To repeal sections 376.421, 376.424, 376.426, 379.930, 379.932, 379.934, 379.936, 379.938, 379.940, 379.942, 379.943, 379.944, 379.946 and 379.952, RSMo 1994, and section 379.950, RSMo Supp. 1996, relating to compliance with federal health care reforms, and to enact in lieu thereof twelve new sections relating to the same subject, with penalty provisions and an emergency clause.

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

     Section A. Sections 376.421, 376.424, 376.426, 379.930, 379.932, 379.934, 379.936, 379.938, 379.940, 379.942, 379.943, 379.944, 379.946 and 379.952, RSMo 1994, and section 379.950, RSMo Supp. 1996, are repealed and twelve new sections enacted in lieu thereof, to be known as sections 376.421, 376.424, 376.426, 376.771, 379.930, 379.932, 379.936, 379.938, 379.940, 379.942, 379.950 and 379.952, to read as follows:

     376.421. 1. Except as provided in subsection 2 of this section, no policy of group health insurance shall be delivered in this state unless it conforms to one of the following descriptions:

     (1) A policy issued to an employer, or to the trustees of a fund established by an employer, which employer or trustees shall be deemed the policyholder, to insure employees of the employer for the benefit of persons other than the employer, subject to the following requirements:

     (a) The employees eligible for insurance under the policy shall be all of the employees of the employer, or all of any class or classes thereof. The policy may provide that the term "employees" shall include the employees of one or more subsidiary corporations, and the employees, individual proprietors, and partners of one or more affiliated corporations, proprietorships or partnerships, if the business of the employer and of such affiliated corporations, proprietorships or partnerships is under common control. The policy may provide that the term "employees" shall include the individual proprietor or partners if the employer is an individual proprietorship or partnership. The policy may provide that the term "employees" shall include retired employees, former employees and directors of a corporate employer. A policy issued to insure the employees of a public body may provide that the term "employees" shall include elected or appointed officials;

     (b) The premium for the policy shall be paid either from the employer's funds or from funds contributed by the insured employees, or from both. Except as provided in paragraph (c) of this subdivision, a policy on which no part of the premium is to be derived from funds contributed by the insured employees must insure all eligible employees, except those who reject such coverage in writing; and

     (c) An insurer may exclude or limit the coverage on any person [as to whom evidence of individual insurability is not satisfactory to the insurer in a policy insuring fewer than ten employees and in a policy insuring ten or more employees if:

     a. Application is not made within thirty-one days after the date of eligibility for insurance; or

     b. The person voluntarily terminated the insurance while continuing to be eligible for insurance under the policy; or

     c. After the expiration of an open enrollment period during which the person could have enrolled for the insurance or could have elected another level of benefits under the policy] only to the extent authorized by the federal Health Insurance Portability and Accountability Act of 1996 (Public Law 104-191), sections 379.930 to 379.952, RSMo, or any state or federal regulations promulgated pursuant to any of said statutes;

     (2) A policy issued to a creditor or its parent holding company or to a trustee or trustees or agent designated by two or more creditors, which creditor, holding company, affiliate, trustee, trustees or agent shall be deemed the policyholder, to insure debtors of the creditor or creditors with respect to their indebtedness subject to the following requirements:

     (a) The debtors eligible for insurance under the policy shall be all of the debtors of the creditor or creditors, or all of any class or classes thereof. The policy may provide that the term "debtors" shall include:

     a. Borrowers of money or purchasers or lessees of goods, services, or property for which payment is arranged through a credit transaction;

     b. The debtors of one or more subsidiary corporations; and

     c. The debtors of one or more affiliated corporations, proprietorships or partnerships if the business of the policyholder and of such affiliated corporations, proprietorships or partnerships is under common control;

     (b) The premium for the policy shall be paid either from the creditor's funds or from charges collected from the insured debtors, or from both. Except as provided in paragraph (c) of this subdivision, a policy on which no part of the premium is to be derived from funds contributed by insured debtors specifically for their insurance must insure all eligible debtors;

     (c) An insurer may exclude any debtors as to whom evidence of individual insurability is not satisfactory to the insurer in a policy insuring fewer than ten debtors and in a policy insuring ten or more debtors if:

     a. Application is not made within thirty-one days after the date of eligibility for insurance; or

     b. The person voluntarily terminated the insurance while continuing to be eligible for insurance under the policy; or

     c. After the expiration of an open enrollment period during which the person could have enrolled for the insurance or could have elected another level of benefits under the policy;

     (d) The total amount of insurance payable with respect to an indebtedness shall not exceed the greater of the scheduled or actual amount of unpaid indebtedness to the creditor. The insurer may exclude any payments which are delinquent on the date the debtor becomes disabled as defined in the policy;

     (e) The insurance may be payable to the creditor or to any successor to the right, title, and interest of the creditor. Such payment or payments shall reduce or extinguish the unpaid indebtedness of the debtor to the extent of each such payment and any excess of insurance shall be payable to the insured or the estate of the insured;

     (f) Notwithstanding the preceding provisions of this subdivision, insurance on agricultural credit transaction commitments may be written up to the amount of the loan commitment, and insurance on educational credit transaction commitments may be written up to the amount of the loan commitment less the amount of any repayments made on the loan;

     (3) A policy issued to a labor union or similar employee organization, which shall be deemed to be the policyholder, to insure members of such union or organization for the benefit of persons other than the union or organization or any of its officials, representatives, or agents, subject to the following requirements:

     (a) The members eligible for insurance under the policy shall be all of the members of the union or organization, or all of any class or classes thereof;

     (b) The premium for the policy shall be paid either from funds of the union or organization or from funds contributed by the insured members specifically for their insurance, or from both. Except as provided in paragraph (c) of this subdivision, a policy on which no part of the premium is to be derived from funds contributed by the insured members specifically for their insurance must insure all eligible members, except those who reject such coverage in writing;

     (c) An insurer may exclude or limit the coverage on any person [as to whom evidence of individual insurability is not satisfactory to the insurer in a policy insuring fewer than ten members and in a policy insuring ten or more members if:

     a. Application is not made within thirty-one days after the date of eligibility for insurance; or

     b. The person voluntarily terminated the insurance while continuing to be eligible for insurance under the policy; or

     c. After the expiration of an open enrollment period during which the person could have enrolled for the insurance or could have elected another level of benefits under the policy] only to the extent authorized by the federal Health Insurance Portability and Accountability Act of 1996 (Public Law 104-191), sections 379.930 to 379.952, RSMo, or any state or federal regulations promulgated pursuant to any of said statutes;

     (4) A policy issued to a trust, or to the trustee of a fund, established or adopted by two or more employers, or by one or more labor unions or similar employee organizations, or by one or more employers and one or more labor unions or similar employee organizations, which trust or trustee shall be deemed the policyholder, to insure employees of the employers or members of the unions or organizations for the benefit of persons other than the employers or the unions or organizations, subject to the following requirements:

     (a) The persons eligible for insurance shall be all of the employees of the employers or all of the members of the unions or organizations, or all of any class or classes thereof. The policy may provide that the term "employees" shall include the employees of one or more subsidiary corporations, and the employees, individual proprietors, and partners of one or more affiliated corporations, proprietorships or partnerships if the business of the employer and of such affiliated corporations, proprietorships or partnerships is under common control. The policy may provide that the term "employees" shall include the individual proprietor or partners if the employer is an individual proprietorship or partnership. The policy may provide that the term "employees" shall include retired employees, former employees and directors of a corporate employer. The policy may provide that the term "employees" shall include the trustees or their employees, or both, if their duties are principally connected with such trusteeship;

