SENATE, No. 76
STATE OF NEW JERSEY
Introduced Pending Technical Review by Legislative Counsel
PRE-FILED FOR INTRODUCTION IN THE 1996 SESSION
By Senator BASSANO
An Act concerning certain small group health insurance plans and supplementing Title 17B of the New Jersey Statutes.
Be It Enacted by the Senate and General Assembly of the State of New Jersey:
1. The Legislature finds and declares that:
a. Small employers have traditionally been at an economic disadvantage with respect to the provision of health insurance for their employees because they lack the ability to self-insure;
b. Self-insurance, which permits health benefits plans to be established which are specifically tailored to the needs of the employees, is often less expensive to administer than traditional insurance;
c. There are now a number of administrators who can provide plan administration services at considerably reduced cost because their overhead is significantly lower than that of traditional insurance companies;
d. Self-insurance, if administered properly, presents the employer with greater opportunities to implement managed care and the closer monitoring of the utilization of benefits than does a traditional insurance program;
e. It is worthwhile to present an opportunity to small employers to join together to take advantage of the economy of scale which self-insurance brings to the delivery of health benefits to large groups; and
f. It is recognized that small employers do not have the resources to administer these plans as efficiently or skillfully as do large companies, and it is thus desirable, as a matter of public policy, to protect members of small employer groups by providing for a greater degree of structure for their activities than is the case with large employers.
2. For the purposes of this act:
"Commissioner" means the Commissioner of Insurance.
"Eligible group of small employers" means any group of small employers which: (1) are engaged in the same type of trade or business; (2) are members of a common trade association, professional association, or other association; or (3) are affiliates of a common parent company.
"Exchange" means a Small Employers Health Benefits Exchange" as provided for in section 3 of this act.
"Health benefits plan" means any hospital or medical expense benefits coverage or dental expense coverage.
"Member" means any small employer which is a member of an exchange as provided for in section 3 of this act.
"Small employer" means any person firm, corporation, partnership or association actively engaged in business which, on at least 50% of its working days during the preceding calendar year quarter, employed at least two but no more than 49 employees, the majority of whom are employed within the State of New Jersey; except that in the case of a small employer who is a member of an exchange because the employer is a member of a common trade association, the restriction on the number of employees shall not apply. In determining the number of employees, businesses which are affiliated businesses shall be considered one employer, and the size of the small employer shall be determined annually. Except as otherwise specifically provided by the by-laws of an exchange, provisions of this act which apply to a small employer shall continue to apply until the anniversary date of the health benefits plan next following the date the employer no longer meets the definition of a small employer.
"Trustee" means a member of the board of trustees of an exchange as provided for in section 4 of this act.
3. Any eligible group of small employers may join together by means of a joint contract under the procedures established by this act for the purpose of providing health benefits plans for their employees and the employees' dependents. The joint contract shall be executed by all members of the exchange, which may be a corporation, and the entity thus created shall be known as a "Small Employers Health Benefits Exchange."
4. The exchange shall be governed by a board of trustees, elected by the members of the exchange, and shall be composed of not less than seven nor more than nine members, as provided in the exchange's by-laws. The trustees shall serve for terms of three years, and shall serve until their successors are elected and qualified. The by-laws shall provide for staggered terms. The trustees shall serve without compensation, except for reimbursement for actual expenses. At the annual meeting of the exchange, the members shall elect from among the trustees a chairman, a treasurer, and a secretary, whose terms of office shall be no longer than one year. No trustee shall be elected for more than three consecutive terms.
