Citations Affected: IC 27-8-10.
Synopsis: Annual actuarial study of ICHIA. Requires the
comprehensive health insurance association (ICHIA) to have
completed an annual actuarial study of ICHIA. Requires ICHIA to
annually adjust premiums based on the actuarial study. (The introduced
version of this bill was prepared by the health finance commission.)
Effective: July 1, 2002.
January 7, 2002, read first time and referred to Committee on Health and Provider
A BILL FOR AN ACT to amend the Indiana Code concerning
IS AMENDED TO READ AS
FOLLOWS [EFFECTIVE JULY 1, 2002]: Sec. 2.1. (a) There is
established a nonprofit legal entity to be referred to as the Indiana
comprehensive health insurance association, which must assure that
health insurance is made available throughout the year to each eligible
Indiana resident applying to the association for coverage. All carriers,
health maintenance organizations, limited service health maintenance
organizations, and self-insurers providing health insurance or health
care services in Indiana must be members of the association. The
association shall operate under a plan of operation established and
approved under subsection (c) and shall exercise its powers through a
board of directors established under this section.
(b) The board of directors of the association consists of seven (7) members whose principal residence is in Indiana selected as follows:
(1) Three (3) members to be appointed by the commissioner from the members of the association, one (1) of which must be a representative of a health maintenance organization.
directors will be made and submitted to the commissioner for
(6) contain additional provisions necessary or proper for the execution of the powers and duties of the association; and
(7) establish procedures for the periodic advertising of the general availability of the health insurance coverages from the association.
(d) The plan of operation may provide that any of the powers and duties of the association be delegated to a person who will perform functions similar to those of this association. A delegation under this section takes effect only with the approval of both the board of directors and the commissioner. The commissioner may not approve a delegation unless the protections afforded to the insured are substantially equivalent to or greater than those provided under this chapter.
(e) The association has the general powers and authority enumerated by this subsection in accordance with the plan of operation approved by the commissioner under subsection (c). The association has the general powers and authority granted under the laws of Indiana to carriers licensed to transact the kinds of health care services or health insurance described in section 1 of this chapter and also has the specific authority to do the following:
(1) Enter into contracts as are necessary or proper to carry out this chapter, subject to the approval of the commissioner.
(2) Sue or be sued, including taking any legal actions necessary or proper for recovery of any assessments for, on behalf of, or against participating carriers.
(3) Take legal action necessary to avoid the payment of improper claims against the association or the coverage provided by or through the association.
(4) Establish a medical review committee to determine the reasonably appropriate level and extent of health care services in each instance.
(5) Establish appropriate rates, scales of rates, rate classifications and rating adjustments, such rates not to be unreasonable in relation to the coverage provided and the reasonable operational expenses of the association.
(6) Pool risks among members.
(7) Issue policies of insurance on an indemnity or provision of service basis providing the coverage required by this chapter.
(8) Administer separate pools, separate accounts, or other plans or arrangements considered appropriate for separate members or
groups of members.
(9) Operate and administer any combination of plans, pools, or other mechanisms considered appropriate to best accomplish the fair and equitable operation of the association.
(10) Appoint from among members appropriate legal, actuarial, and other committees as necessary to provide technical assistance in the operation of the association, policy and other contract design, and any other function within the authority of the association.
(11) Hire an independent consultant.
(12) Develop a method of advising applicants of the availability of other coverages outside the association and may promulgate a list of health conditions the existence of which would deem an applicant eligible without demonstrating a rejection of coverage by one (1) carrier.
(13) Provide for the use of managed care plans for insureds, including the use of:
(A) health maintenance organizations; and
(B) preferred provider plans.
(14) Solicit bids directly from providers for coverage under this chapter.