     (b) The premium for the policy shall be paid from funds contributed by the employer or employers of the insured persons or by the union or unions or similar employee organizations, or by both, or from funds contributed by the insured persons or from both the insured persons and the employer or union or similar employee organization. Except as provided in paragraph (c) of this subdivision, a policy on which no part of the premium is to be derived from funds contributed by the insured persons specifically for their insurance, must insure all eligible persons except those who reject such coverage in writing;

     (c) An insurer may exclude or limit the coverage on any person [as to whom evidence of individual insurability is not satisfactory to the insurer] only to the extent authorized by the federal Health Insurance Portability and Accountability Act of 1996 (Public Law 104-191), sections 379.930 to 379.952, RSMo, or any state or federal regulations promulgated pursuant to any of said statutes;

     (5) A policy issued to an association or to a trust or to the trustees of a fund established, created and maintained for the benefit of members of one or more associations. The association or associations shall have at the outset a minimum of one hundred persons (or the number required in section 379.930 for a bona fide association); shall have been organized and maintained in good faith for purposes other than that of obtaining insurance; shall have been in active existence for at least two years (or five years in the case of a bona fide association as defined in section 379.930, RSMo); shall have a constitution and bylaws which provide that the association or associations shall hold regular meetings not less than annually to further the purposes of the members; shall, except for credit unions, collect dues or solicit contributions from members; and shall provide the members with voting privileges and representation on the governing board and committees. The policy shall be subject to the following requirements:

     (a) The policy may insure members of such association or associations, employees thereof, or employees of members, or one or more of the preceding, or all of any class or classes thereof for the benefit of persons other than the employee's employer;

     (b) The premium for the policy shall be paid from funds contributed by the association or associations or by employer members, or by both, or from funds contributed by the covered persons or from both the covered persons and the association, associations, or employer members;

     (c) Except as provided in paragraph (d) of this subdivision, a policy on which no part of the premium is to be derived from funds contributed by the covered persons specifically for their insurance must insure all eligible persons, except those who reject such coverage in writing;

     (d) An insurer may exclude or limit the coverage on any person [as to whom evidence of individual insurability is not satisfactory to the insurer] only to the extent authorized by the federal Health Insurance Portability and Accountability Act of 1996 (Public Law 104-191), sections 379.930 to 379.952, RSMo, and any state or federal regulations promulgated pursuant to any of said statutes;

     (6) A policy issued to a credit union or to a trustee or trustees or agent designated by two or more credit unions, which credit union, trustee, trustees or agent shall be deemed the policyholder, to insure members of such credit union or credit unions for the benefit of persons other than the credit union or credit unions, trustee or trustees, or agent or any of their officials, subject to the following requirements:

     (a) The members eligible for insurance shall be all of the members of the credit union or credit unions, or all of any class or classes thereof;

     (b) The premium for the policy shall be paid by the policyholder from the credit union's funds and, except as provided in paragraph (c) of this subdivision, must insure all eligible members;

     (c) An insurer may exclude or limit the coverage on any member [as to whom evidence of individual insurability is not satisfactory to the insurer] only to the extent authorized by the federal Health Insurance Portability and Accountability Act of 1996 (Public Law 104-191), sections 379.930 to 379.952, RSMo, and any state or federal regulations promulgated pursuant to any of said statutes;

     (7) A policy issued to cover persons in a group where that group is specifically described by a law of this state as one which may be covered for group life insurance. The provisions of such law relating to eligibility and evidence of insurability shall apply.

     2. Group health insurance offered to a resident of this state under a group health insurance policy issued to a group other than one described in subsection 1 of this section shall be subject to the following requirements:

     (1) No such group health insurance policy shall be delivered in this state unless the director finds that:

     (a) The issuance of such group policy is not contrary to the best interest of the public;

     (b) The issuance of the group policy would result in economies of acquisition or administration; and

     (c) The benefits are reasonable in relation to the premiums charged;

     (2) No such group health insurance coverage may be offered in this state by an insurer under a policy issued in another state unless this state or another state having requirements substantially similar to those contained in subdivision (1) of this subsection has made a determination that such requirements have been met;

     (3) The premium for the policy shall be paid either from the policyholder's funds, or from funds contributed by the covered persons, or from both;

     (4) An insurer may exclude or limit the coverage on any person [as to whom evidence of individual insurability is not satisfactory to the insurer] only to the extent authorized by the federal Health Insurance Portability and Accountability Act of 1996 (Public Law 104-191), sections 379.930 to 379.952, RSMo, and any state or federal regulations promulgated pursuant to any of said statutes.

     376.424. Except for a policy issued under subdivision (2) of subsection 1 of section 376.421, a group health insurance policy may be extended to insure the employees and members with respect to their family members or dependents, or any class or classes thereof, subject to the following:

     (1) The premium for the insurance shall be paid either from funds contributed by the employer, union, association or other person to whom the policy has been issued or from funds contributed by the covered persons, or from both. Except as provided in subdivision (2) of this section, a policy on which no part of the premium for the family members' or dependents' coverage is to be derived from funds contributed by the covered persons must insure all eligible employees or members with respect to their family members or dependents, or any class or classes thereof;

     (2) An insurer may exclude or limit the coverage on any family member or dependent [as to whom evidence of individual insurability is not satisfactory to the insurer], subject to sections 376.406 and 376.776, [in a policy insuring fewer than ten employees or members and in a policy insuring ten or more employees or members if:

     a. Application is not made within thirty-one days after the date of eligibility for insurance; or

     b. The employee or member voluntarily terminated the insurance of the family member or dependent while such family member or dependent continues to be eligible for insurance under the policy; or

     c. After the expiration of an open enrollment period during which the family member or dependent could have been enrolled for the insurance or could have been enrolled for another level of benefits under the policy] only to the extent authorized by the federal Health Insurance Portability and Accountability Act of 1996 (Public Law 104-191), sections 379.930 to 379.952, RSMo, and any state or federal regulations promulgated pursuant to any of said statutes.

     376.426. No policy of group health insurance shall be delivered in this state unless it contains in substance the following provisions, or provisions which in the opinion of the director of insurance are more favorable to the persons insured or at least as favorable to the persons insured and more favorable to the policyholder; except that: Provisions in subdivisions (5), (7), (12), (15), and (16) of this section shall not apply to policies insuring debtors; standard provisions required for individual health insurance policies shall not apply to group health insurance policies; and if any provision of this section is in whole or in part inapplicable to or inconsistent with the coverage provided by a particular form of policy, the insurer, with the approval of the director, shall omit from such policy any inapplicable provision or part of a provision, and shall modify any inconsistent provision or part of the provision in such manner as to make the provision as contained in the policy consistent with the coverage provided by the policy:

     (1) A provision that the policyholder is entitled to a grace period of thirty-one days for the payment of any premium due except the first, during which grace period the policy shall continue in force, unless the policyholder shall have given the insurer written notice of discontinuance in advance of the date of discontinuance and in accordance with the terms of the policy. The policy may provide that the policyholder shall be liable to the insurer for the payment of a pro rata premium for the time the policy was in force during such grace period;

     (2) A provision that the validity of the policy shall not be contested, except for nonpayment of premiums, after it has been in force for two years from its date of issue, and that no statement made by any person covered under the policy relating to insurability shall be used in contesting the validity of the insurance with respect to which such statement was made after such insurance has been in force prior to the contest for a period of two years during such person's lifetime nor unless it is contained in a written instrument signed by the person making such statement; except that, no such provision shall preclude the assertion at any time of defenses based upon the person's ineligibility for coverage under the policy or upon other provisions in the policy;

     (3) A provision that a copy of the application, if any, of the policyholder shall be attached to the policy when issued, that all statements made by the policyholder or by the persons insured shall be deemed representations and not warranties and that no statement made by any person insured shall be used in any contest unless a copy of the instrument containing the statement is or has been furnished to such person or, in the event of the death or incapacity of the insured person, to the individual's beneficiary or personal representative;