5. The trustees shall, within 60 days of their initial election by the members after the effective date of this act, formulate by-laws for the operation of the exchange, which shall be ratified by a two-thirds majority of the members. The by-laws shall include, but not be limited to:
a. The establishment of procedures for the organization and administration of the exchange;
b. Procedures for the verification of eligibility and the assessment of members for their contributions to the exchange and for the collection of assessments which may be in default; provided that the assessments may vary only by size of group and shall not vary by reason of the health status, age, or occupation of any member or employee thereof;
c. At the discretion of the trustees, procedures for the employment of a director of the exchange, whether on a full-time, part-time, or consulting basis;
d. Procedures for the appointment of selecting an administrator to pay claims on behalf of the exchange;
e. Procedures for the obtaining of other professional services as may be needed from time to time, which may include, but not be limited to, utilization review services, case management services, claims review services, accounting services, actuarial services, and legal services;
f. Procedures for obtaining stop-loss coverage, reinsurance, or other services;
g. Procedures for the withdrawal of a member from the exchange;
h. Procedures for the admission of additional members to the exchange;
i. Procedures for the expulsion of a member of the exchange;
j. Procedures for the termination and liquidation of the exchange and the payment of its outstanding obligations.
6. Within 30 days after its election, the trustees shall file with the commissioner a certificate which shall list the members of the exchange, the names of the trustees and the chairman, treasurer, and secretary of the trustees, and the address at which communications for the exchange are to be received and service of process is to be made, a copy of the certificate of incorporation of the exchange, if any, and a copy of the joint contract to which members of the exchange are parties.
7. The health benefits to be provided by the plan shall be evidenced by a health benefit plan document which shall be distributed to member employers and shall contain a statement of all health benefits to be made available to the plan beneficiaries. The health benefits may include, but shall not be limited to, any or all of the following: hospital expense coverage, medical expense coverage, major medical coverage, or dental benefits. The health benefits plan document shall contain a statement of the deductibles and copayments applicable to the plan, as well as coverage limitations, exclusions, and criteria for plan eligibility.
8. The trustees of the exchange shall require a capital deposit from every member upon the member's entry into the exchange, which shall remain on deposit in cash or in investments. The capital deposits and any surplus from operations shall form the exchange's reserve, the amount of which shall be established by the trustees from time to time in consultation with an actuary. If at any time the reserve is less than that required by this section, the members shall be assessed in an amount to make up the deficiency. In the event that there is a deficiency, the trustees shall notify the members of the deficiency. If the members fail to advance the sums necessary to satisfy the deficiency, the trustees may order that the exchange be liquidated in accordance with the exchange's by-laws.
9. No exchange shall begin providing health benefits to its members pursuant to the provisions of this act until its by-laws are adopted by the trustees and the capital deposits have been paid into the exchange in an amount, form and manner, which is in accordance with the provisions of this act.
10. At least annually, the exchange shall file with the commissioner a financial statement for the preceding calendar year, in a form prescribed by the commissioner, along with a filing fee of $250.
11. Every exchange providing health benefits under this act on a self-insured basis shall purchase stop-loss coverage or reinsurance, either on an aggregate or individual attachment point basis, or both, from an insurer providing such coverage which is admitted or authorized to do business in this State pursuant to Title 17 of the Revised Statutes or Title 17B of the New Jersey Statutes and which has a financial rating of A- or better, or its equivalent, from a national rating agency, or which is eligible to write surplus lines coverage in this State pursuant to Title 17 of the Revised Statutes.
12. An exchange may contract with an administrator to provide health benefits to its members pursuant to the provisions of this act. A copy of the contract and any amendments thereto shall be filed with the commissioner.
13. The exchange may employ any consultant, administrator, or clerical personnel as are provided for in the by-laws, provided that any consultant or administrator so employed shall be qualified by virtue of having at least five years' experience in health benefits management or risk management or equivalent educational or professional training. Any consultant or administrator hired by the exchange may be removed by the trustees or upon the vote of two thirds of the members of the exchange.
14. a. The trustees shall establish procedures in the by-laws for the collection, investment, and disbursement of the moneys in the exchange. The procedures shall be established in a manner which will maximize the benefits to the members with respect to investment income and cash flow. An accounting of the exchange's income and claims paid shall be sent monthly to all exchange members.
b. No later than 60 days before the anniversary of the health benefits plan, the trustees, in consultation with an actuary, shall determine each member's assessment for the ensuing calendar year and shall notify each member thereof. Assessments may be paid on an annual, semi-annual, quarterly, bi-monthly, or monthly basis, as provided in the by-laws.
