Requirements Applicable to Small Employer Health Benefit Plans

The requirements of the Small Employer Health Insurance Law applies to group health insurance policies or certificates offered to small employers. It also applies to individual health insurance policies that are offered through a small employer if 3 or more individual policies are sold to employees and premiums are collected through an agreement with an employer.

Exclusions and Limitations
Preexisting Condition Exclusions
Portability
Special Enrollment Periods
Enrollment Participation
Special Provisions

Exclusions and Limitations

A small employer insurer may exclude or limit coverage of specified conditions and services. The small employer insurer is allowed to exclude or limit only those conditions and services which are generally excluded from coverage or limited under the insurer's other small group health benefit plans.

Preexisting Condition Exclusions

A fully insured small employer plan can exclude coverage for preexisting conditions for up to 12 months (18 months for a late enrollee) after an individual's enrollment date. Any preexisting condition exclusion must be reduced by an individual's prior creditable coverage. No preexisting condition may be applied to an individual who maintains continuous creditable coverage (without a break of 63 or more days) for 12 months (18 months for a late enrollee).

A preexisting condition exclusion is a limitation or exclusion of health benefits based on the fact that a physical or mental condition was present before the first day of coverage. A preexisting condition exclusion is limited to a physical or mental condition for which medical advice, diagnosis, care or treatment was recommended or received within the 6-month period ending on the enrollment date in a plan or policy.

During the preexisting condition exclusion period, the plan or issuer may not cover or pay for treatment of a medical condition based on the fact that the condition was present prior to an individual's enrollment date under the new plan or policy. (The plan or issuer must, however, pay for any unrelated covered services or conditions that arise once coverage has begun.) The enrollment date is the first day of coverage, or if there is a waiting period before coverage takes effect, the first day of the waiting period.

Conditions that may not be considered "preexisting:"

• Pregnancy may not be considered a preexisting condition. In other words, if you are pregnant when you join your new employer group health plan, your pregnancy must be covered.
• Genetic information may not be considered a preexisting condition if there is no specific diagnosis of a current disease or medical problem related to the genetic test.
• Services provided for children adopted or placed for adoption before 18 years of age.

Portability

Employees who have satisfied a preexisting condition waiting period under a small employer's plan will not have to satisfy another waiting period if they go to work for another small employer. They also cannot be denied coverage under their new employer's plan because of their health or the health of their dependents.

Special Enrollment Periods

Small employer plans must provide a special period:

• For individuals who become dependents by marriage, birth, or adoption. At that time, the employee or spouse may also elect coverage if not already covered.
• For employee/dependents who initially decline your plan coverage because they were covered through their spouse and then lose that coverage.

Enrollment Participation

A small employer insurer may establish minimum participation and employer contribution rules and requirements on a group health benefit plan offered to a small employer. A small employer insurer that offers a group health benefit plan to a small employer through a network plan may limit the small employers to those with eligible individuals who reside, live or work in the service area of the network plan.

Special Provisions Relating to the Sale of Small Employer Health Insurance Policies

There are special provisions in the small employer health insurance law relating to the sale of group or individual health insurance policies to small employers.

• Small employer insurance plans are required to treat all eligible individuals equally with regard to health status. For example, plans may not discriminate against individuals with an unfavorable medical history.
• Small employer insurers are required to automatically renew group coverage each year as long as the insurer is in the group market.
• Small employer insurers selling coverage to small employers are required to make products available to all small employers who apply.
• The law sets restrictions on the premium rates that a small employer insurer can charge a small employer. The rates must not vary by more than 30% from the midpoint for policies issued by the insurer to all small employers with the same or similar case characteristics and the same or similar benefit design characteristics. This restriction means that if the midpoint rate charged to small employer groups with a given plan is $100 per month for single coverage, then the insurer could not charge less than $70 and not more than $130 per month for single coverage to other similar groups.
• The law also establishes restrictions on the amount insurers can increase premiums when a policy is renewed. It prohibits small employer insurers from increasing rates more than 15% per year due to claims experience.

What is meant by "case characteristics" and "benefit design characteristics?"

The premium rates an insurer can charge a small business are set in a range by Wisconsin law for employers offering plans which have similar "case characteristics" and with the same "benefit design characteristics."

Case characteristics include the age and sex of employees, the geographic location and other objective information which insurers use to determine rates. Case characteristics do not include loss or claims history, health status, occupation of the group, or how long the policy has been in force.

Benefit design characteristics refers to the medical services covered under the plan, the deductibles and copayments, the managed care, or utilization review aspects of the plan, and other features included in the plan.

Small employer insurers must use objective actuarial data to support the reasons for various benefit group characteristics.

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