     (4) A provision setting forth the conditions, if any, under which the insurer reserves the right to require a person eligible for insurance to furnish evidence of individual insurability satisfactory to the insurer as a condition to part or all of the individual's coverage, subject to compliance with the federal Health Insurance Portability and Accountability Act of 1996 (Public Law 104-191), sections 379.930 to 379.952, RSMo, and any state or federal regulations promulgated pursuant to any of said statutes;

     (5) A provision specifying the additional exclusions or limitations, if any, applicable under the policy with respect to a disease or physical condition of a person, not otherwise excluded from the person's coverage by name or specific description effective on the date of the person's loss, which existed prior to the effective date of the person's coverage under the policy. Any such exclusion or limitation may only apply to a disease or physical condition for which medical advice or treatment was received by the person during the twelve months prior to the effective date of the person's coverage. In no event shall such exclusion or limitation apply to loss incurred or disability commencing after the earlier of:

     (a) The end of a continuous period of twelve months commencing on or after the effective date of the person's coverage during all of which the person has received no medical advice or treatment in connection with such disease or physical condition; or

     (b) The end of the two-year period commencing on the effective date of the person's coverage;

Notwithstanding the above provisions of this subdivision, a health benefit plan, as defined in section 379.930, may exclude or limit coverage on any person only to the extent authorized by the federal Health Insurance Portability and Accountability Act of 1996 (Public Law 104-191), sections 379.930 to 379.952, RSMo, and any state or federal regulations promulgated pursuant to any of said statutes;

     (6) If the premiums or benefits vary by age, there shall be a provision specifying an equitable adjustment of premiums or of benefits, or both, to be made in the event the age of the covered person has been misstated, such provision to contain a clear statement of the method of adjustment to be used;

     (7) A provision that the insurer shall issue to the policyholder, for delivery to each person insured, a certificate setting forth a statement as to the insurance protection to which that person is entitled, to whom the insurance benefits are payable, and a statement as to any family member's or dependent's coverage;

     (8) A provision that written notice of claim must be given to the insurer within twenty days after the occurrence or commencement of any loss covered by the policy. Failure to give notice within such time shall not invalidate nor reduce any claim if it shall be shown not to have been reasonably possible to give such notice and that notice was given as soon as was reasonably possible;

     (9) A provision that the insurer shall furnish to the person making claim, or to the policyholder for delivery to such person, such forms as are usually furnished by it for filing proof of loss. If such forms are not furnished before the expiration of fifteen days after the insurer receives notice of any claim under the policy, the person making such claim shall be deemed to have complied with the requirements of the policy as to proof of loss upon submitting, within the time fixed in the policy for filing proof of loss, written proof covering the occurrence, character, and extent of the loss for which claim is made;

     (10) A provision that in the case of claim for loss of time for disability, written proof of such loss must be furnished to the insurer within ninety days after the commencement of the period for which the insurer is liable, and that subsequent written proofs of the continuance of such disability must be furnished to the insurer at such intervals as the insurer may reasonably require, and that in the case of claim for any other loss, written proof of such loss must be furnished to the insurer within ninety days after the date of such loss. Failure to furnish such proof within such time shall not invalidate nor reduce any claim if it was not reasonably possible to furnish such proof within such time, provided such proof is furnished as soon as reasonably possible and in no event, except in the absence of legal capacity of the claimant, later than one year from the time proof is otherwise required;

     (11) A provision that all benefits payable under the policy other than benefits for loss of time shall be payable not more than thirty days after receipt of proof and that, subject to due proof of loss, all accrued benefits payable under the policy for loss of time shall be paid not less frequently than monthly during the continuance of the period for which the insurer is liable, and that any balance remaining unpaid at the termination of such period shall be paid as soon as possible after receipt of such proof;

     (12) A provision that benefits for accidental loss of life of a person insured shall be payable to the beneficiary designated by the person insured or, if the policy contains conditions pertaining to family status, the beneficiary may be the family member specified by the policy terms. In either case, payment of these benefits is subject to the provisions of the policy in the event no such designated or specified beneficiary is living at the death of the person insured. All other benefits of the policy shall be payable to the person insured. The policy may also provide that if any benefit is payable to the estate of a person, or to a person who is a minor or otherwise not competent to give a valid release, the insurer may pay such benefit, up to an amount not exceeding two thousand dollars, to any relative by blood or connection by marriage of such person who is deemed by the insurer to be equitably entitled thereto;

     (13) A provision that the insurer shall have the right and opportunity, at the insurer's own expense, to examine the person of the individual for whom claim is made when and so often as it may reasonably require during the pendency of the claim under the policy and also the right and opportunity, at the insurer's own expense, to make an autopsy in case of death where it is not prohibited by law;

     (14) A provision that no action at law or in equity shall be brought to recover on the policy prior to the expiration of sixty days after proof of loss has been filed in accordance with the requirements of the policy and that no such action shall be brought at all unless brought within three years from the expiration of the time within which proof of loss is required by the policy;

     (15) A provision specifying the conditions under which the policy may be terminated. Such provision shall state that except for nonpayment of the required premium or the failure to meet continued underwriting standards, the insurer may not terminate the policy prior to the first anniversary date of the effective date of the policy as specified therein, and a notice of any intention to terminate the policy by the insurer must be given to the policyholder at least thirty-one days prior to the effective date of the termination. Any termination by the insurer shall be without prejudice to any expenses originating prior to the effective date of termination. An expense will be considered incurred on the date the medical care or supply is received. Notwithstanding the provisions of this subdivision, a health benefit plan, as defined by section 379.930, RSMo, may be terminated or nonrenewed only to the extent authorized by the federal Health Insurance Portability and Accountability Act of 1996 (Public Law 104-191), sections 379.930 to 379.952, RSMo, and any state or federal regulations promulgated pursuant to any of said statutes;

     (16) A provision stating that if a policy provides that coverage of a dependent child terminates upon attainment of the limiting age for dependent children specified in the policy, such policy, so long as it remains in force, shall be deemed to provide that attainment of such limiting age does not operate to terminate the hospital and medical coverage of such child while the child is and continues to be both incapable of self-sustaining employment by reason of mental or physical handicap and chiefly dependent upon the policyholder for support and maintenance. Proof of such incapacity and dependency must be furnished to the insurer by the policyholder at least thirty-one days before the child's attainment of the limiting age. The insurer may require at reasonable intervals during the two years following the child's attainment of the limiting age subsequent proof of the child's incapacity and dependency. After such two-year period, the insurer may require subsequent proof not more than once each year. This subdivision shall apply only to policies delivered or issued for delivery in this state on or after one hundred twenty days after September 28, 1985;

     (17) In the case of a policy insuring debtors, a provision that the insurer shall furnish to the policyholder for delivery to each debtor insured under the policy a certificate of insurance describing the coverage and specifying that the benefits payable shall first be applied to reduce or extinguish the indebtedness.

     376.771. Any policy of accident and sickness insurance having provisions which constitute an individual health benefit plan as defined in section 379.930, RSMo, shall comply with the requirements of the federal Health Insurance Portability and Accountability Act of 1996 (P.L. 104-191), sections 379.930 to 379.952, RSMo, and any regulations authorized and issued pursuant to such laws.

