An Act concerning individual and group health insurance, and amending and supplementing various parts of the statutory law.

Be It Enacted by the Senate and General Assembly of the State of New Jersey:

1. Section 8 of P.L.1992, c.161 (C.17B:27A-9) is amended to read as follows:

8. a. (Deleted by amendment, P.L.2008, c.38).

b. The board shall make application on behalf of all carriers for any other subsidies, discounts, or funds that may be provided for under State or federal law or regulation. A carrier may include subsidies or funds granted to the board to reduce its premium rates for individual health benefits plans subject to this act.

c. A carrier shall not issue individual health benefits plans on a new contract or policy form pursuant to this act until an informational filing of a full schedule of rates which applies to the contract or policy form has been filed with the commissioner. The commissioner shall provide a copy of the informational filing to the Attorney General and the board.

d. A carrier desiring to increase or decrease premiums for any contract or policy form may implement that increase or decrease upon making an informational filing with the commissioner of that increase or decrease, along with the actuarial assumptions and methods used by the carrier in establishing that increase or decrease. The commissioner may disapprove any informational filing on a finding that it is incomplete and not in substantial compliance with P.L.1992, c.161 (C.17B:27A-2 et al.), or that the rates are inadequate or unfairly discriminatory.

e. (1) Rates shall be formulated on contracts or policies required pursuant to section 3 of this act so that the anticipated minimum loss ratio for a contract or policy form shall not be less than 80% of the premium. The carrier shall submit with its rate filing supporting data, as determined by the commissioner, and a certification by a member of the American Academy of Actuaries, or other individuals in a format acceptable to the commissioner, that the carrier is in compliance with the provisions of this subsection.

(2) Each calendar year, a carrier shall return, in the form of aggregate benefits for all of the policy or contract forms offered by the carrier pursuant to subsection a. of section 3 of P.L.1992, c.161 (C.17B:27A-4), at least 80% of the aggregate premiums collected for all of the policy or contract forms during that calendar year. Carriers shall annually report, no later than August 1 of each year, the loss ratio calculated pursuant to this section for all of the policy or contract forms for the previous calendar year. In each case in which the loss ratio fails to comply with the 80% loss ratio requirement, the carrier shall issue a dividend or credit against future premiums for all policy or contract holders, as applicable, in an amount sufficient to assure that the aggregate benefits paid in the previous calendar year plus the amount of the dividends and credits equal 80% of the aggregate premiums collected for the policy or contract forms in the previous calendar year. All dividends and credits shall be distributed by December 31 of the year following the calendar year in which the loss ratio requirements were not satisfied.

The annual report required by this subsection shall include a carrier's calculation of the dividends and credits applicable to all policy or contract forms, as well as an explanation of the carrier's plan to issue dividends or credits. The instructions and format for calculating and reporting loss ratios and issuing dividends or credits shall be specified by the commissioner by regulation. Those regulations shall include provisions for the distribution of a dividend or credit in the event of cancellation or termination by a policyholder.

(3) Beginning with the calendar year starting on January 1, 2015, and in each calendar year thereafter, the annual report of loss ratios shall include:

(a) a specific breakdown of the carrier's administrative expenses for the previous calendar year, which allocates costs to the following categories:

(i) executive salaries and benefits;

(ii) commissions and other fees paid to brokers or agents;

(iii) utilization and other benefits management expenses;

(iv) advertising and marketing expenses;

(v) insurance expenses, including expenses for reinsurance, general liability, and professional liability policies;

(vi) taxes, including insurance premium taxes, payroll taxes, and property taxes;

(vii) travel and entertainment expenses;

(viii) state and federal lobbying expenses; and

(ix) other expenses, including but not limited to non-executive salaries, wages and other benefits, rent and real estate expenses, certification, accreditation, board, bureau and association fees; occupancy, depreciation and amortization; cost or depreciation of electronic data processing, claims and other services, regulatory authority licenses and fees, investment expenses and aggregate write-ins for expenses;

(b) total administrative expenses incurred by the carrier in the previous calendar year, which shall be the sum of the costs provided as to sub-subparagraphs (i) through (ix) of this subparagraph (a) of this paragraph;

(d) net earned premiums received by the carrier in the previous calendar year.

(4) The commissioner shall specify by regulation the instructions and format for submitting annual reports, including a requirement that annual reports shall be certified by a member of the American Academy of Actuaries as accurate and complete.

