NU Online News Service, July 18, 10:35 a.m. – The Florida Department of Insurance has put out a memorandum warning small group health insurance carriers against using low standard rates to hook small groups that will end up paying higher “adjusted” rates for coverage.

Florida lets health insurers and health maintenance organizations add an extra 15% adjustment on rates for new small group business, to reflect the groups’ claims experience, health status and other characteristics.

Carriers can also add up 10% when they renew policies.

Tacking on bigger adjustments violates several sections of the Florida statutes.

Issuing arbitrary, standard quotes while charging adjusted rates violates the sections prohibiting “unfair methods of competition” and “unfair or deceptive acts,” the Florida department says.

If a carrier takes small group characteristics into account when setting small group rates, it must take those same characteristics into account when generating quotes, the department says.

The department says a carrier can get around the restrictiond by quoting standard small group rates, but warning that it might add 15% in adjustments for new accounts.

The memo is available on the Florida department Web site, at http://www.doi.state.fl.us/companies/memoranda/indextest.html