     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:

     (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)] (2) "Agent" means "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;]

     (3) "Bona fide association" means an association which meets all of the following criteria:

     (a) Has been actively in existence for five (5) years;

     (b) Has a constitution and by-laws or other analogous governing documents thereto;

     (c) Has been formed and maintained in good faith for purposes other than obtaining insurance;

     (d) Is not owned or controlled by a carrier or affiliated with a carrier;

     (e) Does not condition membership in the association on health status or claims experience;

     (f) Has at least one thousand members if it is a national association; five hundred members if it is a state association; or two hundred members if it is a local association;

     (g) All members and dependents of members are eligible for coverage regardless of health status or claims experience;

     (h) Does not offer a health benefit plan to an individual through the association other than in connection with a member of the association;

     (i) Is governed by a board of directors and sponsors annual meetings of its members; and

     (j) Meets any other requirements of state or federal law;

     (4) "Bona fide association plan" means a health benefit plan offered through a bona fide association that covers members of a bona fide association and their dependents in this state regardless of the situs of delivery of the policy or contract and which meets all the following criteria:

     (a) Provides renewability of coverage for the members and dependents of members of the bona fide association which meets the criteria set forth in section 379.938;

     (b) Provides availability of coverage for the members and dependents of members of the bona fide association in conformance with the provisions of section 379.940;

     (c) Is offered by a carrier that offers health benefit plan coverage to any bona fide association seeking health benefit plan coverage from the carrier; and

     (d) Conforms with the preexisting condition provisions of section 379.940;

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

     [(8) "Carrier" means any entity that provides health insurance or health benefits in 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;]

     (6) "Church plan" has the meaning given such term under section 3(33) of the Employee Retirement Income Security Act of 1974;

     [(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;

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

     (9) "Creditable coverage" means, with respect to an individual:

     (a) Health benefits or coverage provided under any of the following:

     a. A group health plan;

     b. A health benefit plan;

     c. Part A or Part B of Title XVIII of the Social Security Act (Medicare);

     d. Title XIX of the Social Security Act (Medicaid), other than coverage consisting solely of benefits under section 1928;

     e. Chapter 55 of Title 10, United States Code (Civilian Health and Medical Program of the Uniformed Services (CHAMPUS));

     f. A medical care program of the Indian Health Service or of a tribal organization;

     g. A state health benefits risk pool;

     h. A health plan offered under chapter 89 of Title 5, United States Code (Federal Employees Health Benefits Program (FEHBP));

     i. A public health plan as defined in federal regulations authorized by the Public Health Service Act, section 2701(c)(1)(I), as amended by P.L. 104-191; or

     j. A health benefit plan under section 5(e) of the Peace Corps Act (22 U.S.C. 2504(e));

     (b) A period of creditable coverage shall not be counted, with respect to enrollment of an individual under a group health plan, if, after such period and before the enrollment date, there was a sixty-three (63) day period during all of which the individual was not covered under any creditable coverage:

     [(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 basis and has a normal work week of thirty or more hours, except that at the employer's sole discretion the term shall also include an employee who works on a full-time basis with a normal work week of anywhere between at least seventeen and one-half (17.5) and thirty (30) hours, so long as this eligibility criterion is applied uniformly among all of the employer's employees and without regard to health status-related factors. Persons covered under a health benefit plan pursuant to the Consolidated Omnibus Budget Reconciliation Act of 1986 shall not be considered "eligible employees" for purposes of minimum participation requirements pursuant to section 379.940[. 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 spouse and his minor children shall constitute only one eligible employee when they are employed by the same small employer];

     (13) "Eligible person" means a person who is a resident of this state who is not eligible to be insured under an employer-sponsored group health benefit plan, including an "eligible individual" as that term is defined in the Public Health Service Act, section 2741(b) as added by P.L. 104-191.

     [(16)] (14) "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;

     (15) "Family composition" means:

     (a) Enrollee;

     (b) Enrollee, spouse and children;

     (c) Enrollee and spouse;

     (d) Enrollee and children; or

     (e) Child only;

     (16) "Governmental plan" has the meaning given such term under section 3(32) of the Employee Retirement Income Security Act of 1974 and any federal governmental plan;

     (17) "Group health plan" means an employee welfare benefit plan as defined in section 3(1) of the Employee Retirement Income Security Act of 1974 to the extent that the plan provides medical care as defined in section 379.930 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. For the purposes of sections 379.930 to 379.952:

     (a) Any plan, fund, or program which would not be, but for Public Health Service Act, section 2721(e) as added by P.L. 104-191, an employee welfare benefit plan and which is established or maintained by a partnership, to the extent that such plan, fund, or program provides medical care, including items and services paid for as medical care, to present or former partners in the partnership, or to their dependents, as defined under the terms of the plan, fund, or program, directly or through insurance, reimbursement, or otherwise, shall be treated, subject to paragraph (b), as an employee welfare benefit plan which is a group health plan;

     (b) In the case of a group health plan, the term "employer" also includes the partnership in relation to any partner; and

     (c) In the case of a group health plan, the term "participant" also includes:

     a. In connection with a group health plan maintained by a partnership, an individual who is a partner in relation to the partnership; or

     b. In connection with a group health plan maintained by a self-employed individual, under which one or more employees are participants, the self-employed individual, if such individual is, or may become, eligible to receive a benefit under the plan or such individual's beneficiaries may be eligible to receive any such benefit;

     [(17)] (18) "Health benefit plan" means [any hospital or medical] a policy, contract, [or] certificate or agreement[, health services corporation contract, or health maintenance organization subscriber contract] offered by a health carrier to provide, deliver, arrange for, pay for or reimburse any of the costs of health care services. [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;] Health benefit plan does include short-term and catastrophic health insurance policies, and a policy that pays on a cost-incurred basis, except as otherwise specifically exempted in this definition. Health benefit plan shall not include:

     (a) One or more, or any combination of, the following:

     a. Coverage only for accident, or disability income insurance, or any combination thereof;

     b. Coverage issued as a supplement to liability insurance;

     c. Liability insurance, including general liability insurance and automobile liability insurance;

     d. Workers' compensation or similar insurance;

     e. Automobile medical payment insurance;

     f. Credit-only insurance;

     g. Coverage for on-site medical clinics; and

     h. Other similar insurance coverage, specified in federal regulations issued pursuant to P.L. 104-191, under which benefits for medical care are secondary or incidental to other insurance benefits;

     (b) The following benefits if they are provided under a separate policy, certificate or contract of insurance or are otherwise not an integral part of the plan:

     a. Limited scope dental or vision benefits;

     b. Benefits for long-term care, nursing home care, home health care, community-based care, or any combination thereof;

     c. Such other similar, limited benefits as are specified in federal regulations issued pursuant to P.L. 104-191;

     (c) The following benefits if the benefits are provided under a separate policy, certificate or contract of insurance, there is no coordination between the provision of the benefits and any exclusion of benefits under any group health plan maintained by the same plan sponsor, and such benefits are paid with respect to an event without regard to whether benefits are provided with respect to such an event under any group health plan maintained by the same plan sponsor:

     a. Coverage only for a specified disease or illness;

     b. Hospital indemnity or other fixed indemnity insurance;

     (d) The following if it is offered as a separate policy, certificate or contract of insurance:

     a. Medicare supplemental health insurance as defined under section 1882(g)(1) of the Social Security Act;

     b. Coverage supplemental to the coverage provided under chapter 55 of title 10, United States Code (Civilian Health and Medical Program of the Uniformed Services (CHAMPUS); and

     c. Similar supplemental coverage provided to coverage under a group health plan;

     (e) Provided, however, that a carrier offering policies or certificates of specified disease, hospital confinement indemnity or limited benefit health insurance shall comply with the following:

     a. The carrier shall file on or before the first day of March of each year a certification with the director that contains the statement and information described in subparagraph b.;

     b. The certification required in subparagraph a. shall contain the following:

     i. A statement from the carrier certifying that policies or certificates described in this paragraph are being offered and marketed as supplemental health insurance and not as a substitute for hospital or medical expense insurance or major medical expense insurance; and

     ii. A summary description of each policy or certificate described in this paragraph, including the average annual premium rates (or range of premium rates in cases where premiums vary by age or other factors) charged for such policies and certificates in this state;

     c. In the case of a policy or certificate that is described in this paragraph and that is offered for the first time in this state on or after the effective date of this act, the carrier files with the director the information and statement required in subparagraph b. at least thirty days prior to the date such a policy or certificate is issued or delivered in this state;

