness activities that are not applicable to all individuals; and (iii)are not obtainable by all individuals to whom coverage is offered; (D)from reinstating lapsed coverage; or (E)from retroactively adjusting the rates charged an individual insured individual if the initial rates were set based on material misrepresentation by the individual at the time of issue. (e)
Prior offering of policy in primary State
A health insurance issuer may not offer for sale individual health insurance coverage in a secondary State unless that coverage is currently offered for sale in the primary State. (f)
Licensing of agents or brokers for health insurance issuers
Any State may require that a person acting, or offering to act, as an agent or broker for a health insurance issuer with respect to the offering of individual health insurance coverage obtain a license from that State, except that a State many not impose any qualification or requirement which discriminates against a nonresident agent or broker. (g)
Documents for submission to State insurance commissioner
Each health insurance issuer issuing individual health insurance coverage in both primary and secondary States shall submit— (1)to the insurance commissioner of each State in which it intends to offer such coverage, before it may offer individual health insurance coverage in such State— (A)a copy of the plan of operation or feasibility study or any similar statement of the policy being offered and its coverage (which shall include the name of its primary State and its principal place of business); (B)written notice of any change in its designation of its primary State; and (C)written notice from the issuer of the issuer’s compliance with all the laws of the primary State; and (2)to the insurance commissioner of each secondary State in which it offers individual health insurance coverage, a copy of the issuer’s quarterly financial statement submitted to the primary State, which statement shall be certified by an independent public accountant and contain a statement of opinion on loss and loss adjustment expense reserves made by— (A)a member of the American Academy of Actuaries; or (B)a qualified loss reserve specialist. (h)
Power of courts To enjoin conduct
Nothing in this section shall be construed to affect the authority of any Federal or State court to enjoin— (1)the solicitation or sale of individual health insurance coverage by a health insurance issuer to any person or group who is not eligible for such insurance; or (2)the solicitation or sale of individual health insurance coverage by, or operation of, a health insurance issuer that is in hazardous financial condition. (i)
State powers To enforce State laws
(1)
In general
Subject to the provisions of subsection (b)(1)(G) (relating to injunctions) and paragraph (2), nothing in this section shall be construed to affect the authority of any State to make use of any of its powers to enforce the laws of such State with respect to which a health insurance issuer is not exempt under subsection (b). (2)
Courts of competent jurisdiction
If a State seeks an injunction regarding the conduct described in paragraphs (1) and (2) of subsection (h), such injunction must be obtained from a Federal or State court of competent jurisdiction. (j)
States’ authority To sue
Nothing in this section shall affect the authority of any State to bring action in any Federal or State court. (k)
Generally applicable laws
Nothing in this section shall be construed to affect the applicability of State laws generally applicable to persons or corporations.
2797.
Primary State must meet Federal floor before issuer may sell into secondary States
A health insurance issuer may not offer, sell, or issue individual health insurance coverage in a secondary State if the primary State does not meet the following requirements: (1)The State insurance commissioner must use a risk-based capital formula for the determination of capital and surplus requirements for all health insurance issuers. (2)The State must have legislation or regulations in place establishing an independent review process for individuals who are covered by individual health insurance coverage unless the issuer provides an independent review mechanism functionally equivalent (as determined by the primary State insurance commissioner or official) to that prescribed in the Health Carrier External Review Model Act of the National Association of Insurance Commissioners for all individuals who purchase insurance coverage under the terms of this part.
2798.
Enforcement
(a)
In general
Subject to subsection (b), with respect to specific individual health insurance coverage the primary State for such coverage has sole jurisdiction to enforce the primary State’s covered laws in the primary State and any secondary State. (b)
Secondary State’s authority
Nothing in subsection (a) shall be construed to affect the authority of a secondary State to enforce its laws as set forth in the exception specified in section 2796(b)(1). (c)
Court interpretation
In reviewing action initiated by the applicable secondary State authority, the court of competent jurisdiction shall apply the covered laws of the primary State. (d)
Notice of compliance failure
In the case of individual health insurance coverage offered in a secondary State that fails to comply with the covered laws of the primary State, the applicable State authority of the secondary State may notify the applicable State authority of the primary State.
. (b)
Effective date
The amendment made by subsection (a) shall apply to individual health insurance coverage offered, issued, or sold after the date of the enactment of this Act.
5.
Severability
If any provision of the Act or the application of such provision to any person or circumstance is held to be unconstitutional, the remainder of this Act and the application of the provisions of such to any other person or circumstance shall not be affected.