(f) Rates for coverages issued by the association may not be unreasonable in relation to the benefits provided, the risk experience, and the reasonable expenses of providing the coverage. The association shall annually adjust premium rates based on the actuarial study completed under section 2.2 of this chapter. Separate scales of premium rates based on age apply for individual risks. Premium rates must take into consideration the extra morbidity and administration expenses, if any, for risks insured in the association. The rates for a given classification may not be more than one hundred fifty percent (150%) of the average premium rate for that class charged by the five (5) carriers with the largest premium volume in the state during the preceding calendar year. In determining the average rate of the five (5) largest carriers, the rates charged by the carriers shall be actuarially adjusted to determine the rate that would have been charged for benefits identical to those issued by the association. All rates adopted by the association must be submitted to the commissioner for approval.
(g) Following the close of the association's fiscal year, the association shall determine the net premiums, the expenses of administration, and the incurred losses for the year. Any net loss shall be assessed by the association to all members in proportion to their
respective shares of total health insurance premiums, excluding
premiums for Medicaid contracts with the state of Indiana, received in
Indiana during the calendar year (or with paid losses in the year)
coinciding with or ending during the fiscal year of the association or
any other equitable basis as may be provided in the plan of operation.
For self-insurers, health maintenance organizations, and limited service
health maintenance organizations that are members of the association,
the proportionate share of losses must be determined through the
application of an equitable formula based upon claims paid, excluding
claims for Medicaid contracts with the state of Indiana, or the value of
services provided. In sharing losses, the association may abate or defer
in any part the assessment of a member, if, in the opinion of the board,
payment of the assessment would endanger the ability of the member
to fulfill its contractual obligations. The association may also provide
for interim assessments against members of the association if necessary
to assure the financial capability of the association to meet the incurred
or estimated claims expenses or operating expenses of the association
until the association's next fiscal year is completed. Net gains, if any,
must be held at interest to offset future losses or allocated to reduce
future premiums. Assessments must be determined by the board
members specified in subsection (b)(1), subject to final approval by the
(h) The association shall conduct periodic audits to assure the general accuracy of the financial data submitted to the association, and the association shall have an annual audit of its operations by an independent certified public accountant.
(i) The association is subject to examination by the department of insurance under IC 27-1-3.1. The board of directors shall submit, not later than March 30 of each year, a financial report for the preceding calendar year in a form approved by the commissioner.
(j) All policy forms issued by the association must conform in substance to prototype forms developed by the association, must in all other respects conform to the requirements of this chapter, and must be filed with and approved by the commissioner before their use.
(k) The association may not issue an association policy to any individual who, on the effective date of the coverage applied for, does not meet the eligibility requirements of section 5.1 of this chapter.
(l) The association shall pay an agent's referral fee of twenty-five dollars ($25) to each insurance agent who refers an applicant to the association if that applicant is accepted.
(m) The association and the premium collected by the association shall be exempt from the premium tax, the gross income tax, the
adjusted gross income tax, supplemental corporate net income, or any
combination of these, or similar taxes upon revenues or income that
may be imposed by the state.
(n) Members who after July 1, 1983, during any calendar year, have paid one (1) or more assessments levied under this chapter may either:
(1) take a credit against premium taxes, gross income taxes, adjusted gross income taxes, supplemental corporate net income taxes, or any combination of these, or similar taxes upon revenues or income of member insurers that may be imposed by the state, up to the amount of the taxes due for each calendar year in which the assessments were paid and for succeeding years until the aggregate of those assessments have been offset by either credits against those taxes or refunds from the association; or
(2) any member insurer may include in the rates for premiums charged for insurance policies to which this chapter applies amounts sufficient to recoup a sum equal to the amounts paid to the association by the member less any amounts returned to the member insurer by the association, and the rates shall not be deemed excessive by virtue of including an amount reasonably calculated to recoup assessments paid by the member.
(o) The association shall provide for the option of monthly collection of premiums.
SECTION 2. IC 27-8-10-2.2 IS ADDED TO THE INDIANA CODE AS A NEW SECTION TO READ AS FOLLOWS [EFFECTIVE JULY 1, 2002]: Sec. 2.2. Each year, the association shall complete an actuarial study of the association's operations.