     (19) "Health carrier" or "carrier" means any entity subject to the insurance laws and regulations of this state, or subject to the jurisdiction of the director, that contracts or offers to contract to provide, deliver, arrange for, pay for, or reimburse any of the costs of health care services, including a sickness and accident insurance company, a health maintenance organization, a health services corporation, fraternal benefit society, a multiple employer welfare arrangement specifically authorized to operate in the state of Missouri, or any other entity providing a plan of health insurance, health benefits or health services;

     (20) "Health status-related factor" means any of the following factors:

     (a) Health status;

     (b) Medical condition, including both physical and mental illnesses;

     (c) Claims experience;

     (d) Receipt of health care;

     (e) Medical history;

     (f) Genetic information;

     (g) Evidence of insurability, including conditions arising out of acts of domestic violence; and

     (h) Disability;

     (21) "Individual carrier" means a carrier that issues or offers for issuance individual health benefit plans covering one or more residents of this state;

     (22) "Individual health benefit plan" means:

     (a) A health benefit plan other than a converted policy or a bona fide association plan for eligible persons and their dependents; and

     (b) A certificate issued to an eligible person that evidences coverage under a policy or contract issued to a trust or association or other similar grouping of individuals, regardless of the situs of delivery of the policy or contract, if the eligible person pays the premium and is not being covered under the policy or contract pursuant to continuation of benefits provisions applicable under federal or state law, except that "individual health benefit plan" shall not include a certificate issued to an eligible person that evidences coverage under a bona fide association plan or purchasing alliance plan;

     [(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)] (23) "Late enrollee" means 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. However, an eligible employee or dependent shall not be considered a late enrollee if:

     (a) The individual meets each of the following:

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

     b. The individual lost coverage under [qualifying previous] creditable coverage as a result of cessation of employer contribution, termination of employment or eligibility, reduction in the number of hours of employment, the involuntary termination of the [qualifying previous] creditable coverage, or death of a spouse or divorce or legal separation;

     c. The individual requests enrollment within thirty days after termination of the [qualifying previous] creditable coverage or the change in conditions that gave rise to the termination of coverage;

     (b) Where provided for in contract or where otherwise provided in state law, the individual enrolls during the specified bona fide association open enrollment period;

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

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

     (e) The individual changes status from not being an eligible employee to becoming an eligible employee and requests enrollment within thirty days after the change in status; or

     (f) The individual had coverage under a COBRA continuation provision and the coverage under that provision was exhausted;

     (24) "Limited benefit health insurance" means that form of coverage that pays stated predetermined amounts for specific services or treatments or pays a stated predetermined amount per day or confinement for one or more named conditions, named diseases or accidental injury;

     (25) "Medical care" means amounts paid for:

     (a) The diagnosis, care, mitigation, treatment, or prevention of disease, or amounts paid for the purpose of affecting any structure or function of the body;

     (b) Transportation primarily for and essential to medical care referred to in paragraph (a); and

     (c) Insurance covering medical care referred to in paragraphs (a) and (b);

     (26) "Network plan" means a health benefit plan offered by a health carrier under which the financing and delivery of medical care including items and services paid for as medical care are provided, in whole or in part, through a defined set of providers under contract with the carrier;

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

     (27) "Plan sponsor" has the meaning given such term under section 3(16)(B) of the Employee Retirement Income Security Act of 1974;

     (28) "Preexisting condition" means a condition, regardless of the cause of the condition, for which medical advice, diagnosis, care or treatment was recommended or received during the six (6) months for small group coverage, or twelve months for individual or bona fide association plan coverage, preceding the effective date of coverage. Genetic information shall not be treated as a condition for which a preexisting condition exclusion may be imposed in the absence of a diagnosis of the condition related to such information;

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

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

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

     (31) "Purchasing alliance" means a non-risk bearing, nonprofit corporation established to provide health benefit plans through multiple, unaffiliated, participating health carriers to member employers and their employees that:

     (a) Has a constitution and by-laws or other analogous governing documents thereto;

     (b) Has been formed and maintained in good faith;

     (c) Is not owned or controlled by a carrier or affiliated with a carrier;

     (d) Does not condition membership in the purchasing alliance on health status or claims experience;

     (e) Has at least one hundred employer members if it is a national purchasing alliance; fifty employer members if it is a state purchasing alliance; twenty employer members if it is a local purchasing alliance; or any number of employer members if it is a governmental purchasing alliance;

     (f) All eligible employees and dependents of eligible employees are eligible for coverage regardless of health status or claims experience;

     (g) Does not offer a health benefit plan to an individual through the purchasing alliance other than in connection with an employer member of the purchasing alliance;

     (h) Is governed by a board of directors and sponsors annual meetings of its employer members; and

     (i) Meets any other requirements of state or federal law;

     (32) "Purchasing alliance plan" means a health benefit plan offered through a purchasing alliance that covers eligible employees and dependents of employer members in this state regardless of the situs of delivery of the policy or contract and which meets all the following criteria:

     (a) Provides renewability of coverage for the eligible employees and dependents of employer members of the purchasing alliance which meets the criteria set forth in subsection 4 of section 379.938 as they apply to individual health benefit plans;

     (b) Provides availability of coverage for the eligible employees and dependents of employer members of the purchasing alliance in conformance with the provisions of section 379.940;

     (c) Is offered by a carrier that offers health benefit plan coverage to any purchasing alliance seeking health benefit plan coverage from the carrier; and

     (d) Conforms with the preexisting condition provisions of section 379.940;

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

     (27)] (33) "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 354.400, RSMo, et seq. to provide health care services to covered individuals;

     (34) "Self-employed individual" means an individual or sole proprietor who derives a substantial portion of his or her income from a trade or business through which the individual or sole proprietor has attempted to earn taxable income and for which he or she has filed the appropriate Internal Revenue Service Form 1040, Schedule C or F, for the previous taxable year;

     [(28)] (35) "Small employer" means, in connection with a group health plan with respect to a calendar year and a plan year, any person, firm, corporation, partnership, [or] association or political subdivision 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] an average of at least two but not more than [twenty-five eligible] fifty employees on business days during the preceding calendar year and that employs at least two employees on the first day of the plan year. [, 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] All persons treated as a single employer under subsection (b), (c), (m), or (o) of Section 414 of the Internal Revenue Code of 1986 shall be treated as one employer. Subsequent to the issuance of a health benefit plan to a small employer and for the purpose of determining continued eligibility, the size of a small employer shall be determined annually. Except as otherwise specifically provided, the provisions of this act that apply to a small employer shall continue to apply at least until the plan anniversary following the date the small employer no longer meets the requirements of this definition. In the case of an employer which was not in existence throughout the 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 that the employer will employ on business days in the current calendar year. Any reference in this act to an employer shall include a reference to any predecessor of such employer;

     [(29)] (36) "Small employer carrier" means a carrier that issues or offers to issue health benefit plans covering eligible employees of one or more small employers [in this state], regardless of whether coverage is offered through an association or trust or whether the policy or contract is sitused out of state;

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

     (38) "Waiting period" means, with respect to a group health plan and an individual who is a potential participant or beneficiary in the plan, the period that must pass with respect to the individual before the individual is eligible to be covered for benefits under the terms of the plan. For the purpose of calculating periods of creditable coverage, a waiting period shall not be considered a gap in coverage.

     379.932. 1. Sections 379.930 to 379.952 shall apply to any health benefit plan that provides coverage to the employees of a small employer in this state if any of the following conditions are met:

     (1) Any portion of the premium or benefits is paid by or on behalf of the small employer;

     (2) An eligible employee or dependent is reimbursed, whether through wage adjustments or otherwise, by or on behalf of the small employer for any portion of the premium; [or]

     (3) The health benefit plan is treated by the employer or any of the eligible employees or dependents as part of a plan or program for the purposes of section 162, section 125 or section 106 of the federal Internal Revenue Code; or

     (4) The health benefit plan is marketed to individual employees through an employer.