(5) The commissioner shall make available to the public, through its official department website, and in printed format, upon request, each carrier's annual report.

f. (Deleted by amendment, P.L.2008, c.38).

(cf: P.L.2008, c.38, s.16)

2. Section 9 of P.L.1992, c.162 (C.17B:27A-25) is amended to read as follows:

9. a. (1) (Deleted by amendment, P.L.1997, c.146).

(2) (Deleted by amendment, P.L.1997, c.146).

(3) (a) For all policies or contracts providing health benefits plans for small employers issued pursuant to section 3 of P.L.1992, c.162 (C.17B:27A-19), and including policies or contracts offered by a carrier to a small employer who is a member of a Small Employer Purchasing Alliance pursuant to the provisions of P.L.2001, c.225 (C.17B:27A-25.1 et al.) the premium rate charged by a carrier to the highest rated small group purchasing a small employer health benefits plan issued pursuant to section 3 of P.L.1992, c.162 (C.17B:27A-19) shall not be greater than 200% of the premium rate charged for the lowest rated small group purchasing that same health benefits plan; provided, however, that the only factors upon which the rate differential may be based are age, gender and geography. Such factors shall be applied in a manner consistent with regulations adopted by the commissioner. For the purposes of this paragraph (3), policies or contracts offered by a carrier to a small employer who is a member of a Small Employer Purchasing Alliance shall be rated separately from the carrier's other small employer health benefits policies or contracts.

(b) A health benefits plan issued pursuant to subsection j. of section 3 of P.L.1992, c.162 (C.17B:27A-19) shall be rated in accordance with the provisions of section 7 of P.L.1995, c.340 (C.17B:27A-19.3), for the purposes of meeting the requirements of this paragraph.

(4) (Deleted by amendment, P.L.1994, c.11).

(5) Any policy or contract issued after January 1, 1994 to a small employer who was not previously covered by a health benefits plan issued by the issuing small employer carrier, shall be subject to the same premium rate restrictions as provided in paragraph (3) of this subsection, which rate restrictions shall be effective on the date the policy or contract is issued.

(6) The board shall establish, pursuant to section 17 of P.L.1993, c.162 (C.17B:27A-51):

(a) up to six geographic territories, none of which is smaller than a county; and

(b) age classifications which, at a minimum, shall be in five-year increments.

b. (Deleted by amendment, P.L.1993, c.162).

c. (Deleted by amendment, P.L.1995, c.298).

d. Notwithstanding any other provision of law to the contrary, this act shall apply to a carrier which provides a health benefits plan to one or more small employers through a policy issued to an association or trust of employers.

A carrier which provides a health benefits plan to one or more small employers through a policy issued to an association or trust of employers after the effective date of P.L.1992, c.162 (C.17B:27A-17 et seq.), shall be required to offer small employer health benefits plans to non-association or trust employers in the same manner as any other small employer carrier is required pursuant to P.L.1992, c.162 (C.17B:27A-17 et seq.).

e. Nothing contained herein shall prohibit the use of premium rate structures to establish different premium rates for individuals and family units.

f. No insurance contract or policy subject to this act, including a contract or policy entered into with a small employer who is a member of a Small Employer Purchasing Alliance pursuant to the provisions of P.L.2001, c.225 (C.17B:27A-25.1 et al.), may be entered into unless and until the carrier has made an informational filing with the commissioner of a schedule of premiums, not to exceed 12 months in duration, to be paid pursuant to such contract or policy, of the carrier's rating plan and classification system in connection with such contract or policy, and of the actuarial assumptions and methods used by the carrier in establishing premium rates for such contract or policy.

g. (1) Beginning January 1, 1995, a carrier desiring to increase or decrease premiums for any policy form or benefit rider offered pursuant to subsection i. of section 3 of P.L.1992, c.162 (C.17B:27A-19) subject to this act may implement such increase or decrease upon making an informational filing with the commissioner of such increase or decrease, along with the actuarial assumptions and methods used by the carrier in establishing such increase or decrease, provided that the anticipated minimum loss ratio for all policy forms shall not be less than 80% of the premium therefor as provided in paragraph (2) of this subsection. The commissioner may disapprove any informational filing on a finding that it is incomplete and not in substantial compliance with P.L.1992, c.162 (C.17B:27A-17 et seq.), or that the rates are inadequate or unfairly discriminatory. Until December 31, 1996, the informational filing shall also include the carrier's rating plan and classification system in connection with such increase or decrease.