15. The exchange shall hold an annual meeting, at a time and place to be established by the board. The meetings shall be held within the first quarter of each calendar year, and all members shall be notified of the meeting at least 60 days in advance. Prior to the annual meeting nominations shall be made from the membership for vacancies on the board. Voting may be done by proxy, as provided in the by-laws. Additional meetings may be held at any time, upon at least 15 days' notice to the members of the exchange. Notice of the annual meeting and any additional meetings shall be sent to the commissioner.
16. Amendments to the by-laws may be proposed by recommendation of the board or by petition of 60% of the members. Amendments shall be ratified by at least a two-thirds vote of the membership and filed with the commissioner.
17. The trustees may, from time to time, recommend modifications or additions to the health benefits plan provided by the exchange. These modifications shall become effective upon ratification by two-thirds of the members of the exchange, and shall be filed with the commissioner upon their ratification.
18. The trustees of the exchange shall cause an annual audit to be made of the exchange's financial condition, which shall be transmitted
to all members of the exchange. The trustees shall also cause a claims audit to be made at least biennially.
19. The members of the exchange may be assessed, from time to time, for reasonable expenses for the administration of the exchange, as provided by the by-laws of the exchange.
20. Any exchange established pursuant to the provisions of this act is not an insurance company, health service corporation, hospital service corporation, medical service corporation, dental service corporation or health maintenance organization under the laws of this State, and the authorized activities of the exchange do not constitute the transaction of insurance nor doing an insurance business.
21. Every member of the exchange, as a condition of membership, shall provide equal access to the benefits provided for herein by all of the member's full-time employees who work a normal work week of 25 or more hours.
22. a. A health benefits plan provided by an exchange pursuant to this act shall not include any preexisting condition provision, except that, a preexisting condition provision may apply to a late enrollee or to any small employer group of two to five persons if the provision excludes coverage for a period of no more than 180 days following the effective date of coverage of the enrollee, and relates only to conditions manifesting themselves during the six months immediately preceding the effective date of coverage of the enrollee in such a manner as would cause an ordinarily prudent person to seek medical advice, diagnosis, care or treatment or for which medical advice, diagnosis, care, or treatment was recommended or received during the six months immediately preceding the effective date of coverage, or as to a pregnancy existing on the effective date of coverage; except that, if 10 or more late enrollees request enrollment during any 30-day enrollment period, then no preexisting condition provision shall apply to any such enrollee.
b. In determining whether a preexisting condition provision applies to an eligible employee or dependent, the health benefits plan shall credit the time that person was covered under any previous health benefits plan if the previous coverage was continuous to a date not more than 90 days prior to the effective date of the new coverage, exclusive of any applicable waiting period under the plan.
c. For the purposes of this section, "late enrollee" is defined pursuant to section 1 of P.L.1992, c.162 (C.17B:27A-17).
23. All of the materials required to be filed with the commissioner pursuant to this act shall be available for public inspection.
24. This act shall apply to an exchange established after the effective date of this act and, in the case of an existing exchange or self-insured trust, this act shall apply upon the first anniversary date for renewal of the contract or agreement after the effective date of this act.
25. The commissioner shall promulgate rules and regulations pursuant to the "Administrative Procedure Act," P.L.1968, c.410 (C.52:14B-1 et seq.) as are necessary to effectuate the purposes of this act.
26. This act shall take effect immediately.
STATEMENT
This bill would permit certain small employers to combine for the purpose of self-insuring for health benefits. The small employers would join together by means of a joint contract and create an entity to be known as a "Small Employers Health Benefits Exchange."
Small employers have been at a disadvantage because they do not have the financial or technical resources to assume the risk of self-insurance. This bill is similar to the idea of a risk retention group or a reciprocal insurer as it is normally applied in property-casualty insurance. This bill provides a statutory framework for small employers who wish to combine to insure for health benefits. The employers would have to have some type of relationship with each other, whether being in a similar business or trade, in a trade association or other professional association, or under common control of a parent company.
Permits certain small groups to combine for purpose of self-insuring or purchasing traditional insurance for health benefits.