     2. The provisions of sections 379.930 to 379.952 concerning individual health benefit plans and the individual carriers that offer them shall apply to a health benefit plan that covers eligible persons and their dependents and to a certificate issued to an eligible person that evidences coverage under a policy or contract issued to a trust or association or other similar grouping of individuals, regardless of the situs of delivery of the policy or contract, if the eligible person pays the premium and is not covered under the policy or contract pursuant to continuation of benefits provisions applicable under federal or state law.

     3. (1) Except as provided in subdivision (2) of this subsection, for the purposes of sections 379.930 to 379.952, carriers that are affiliated companies or that are eligible to file a consolidated tax return shall be treated as one carrier and any restrictions or limitations imposed by this act shall apply as if all health benefit plans delivered to or issued for delivery to small employers or eligible persons in this state by such affiliated carriers were issued by one carrier.

     (2) An affiliated carrier that is a health maintenance organization having a certificate of authority under section 354.400, et seq., RSMo, may be considered to be a separate carrier for the purposes of sections 379.930 to 379.952.

     (3) Unless otherwise authorized by the director, a small employer or individual carrier shall not enter into one or more ceding arrangements with respect to health benefit plans delivered or issued for delivery to small employers or eligible persons in this state if such arrangements would result in less than fifty percent of the insurance obligation or risk for such health benefit plans being retained by the ceding carrier. The provisions of sections 375.1280 to 375.1295 shall apply if a small employer or individual carrier cedes or assumes all of the insurance obligation or risk with respect to one or more health benefit plans delivered or issued for delivery to small employers or eligible persons in this state.

     [3. Sections 379.930 to 379.952 shall not apply to any plan or program when the employees pay the total cost of the health benefit plan.]

          [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 of this act 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] A small employer group health plan, and a health carrier offering a health benefit plan in connection with a small employer group health plan, may not require any individual (as a condition of enrollment or continued enrollment under the plan) to pay a premium or contribution which is greater than such premium or contribution for a similarly situated individual enrolled in the plan on the basis of any health status-related factor in relation to the individual or to an individual enrolled under the plan as a dependent of the individual. Nothing in this subsection shall be construed:

     (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;] To restrict the amount that a small employer may be charged for a health benefit plan; or

     (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;] To prevent a small employer group health plan, and a health carrier offering a health benefit plan in connection with a small employer group health plan, from establishing premium discounts or rebates or modifying otherwise applicable copayments or deductibles in return for adherence to programs of health promotion and disease prevention.

     [(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) 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.] 2. In connection with the offering for sale of any health benefit plan to a small employer or eligible person, a small employer or individual 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 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 the employees of the small employer and their dependents;

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

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

     (4)] (3) The provisions relating to any preexisting condition provision; and

     (4) A listing of and descriptive information, including benefits and premiums, about all benefit plans for which the small employer or eligible person is qualified.

     [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.]

     3. The requirements of this section shall apply to:

     (1) All small employer health benefit plans issued or renewed on or after the effective date of sections 379.930 to 379.952; and

     (2) All individual health benefit plans issued after the effective date of sections 379.930 to 379.952.

     379.938. 1. A small employer 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] The plan sponsor has failed to pay premiums or contributions in accordance with the terms of the health benefit plan or the health carrier has not received timely premium payments;

     (2) [Fraud or misrepresentation of the small employer or, with respect to coverage of individual insureds, the insureds or their representatives] The plan sponsor has performed an act or practice that constitutes fraud or made an intentional misrepresentation of material fact under the terms of the coverage;

     (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] A decision by the small employer carrier [elects] to discontinue offering and 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, participants and beneficiaries, 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 and participants and beneficiaries; and

     (c) Discontinue all health insurance issued or delivered for issuance in the state's small employer market and not renew coverage under any health benefit plan issued to a small employer;

     [(7)] (6) 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;

     (7) The director finds that the product form is obsolete and is being replaced with comparable coverage, and the small employer carrier decides to discontinue offering a particular type of health benefit plan in the state's small employer market. A type of health benefit plan may be discontinued by the carrier in that market only if the carrier:

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

     (b) Provides notice of the decision not to renew coverage to all affected small employers, participants and beneficiaries, and to the insurance supervisory official in each state in which an affected insured individual is known to reside, at least one hundred eighty days prior to the nonrenewal of any health benefit plans 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 and participants and beneficiaries;

     (c) Offers to each small employer provided the type of health benefit plan, the option to purchase all other health benefit plans currently being offered by the carrier to small employers in the state; and

     (d) In exercising the option to discontinue the particular type of health benefit plan and in offering the option of coverage under paragraph (c), the carrier acts uniformly without regard to the claims experience of those small employers or any health status-related factor relating to any participants or beneficiaries covered or new participants or beneficiaries who may become eligible for such coverage;

     (8) In the case of health benefit plans that are made available in the small employer market only through one or more bona fide associations or purchasing alliances, the membership of an employer in the association or purchasing alliance, on the basis of which the coverage is provided, ceases, but only if the coverage is terminated under this subdivision uniformly without regard to any health status-related factor relating to any covered individual.

     2. A small employer carrier that elects not to renew a health benefit plan under subdivision [(6)] (5) 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.

     4. An individual health benefit plan subject to sections 379.930 to 379.952 shall be renewable with respect to all individuals or dependents, at the option of the enrollee, except in the following cases:

     (1) The individual has failed to pay premiums or contributions in accordance with the terms of the health benefit plan or the health carrier has not received timely premium payments;

     (2) The individual has performed an act or practice that constitutes fraud or made an intentional misrepresentation of material fact under the terms of the coverage;

     (3) The individual carrier elects to discontinue offering and to nonrenew all its health benefit plans delivered or issued for delivery to individuals in this state. In that case the carrier shall:

     (a) Provide advance notice of its decision 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 individuals and to the insurance supervisory official in each state in which an affected insured individual is known to reside at least one hundred eighty days prior to the nonrenewal of any health benefit plans by the carrier. Notice to the insurance supervisory official shall be provided at least three working days prior to the notice to the affected individuals; or

     (c) Discontinue all health insurance issued or delivered for issuance in the state's individual market and not renew coverage under any health benefit plan issued to an individual;

     (4) The director finds that the continuation of the coverage would not be in the best interests of the policyholders or certificate holders or would impair the carrier's ability to meet its contractual obligations. In that instance the director shall assist affected individuals in finding replacement coverage;

     (5) The director finds that the product form is obsolete and is being replaced with comparable coverage and the individual carrier decides to discontinue offering a particular type of health benefit plan in the state's individual insurance market. A type of health benefit plan may be discontinued by the carrier in the individual market only if the carrier:

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

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

     (c) Offers to each individual provided the particular type of health benefit plan, the option to purchase all other health benefit plans currently being offered by the carrier to individuals in the state; and

     (d) In exercising the option to discontinue the particular type of health benefit plan and in offering the option of coverage under paragraph (c), the carrier acts uniformly without regard to the claims experience of any affected individual or any health status-related factor relating to any covered individuals or beneficiaries who may become eligible for the coverage;

     (6) In the case of health benefit plans that are made available in the individual market only through one or more bona fide associations or purchasing alliances, the membership of an individual in the association or purchasing alliance, on the basis of which the coverage is provided, ceases, but only if the coverage is terminated under this paragraph uniformly without regard to any health status-related factor relating to any covered individual.