(2) Each calendar year, a carrier shall return, in the form of aggregate benefits for all of the standard policy forms offered by the carrier pursuant to subsection a. of section 3 of P.L.1992, c.162 (C.17B:27A-19), at least 80% of the aggregate premiums collected for all of the standard policy forms, other than alliance policy forms, and at least 80% of the aggregate premiums collected for all of the non-standard policy forms during that calendar year. A carrier shall return at least 80% of the premiums collected for all of the alliances during that calendar year, which loss ratio may be calculated in the aggregate for all of the alliances or separately for each alliance. Carriers shall annually report, no later than August 1st of each year, the loss ratio calculated pursuant to this section for all of the standard, other than alliance policy forms, non-standard policy forms and alliance policy forms for the previous calendar year, provided that a carrier may annually report the loss ratio calculated pursuant to this section for all of the alliances in the aggregate or separately for each alliance. In each case where the loss ratio fails to substantially comply with the 80% loss ratio requirement, the carrier shall issue a dividend or credit against future premiums for all policyholders with the standard, other than alliance policy forms, nonstandard policy forms or alliance policy forms, as applicable, in an amount sufficient to assure that the aggregate benefits paid in the previous calendar year plus the amount of the dividends and credits shall equal 80% of the aggregate premiums collected for the respective policy forms in the previous calendar year. All dividends and credits must be distributed by December 31 of the year following the calendar year in which the loss ratio requirements were not satisfied. The annual report required by this paragraph shall include a carrier's calculation of the dividends and credits applicable to standard, other than alliance policy forms, non-standard policy forms and alliance policy forms, as well as an explanation of the carrier's plan to issue dividends or credits. The instructions and format for calculating and reporting loss ratios and issuing dividends or credits shall be specified by the commissioner by regulation. Such regulations shall include provisions for the distribution of a dividend or credit in the event of cancellation or termination by a policyholder. For purposes of this paragraph, "alliance policy forms" means policies purchased by small employers who are members of Small Employer Purchasing Alliances.

(3) The loss ratio of a health benefits plan issued pursuant to subsection j. of section 3 of P.L.1992, c.162 (C.17B:27A-19) shall be calculated in accordance with the provisions of section 7 of P.L.1995, c.340 (C.17B:27A-19.3), for the purposes of meeting the requirements of this subsection.

(4) Beginning with the calendar year starting on January 1, 2015, and in each calendar year thereafter, the annual report of loss ratios required by this subsection shall include:

(a) a specific breakdown of the carrier's administrative expenses for the previous calendar year, which allocates costs to the following categories:

(i) executive salaries and benefits;

(ii) commissions and other fees paid to brokers or agents;

(iii) utilization and other benefits management expenses;

(iv) advertising and marketing expenses;

(v) insurance expenses, including expenses for reinsurance, general liability, and professional liability policies;

(vi) taxes, including insurance premium taxes, payroll taxes, and property taxes;

(vii) travel and entertainment expenses;

(viii) state and federal lobbying expenses; and

(b) total administrative expenses incurred by the carrier in the previous calendar year, which shall be the sum of the costs provided as to sub-subparagraphs (i) through (ix) of subparagraph (a) of this paragraph;

(d) net earned premiums received by the carrier in the previous calendar year.

(5) The commissioner shall specify by regulation the instructions and format for submitting annual reports, including a requirement that annual reports shall be certified by a member of the American Academy of Actuaries as accurate and complete.

(6) The commissioner shall make available to the public, through its official department website, and in printed format, upon request, each carrier's annual report.

h. (Deleted by amendment, P.L.1993, c.162).

i. The provisions of this act shall apply to health benefits plans which are delivered, issued for delivery, renewed or continued on or after January 1, 1994.

j. (Deleted by amendment, P.L.1995, c.340).

k. A carrier who negotiates a reduced premium rate with a Small Employer Purchasing Alliance for members of that alliance shall provide a reduction in the premium rate filed in accordance with paragraph (3) of subsection a. of this section, expressed as a percentage, which reduction shall be based on volume or other efficiencies or economies of scale and shall not be based on health status-related factors.

