House passes insurance amendments expanding small-employer rating flexibility, 46–23

The Utah House of Representatives on July 20, 2011, approved House Bill 2003, a package of insurance code amendments aimed at allowing more flexible rate structures for small-employer health plans and clarifying marketing and notice rules tied to the state’s health insurance marketplace. Representative Dunnigan, the bill sponsor, said the measure is permissive and intended to give employers and carriers more options until federal rules take effect in 2014.

The bill was amended on the floor by Amendment No. 2, which Representative Dunnigan described as clarifying several case characteristics for small-group health plans (employers with two to 50 employees). Under the amendment, a small business with 19 or fewer employees in which one or more employees is age 65 or older may elect to have Medicare as the primary insurer and the employer plan as secondary, which the sponsor said can reduce employer cost “by up to 50%.” The amendment also removed a statutory requirement about how an employee’s age is determined at the beginning of the plan year, leaving that determination to the carrier and contract terms, and it specified that if the Utah Health Exchange notifies an employer about a change, the insurer need not send a duplicate notice to the employer.

Critics and questioners on the floor raised concerns about midyear premium changes and potential "sticker shock" for employers who might receive notice of an age-related rate change outside the plan anniversary. Representative Lipback asked whether an individual would receive notice of a midyear increase; the sponsor responded that notice goes to the employer because these are employer-based plans. Representative King and others pressed on who would win or lose from slope and tier changes; the sponsor repeatedly described the changes as permissive and modest and said carriers, not statute, would decide whether to adopt alternative tiers or slope adjustments.

The bill also permits more granular family tiers in the open market (allowing up to six tiers for non-exchange plans while keeping four tiers inside the exchange) and relaxes the slope (the relative rate ratio between older and younger enrollees) to provide market flexibility outside the exchange. Sponsor Dunnigan said the changes restore some historical flexibility and are not intended to cause large shifts in pricing.

Voting opened after debate. House Bill 2003, as amended, passed the House 46–23 and was transmitted to the Senate for consideration.

The next procedural step is Senate consideration; the House record shows the bill will be sent to the Senate for its action and any further amendments.