     5. A small employer or individual carrier offering coverage through a network plan shall not be required to offer coverage or accept applications in the following instances:

     (1) To an eligible person who no longer resides, lives, or works in the service area, or in an area for which the carrier is authorized to do business, but only if coverage is terminated under this paragraph uniformly without regard to any health status-related factor of covered individuals; or

     (2) To a small employer that no longer has any enrollee in connection with such plan who lives, resides, or works in the service area of the carrier, or the area for which the carrier is authorized to do business.

     379.940. 1. For small employer health benefit plans:

     (1) Every small employer carrier shall, as a condition of transacting business in this state with small employers, actively offer to small employers all health benefit plans it actively markets to small employers in this state [at least two health benefit plans. 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]. A small employer carrier shall be considered to be actively marketing a health benefit plan if it offers that plan to a small employer not currently receiving a health benefit plan by that small employer carrier;

     (2) [(a) A] Subject to subdivision (1), a small employer carrier shall issue [a basic] any health benefit plan [or a standard health benefit plan] to any eligible small employer that applies for [either such] the 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. However, no carrier shall be required to issue a health benefit plan to a self-employed individual who is covered by, or is eligible for coverage under, a health benefit plan offered by an employer.

     [(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.]

     2. For individual health benefit plans:

     (1) Every individual carrier shall, as a condition of transacting business in this state with individuals, actively offer to individuals all health benefit plans it actively markets to individuals in this state. An individual carrier shall be considered to be actively marketing a health benefit plan if it offers that plan to an individual not currently receiving a health benefit plan by that individual carrier.

     (2) Subject to subdivision (1), an individual carrier shall issue any individual health benefit plan to any eligible person that applies for the plan and agrees to make the required premium payments and to satisfy the other reasonable provisions of the health benefit plan not inconsistent with this act, except as provided in subdivision (3) below.

     (3) An individual carrier shall not be required to issue an individual health benefit plan to an eligible person if:

     (a) The individual is covered, or is eligible for coverage, through a benefit plan that provides health care coverage which is provided by the individual's employer. A converted policy is not considered a benefit plan provided by an employer for the purposes of this paragraph;

     (b) The individual is covered, or is eligible for coverage, through a benefit plan that provides health care coverage in which the individual's spouse, parent or guardian is enrolled or eligible to be enrolled;

     (c) The individual already has coverage under an individual health benefit plan or converted policy; except that an individual may purchase a new individual health benefit plan or converted policy and terminate coverage under the prior health benefit plan on the renewal date of the prior health benefit plan or converted policy;

     (d) The individual is covered, or is eligible for coverage, under any other private or public health benefits arrangements, including a Medicare supplement policy or the Medicare program established under Title XVIII of the Social Security Act, 49 Stat. 620 (1935), 42 U.S.C. 301, as amended, or any other act of Congress or law of any state, except for a Medicare-eligible individual who is eligible for Medicare for reasons other than age;

     (e) The individual is covered, or is eligible for any continued group coverage under Section 4980B of the Internal Revenue Code of 1986, Sections 601 through 608 of the Employee Retirement Income Security Act of 1974, or pursuant to sections 2201 through 2208 of the Public Health Service Act, as amended, or any state-required continued group coverage. For the purposes of this subsection, an individual who would have been eligible for continuation coverage, but is not eligible solely because the individual or other responsible party failed to make the required coverage election during the applicable time period, shall be deemed to be eligible for group coverage until the date on which the individual's continuing group coverage would have expired had an election been made.

     [(4) The provisions of this subsection shall be effective one hundred eighty days after the director's approval of the basic health benefit plan and the standard health benefit plan 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.]

     3. (1) A small employer or individual carrier shall file with the director, in a format and manner prescribed by the director, the health benefit plans to be used by the carrier. A health benefit plan filed pursuant to this paragraph may be used by a small employer or individual carrier beginning thirty days after it is filed unless the director disapproves of its use.

     (2) The director at any time may, after providing notice and an opportunity for a hearing to the small employer or individual carrier, disapprove the continued use by a small employer or individual carrier of a health benefit plan on the grounds that the plan does not meet the requirements of sections 379.930 to 379.952.

     [2.] 4. Health benefit plans covering small employers 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] six months following the effective date of the individual's coverage due to a preexisting condition, or the first date of the waiting period for such enrollment if that date is earlier than the effective date. A health benefit plan shall not define a preexisting condition more restrictively than as defined in section 379.930 [:

     (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.]

     (2) The period of any preexisting condition exclusion must be reduced by the aggregate of the period of creditable coverage, pursuant to Public Health Service Act, section 2701(c)(3) as amended by P.L. 104-191, provided that the creditable coverage was continuous to a date not more than sixty-three days prior to the effective date of new coverage. The period of continuous coverage shall not include any waiting period for the effective date of the new coverage applied by the employer or the carrier, or an affiliation period, or for the normal application and enrollment process following employment or other triggering event for eligibility. A health maintenance organization that does not use preexisting condition limitations in any of its health benefit plans may impose an affiliation period. "Affiliation period" means a period of time not to exceed sixty days for new entrants and not to ninety days for late enrollees during which no premiums shall be collected and coverage issued would not become effective, as long as the affiliation period is applied uniformly, without regard to any health status-related factors. This subdivision does not preclude application of any waiting period applicable to all new enrollees under the health benefit plan, provided that any carrier-imposed waiting period shall be no longer than sixty days and shall be used in lieu of a preexisting condition exclusion.

     (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] preexisting conditions for a period not to exceed twelve months.

     (4) A small employer carrier is prohibited from imposing any preexisting condition exclusion in the following cases:

     (a) A small employer carrier shall not impose any preexisting condition exclusion relating to pregnancy as a preexisting condition;

     (b) Subject to paragraph (e), a small employer carrier shall not impose any preexisting condition exclusion in the case of an individual who, as of the last day of the thirty day period beginning with the date of birth, is covered under creditable coverage;

     (c) Subject to paragraph (e), a small employer carrier shall not impose any preexisting condition exclusion in the case of a child who is adopted or placed for adoption before attaining eighteen years of age and who, as of the last day of the thirty day period beginning on the date of adoption or placement for adoption, is covered under creditable coverage. The previous sentence shall not apply to coverage before the date of adoption or placement for adoption;

     (d) A small employer carrier shall not impose any preexisting condition exclusion in the case of a condition for which medical advice, diagnosis, care or treatment was recommended or received for the first time while the covered person held creditable coverage, and the medical advice, diagnosis, care or treatment was a covered benefit under the plan, provided that the creditable coverage was continuous to a date not more than sixty-three days prior to the effective date of the new coverage;

     (e) Subparagraphs (b) and (c) shall no longer apply to an individual after the end of the first sixty-three-day period during all of which the individual was not covered under any creditable coverage.

     (5) (a) Except as provided in paragraph (d) of this subdivision, requirements used by a small employer carrier in determining whether to provide coverage to a small employer, including requirements for minimum 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] shall not require a minimum participation [requirements only by the size of the small employer group] level greater than:

     a. One hundred percent of eligible employees working for groups of three or less employees; and

     b. Seventy-five percent of eligible employees working for groups with more than three employees.

     (c) [a. Except as provided in paragraph (b) of this subdivision, in] 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] creditable 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 modify any requirement for minimum employer contribution applicable to a small employer at any time after the small employer has been accepted for coverage.

     [(5)] (6) (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 or dependents 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.

     (b) Except as permitted under subdivisions (1) and (3) of this subsection, [A] a small employer carrier shall not modify a [basic or standard] health benefit plan with respect to 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 or services otherwise covered by the health benefit plan.

