NU Online News Service, Nov. 4, 2004, 4:10 p.m. EST

Texas insurance regulators want health carriers in their state to do a better job of applying the same underwriting rules to small employers and very small employers.[@@]

State-regulated small group carriers can require all of the eligible employees in a 2-employee group to participate in a small group plan, but, in most other cases, carriers must treat the smallest small groups as well as they treat larger small groups, regulators say.

Affected carriers must “take immediate action to correct any noncompliant practices, procedures, forms and rates to ensure compliance and avoid an enforcement action,” according to Kimberly Stokes, the senior associate commissioner for life, health and licensing at the Texas Department of Insurance.

Stokes discusses small group underwriting and pricing rules in Texas Insurance Commissioner’s Bulletin Number B-0043-04.

Stokes cites reports of problems with medical questionnaires, issuance of coverage to small employer health coalitions and small group guaranteed renewability requirements.

Separately, Stokes reviews reports of confusion about state coverage continuation rules for group health plans of all sizes.

- Questionnaires: Stokes notes that carriers let some of the larger small employers fill out general health information questionnaires but require all employees at the smallest employers to fill out individual medical questionnaires.

“The law does not permit a carrier to use different applications for different-size small employer groups,” Stokes writes.

Similarly, efforts to offer composite rate options or other special rate options to larger small groups are out-of-bounds, Stokes writes.

If the same rate options are not available to small employers of all sizes, “access to the same coverage is effectively denied,” Stokes concludes.

- Coalitions: Texas now lets small employers to join in small groups to buy health coverage.

The Texas department “has received reports that some carriers are not treating small employer health coalitions in the same manner as a single small employer,” Stokes writes.

Some insurers are quoting excessively high premium rates or demanding excessive documentation, Stokes writes.

But Texas law requires small group carriers to offer the coalitions all the products and guaranteed-issuance features that it would have to offer a single small employer, Stokes writes.

- Guaranteed renewability: A small group carrier can make changes in rates and benefits changes required by state or federal law. Otherwise, a small group carrier that stays in the Texas market must get employer approval for any plan changes, Stokes writes.

“This includes changes of substance, such as eliminating covered benefits, as well as seemingly minor changes, such as co-payment or deductible amounts,” Stokes writes.

- Continuation coverage: Stokes notes that, in some cases, Texas continuation policy rules are tougher than the federal rules. If, for example, an employer completely eliminates health coverage for a class of employees, it might not trigger federal COBRA coverage continuation requirements, but it would have to offer the continuation benefits required by the Texas coverage continuation law, Stokes writes.

The text of the bulletin is on the Web at http://www.tdi.state.tx.us/general/pdf/b-0043-04.pdf