(cf: P.L.2008, c.38, s.24)

3. (New section) a. Beginning with the calendar year starting on January 1, 2015, and in each calendar year thereafter, an insurer shall return, in the form of aggregate benefits for all group health insurance policy forms offered by the insurer pursuant to N.J.S.17B:27-26 et seq., at least 85% of the aggregate premiums collected for all of the policy forms during that calendar year. Insurers shall annually report to the Commissioner of Banking and Insurance, no later than August 1 of each year, the loss ratio calculated for all of the policy forms for the previous calendar year. In each case in which the loss ratio fails to substantially comply with the 85% loss ratio requirement, the insurer shall issue a dividend or credit against future premiums for all policyholders in an amount sufficient to assure that the aggregate benefits paid in the previous calendar year plus the amount of the dividends and credits shall equal 85% of the premiums collected in the previous calendar year. All dividends and credits shall be distributed by December 31 of the year following the calendar year in which the loss ratio requirements were not satisfied. The annual report shall include an insurer's calculation of the dividends and credits applicable to all policy forms, as well as an explanation of the insurer's plan to issue dividends or credits.

b. Beginning with the calendar year starting on January 1, 2015, and in each calendar year thereafter, the annual report of loss ratios required by this section shall include:

(1) a specific breakdown of the carrier's administrative expenses for the previous calendar year, which allocates costs to the following categories:

(a) executive salaries and benefits;

(b) commissions and other fees paid to brokers or agents;

(d) advertising and marketing expenses;

(e) insurance expenses, including expenses for reinsurance, general liability, and professional liability policies;

(f) taxes, including insurance premium taxes, payroll taxes, and property taxes;

(g) travel and entertainment expenses;

(h) state and federal lobbying expenses; and

(i) other expenses, including but not necessarily limited to non-executive salaries, wages and other benefits, rent and real estate expenses, certification, accreditation, board, bureau and association fees; occupancy, depreciation and amortization; cost or depreciation of electronic data processing, claims and other services, regulatory authority licenses and fees, investment expenses and aggregate write-ins for expenses;

(2) total administrative expenses incurred by the carrier in the previous calendar year, which shall be the sum of the costs provided as to subparagraphs (a) through (i) of paragraph (1) of this subsection;

(3) total claims paid by the carrier in the previous calendar year; and

(4) net earned premiums received by the carrier in the previous calendar year.

c. The commissioner shall specify by regulation:

(1) any informational filings required to be submitted by insurers to the commissioner in order to determine whether insurers are in compliance with their loss ratio requirements;

(2) the instructions and format for calculating and reporting loss ratios and issuing dividends or credits;

(3) procedures for the distribution of a dividend or credit in the event of cancellation or termination by a policyholder; and

(4) the instructions and format for submitting annual reports, including a requirement that annual reports shall be certified by a member of the American Academy of Actuaries as accurate and complete.

d. The commissioner shall make available to the public, through its official department website, and in printed format, upon request, each carrier's annual report.

4. This act shall take effect immediately.

STATEMENT

This bill applies enhanced reporting and public disclosure requirements to the 80% loss ratio requirements currently applicable to carriers offering individual and small group health insurance plans in the State. The bill also applies a new 85% loss ratio requirement to carriers that provide large group health insurance plans in the State, and applies the same enhanced reporting and disclosure requirements to the loss ratio requirements of these carriers. Generally, a loss ratio requirement means that a certain percentage of every premium dollar must be expended on the payment of claims, while the remaining percentage can be used for administrative expenses.

The bill's requirements apply, beginning with the calendar year starting on January 1, 2015, and in each calendar year thereafter.

As to carriers participating in the individual, small employer, and large employer markets, and their obligations to provide the Department of Banking and Insurance an annual report of loss ratios, the bill requires the annual report to include, so as to provide specific information about administrative expenses in comparison to amounts expended for payment of claims:

(1) a specific breakdown of the carrier's administrative expenses for the previous calendar year, which allocates costs to the following categories:

(a) executive salaries and benefits;

(b) commissions and other fees paid to brokers or agents;

(d) advertising and marketing expenses;

(e) insurance expenses, including expenses for reinsurance, general liability, and professional liability policies;

(f) taxes, including insurance premium taxes, payroll taxes, and property taxes;

(g) travel and entertainment expenses;

(h) state and federal lobbying expenses; and

(2) total administrative expenses incurred by the carrier in the previous calendar year, which shall be the sum of the costs provided as to the categories of costs set forth in the bill;

(3) total claims paid by the carrier in the previous calendar year; and

(4) net earned premiums received by the carrier in the previous calendar year.

The bill also requires the department to specify by regulation the instructions for submitting annual reports with the required loss ratio information, including a requirement that the annual report of each carrier be certified by a member of the American Academy of Actuaries as accurate and complete. Finally, the bill requires the department to make each carrier's annual report available to the public through its official department website, and in printed format, upon request.