     5. Individual health benefit plans shall comply with the following provisions:

     (1) An individual health benefit plan shall not deny, exclude or limit benefits for a covered eligible person for losses incurred more than twelve months following the effective date of the eligible person's coverage due to a preexisting condition. An individual health benefit plan shall not define a preexisting condition more restrictively than as defined in section 379.930;

     (2) An individual carrier shall waive any carrier waiting period applicable to a preexisting condition exclusion or limitation period with respect to particular services in a health benefit plan for the period of time an eligible person was covered by creditable coverage provided that the creditable coverage was continuous to a date not more than sixty-three days prior to the effective date of new coverage. The period of continuous coverage shall not include any waiting period for the effective date of the new coverage applied by the carrier, or for the normal application and enrollment process. An individual carrier that does not use preexisting condition limits in any of its health benefit plans may impose or apply one or more of the following terms or conditions. However, if more than one term or condition is used, the combination of terms or conditions may not exceed the actuarial value of the twelve-month preexisting condition limit permitted by this section:

     (a) A rating surcharge for a period not to exceed twelve months; or

     (b) An affiliation period. "Affiliation period" means a period of time not to exceed ninety days during which no premiums shall be collected and coverage issued would not become effective, as long as the affiliation period is applied uniformly without regard to any health status-related factors. This paragraph does not preclude application of a waiting period applicable to any new enrollee under the health benefit plan, provided that any carrier-imposed waiting period shall be no longer than ninety days and shall be used in lieu of a preexisting condition exclusion. An affiliation period shall be waived for the period of time an individual was covered by creditable coverage, provided that the creditable coverage was continuous to a date not more than ninety days prior to the effective date of new coverage; and

     (3) Except as permitted under subdivisions (1) and (2) of this subsection, an individual carrier shall not modify a health benefit plan with respect to an individual or dependent, through riders, endorsements or otherwise, to restrict or exclude coverage or benefits for specific diseases, medical conditions or services otherwise covered by the plan.

     [3.] 6. (1) [A small employer] An individual carrier shall not be required to offer coverage or accept applications pursuant to subsection [1] 2 of this section in the case of the following:

     (a) To [a small employer] an eligible person, where the [small employer] eligible person 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] individual 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] eligible persons because of its obligations to existing [group] individual policyholders [and enrollees].

     [(2) A small employer] (c) An individual carrier that cannot offer coverage pursuant to paragraph [(c)] (b) 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.

     (2) A small employer carrier offering coverage through a network plan shall not be required pursuant to subsection 1 to offer coverage to or accept applications from a small employer:

     (a) If the small employer does not have eligible individuals who live, work, or reside in the service area for such network plan; or

     (b) If the small employer does have eligible individuals who live, work, or reside in the service area for such network plan, the carrier has demonstrated, if required, to the director that it will not have the capacity to deliver services adequately to enrollees of any additional groups because of its obligations to existing group contract holders and enrollees; and that it is applying this paragraph uniformly to all employers without regard to the claims experience of those employers and their employees and their dependents or any health status-related factor relating to such employees and dependents.

     (c) A small employer carrier, upon denying health insurance coverage in any service area in accordance with paragraph (2)(b), shall not offer coverage in the small employer market within such service area for a period of one hundred eighty days after the date such coverage is denied.

     [4.] 7. A small employer or individual carrier shall not be required to provide coverage to small employers and eligible persons pursuant to [subsection 1] subsections 1 and 2 of this section for any period of time for which the director determines that requiring the acceptance of small employers or eligible persons in accordance with the provisions of [subsection 1] subsections 1 and 2 of this section would place the [small employer] carrier in a financially impaired condition.

     8. A small employer or individual carrier shall not be required to provide coverage to small employers and eligible persons pursuant to subsections 1 and 2 if the small employer or individual carrier elects not to offer new coverage to small employers and individuals in this state. However, a small employer or individual carrier that elects not to offer new coverage to small employers and individuals under this subsection shall be allowed to maintain its existing policies in the state, subject to the requirements of section 379.938.

     9. A small employer or individual carrier that elects not to offer new coverage to small employers and eligible persons under subsection 8 above shall provide at least one hundred eighty days notice to the director and shall be prohibited from writing new business in the small employer or individual market in this state for a period of five years from the date of notice to the director.

     10. This section shall not apply to health benefit plans offered by a small employer carrier if the carrier makes the health benefit plans available in the small employer market only through one or more bona fide associations or purchasing alliances as defined in section 379.930.

     11. This section shall not be construed to require that a health carrier offering health benefit plans only in connection with group health plans or through one or more bona fide associations or purchasing alliances, or any combination thereof, offer such health insurance coverage in the individual market.

     [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.]

     379.942. [1. There is hereby created a nonprofit entity to be known as the "Missouri Small Employer 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. 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 without the protection of the program; and its commitment to market fairly to all small employers 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.] The Missouri Small Employer Health Reinsurance Program is hereby dissolved. Any funds held by the program on the effective date of this section shall, after payment of all outstanding program debts, be distributed to the health carriers that paid into the program in proportion to the assessments paid by such carriers over the life of the program.

          [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;

          (4) Establish procedures for collecting assessments from reinsuring carriers to fund claims and administrative expenses incurred or estimated to be incurred by the program; and

          (5) 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 the program;

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

          (7) 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) 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) 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 subparagraph 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 1 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.

          (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 on-going 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. 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.]

          [379.944. 1. The director shall appoint a seven-member "Health Benefit Plan Committee". The committee shall be composed of one representatives 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 health care provider, and a 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) The committee shall submit the health benefit plans described in this subsection to the director for approval within one hundred eighty days after the appointment of the committee.]

          [379.946. The board shall study and report at least every three years to the director on the effectiveness of sections 379.930 to 379.952. The report shall analyze the effectiveness of sections 379.930 to 379.952 in promoting rate stability, product availability, and coverage affordability. The report may contain recommendations for actions to improve the overall effectiveness, efficiency and fairness of the small group health insurance marketplace. The report shall address whether carriers and producers are fairly and actively marketing or issuing health benefit plans to small employers in fulfillment of the purposes of sections 379.930 to 379.952. The report may contain recommendations for market conduct or other regulatory standards or action.]

     379.950. 1. The director may promulgate rules pursuant to chapter 536, RSMo, for the implementation and administration of sections 379.930 to 379.952 and section 374.184, RSMo. 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.

     2. The director may require small employer or individual carriers, as a condition of transacting business with small employers or individuals in this state after the effective date of sections 379.930 to 379.952, to reissue a health benefit plan to any small employer or individual whose health benefit plan has been terminated or not renewed by the carrier within six months prior to the effective date of sections 379.930 to 379.952. The director may prescribe such terms for the reissuance of coverage as the director finds are reasonable and necessary to provide continuity of coverage to small employers and individuals.

     3. The director may prescribe standards for determining whether a policy issued as a stop loss policy is a health benefit plan for the purposes of sections 379.930 to 379.952.

     379.952. 1. Each small employer and individual carrier shall actively market all health benefit [plan] plans sold by the carrier [coverage, including the basic and standard health benefit plans,] to eligible small employers and individuals, respectively, 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.]

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

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

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

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

     3. (1) Except as provided in subdivision (2) of this subsection, no small employer or individual 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 initial or renewal health status, claims experience, industry, occupation or geographic location of the small employer or individual.

     (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 small employer or individual.

     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 or individual 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 initial or renewal health status, claims experience, occupation, or geographic location of the small employers or individuals placed by the agent or broker with the small employer or individual carrier.

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

     7. Denial by a small employer or individual carrier of an application for coverage from a small employer or individual 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 small employers and individuals in this state.

     9. (1) A violation of this section by a small employer or individual 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 or individuals in this state, the third-party administrator shall be subject to this section as if it were a small employer or individual carrier.

     Section B. Because immediate action is necessary in order to bring Missouri law into compliance with the federal Health Insurance Portability and Accountability Act of 1996 (Public Law 104-191) by July 1, 1997, this act is deemed necessary for the immediate preservation of the public health, welfare, peace, and safety, and an emergency exists within the meaning of the constitution, and this act shall become effective on July 1, 1997, or upon final passage and approval, whichever later occurs.