1. A. A reinsuring carrier shall be subject to the provisions of this section.
2. B. There is hereby created a nonprofit entity to be known as the "Oklahoma Small Employer Health Reinsurance Program".

3. C.

   1. 1. The program shall operate subject to the supervision and control of the board. Subject to the provisions of paragraph 2 of this subsection, the board shall consist of eight (8) members appointed by the Insurance Commissioner plus the Commissioner, or his or her designated representative, who shall serve as an ex officio member of the board.

   2. 2.

      1. a. In selecting the members of the board, the Commissioner shall include representatives of small employers and small employer carriers and such other individuals determined to be qualified by the Commissioner. At least five members of the board shall be representatives of carriers and shall be selected from individuals nominated in this state pursuant to procedures and guidelines developed by the Commissioner.
      2. b. In the event that the program becomes eligible for additional financing pursuant to paragraph 3 of subsection L of this section, the board shall be expanded to include two additional members who shall be appointed by the Commissioner. In selecting the additional members of the board, the Commissioner shall choose individuals who represent organizations offering categories of health insurance not already represented on the board, including but not limited to excess or stop loss health insurance. The expansion of the board under this subsection shall continue for the period that the program continues to be eligible for additional financing pursuant to paragraph 3 of subsection L of this section.
   3. 3. The initial board members shall be appointed as follows: two of the members to serve a term of two (2) years; three of the members to serve a term of four (4) years; and three of the members to serve a term of six (6) years. Subsequent board members shall serve for a term of three (3) years. A board member's term shall continue until his or her successor is appointed.
   4. 4. A vacancy on the board shall be filled by the Commissioner. A board member may be removed by the Commissioner for cause.
4. D. Within sixty (60) days after the effective date of this act, each small employer carrier shall make a filing with the Commissioner containing the carrier's net health insurance premium derived from health benefit plans delivered or issued for delivery to small employers in this state in the previous calendar year.
5. E. Within one hundred eighty (180) days after the appointment of the initial board, the board shall submit to the Commissioner a plan of operation and, thereafter, any amendments thereto necessary or suitable to ensure the fair, reasonable and equitable administration of the program. The Commissioner may, after notice and hearing, approve the plan of operation if the Commissioner determines it to be suitable to ensure the fair, reasonable and equitable administration of the program, and to provide for the sharing of program gains or losses on an equitable and proportionate basis in accordance with the provisions of this section. The plan of operation shall become effective upon written approval by the Commissioner.
6. F. If the board fails to submit a suitable plan of operation within one hundred eighty (180) days after its appointment, the Commissioner shall, after notice and hearing, adopt and promulgate a temporary plan of operation. The Commissioner shall amend or rescind any plan adopted under this subsection at the time a plan of operation is submitted by the board and approved by the Commissioner.

7. G. The plan of operation shall:

   1. 1. Establish procedures for the handling and accounting of program assets and monies and for an annual fiscal reporting to the Commissioner;
   2. 2. Establish procedures for selecting an administering carrier and setting forth the powers and duties of the administering carrier;
   3. 3. Establish procedures for reinsuring risks in accordance with the provisions of this section;
   4. 4. Establish procedures for collecting assessments from reinsuring carriers to fund claims and administrative expenses incurred or estimated to be incurred by the program;
   5. 5. Establish a methodology for applying the dollar thresholds contained in this section in the case of carriers that pay or reimburse health care providers through capitation or salary; or
   6. 6. Provide for any additional matters necessary for the implementation and administration of the program.

8. H. The program shall have the general powers and authority granted under the laws of this state to insurance companies and health maintenance organizations licensed to transact business, except the power to issue health benefit plans directly to either groups or individuals. In addition thereto, the program shall have the specific authority to:

   1. 1. Enter into contracts as are necessary or proper to carry out the provisions and purposes of this act, including the authority, with the approval of the Commissioner, to enter into contracts with similar programs of other states for the joint performance of common functions or with persons or other organizations for the performance of administrative functions;
   2. 2. Sue or be sued, including taking any legal actions necessary or proper to recover any assessments and penalties for, on behalf of, or against the program or any reinsuring carriers;
   3. 3. Take any legal action necessary to avoid the payment of improper claims against the program;
   4. 4. Define the health benefit plans for which reinsurance will be provided, and to issue reinsurance policies, in accordance with the requirements of this act;
   5. 5. Establish rules, conditions and procedures for reinsuring risks under the program;
   6. 6. Establish actuarial functions as appropriate for the operation of the program;
   7. 7. Assess reinsuring carriers in accordance with the provisions of subsection L of this section, and to make advance interim assessments as may be reasonable and necessary for organizational and interim operating expenses. Any interim assessments shall be credited as offsets against any regular assessments due following the close of the fiscal year;
   8. 8. Appoint appropriate legal, actuarial and other committees as necessary to provide technical assistance in the operation of the program, policy and other contract design, and any other function within the authority of the program; and
   9. 9. Unless otherwise prohibited by law, borrow money to effect the purposes of the program. Any notes or other evidence of indebtedness of the program not in default shall be legal investments for carriers and may be carried as admitted assets;

9. I. A reinsuring carrier may reinsure with the program as provided for in this subsection:

   1. 1. With respect to a basic health benefit plan or a standard health benefit plan, the program shall reinsure the level of coverage provided and, with respect to other plans, the program shall reinsure up to the level of coverage provided in a basic or standard health benefit plan;
   2. 2. A small employer carrier may reinsure an entire employer group within sixty (60) days following the commencement of the group's coverage under a health benefit plan;
   3. 3. A reinsuring carrier may reinsure an eligible employee or dependent of a small employer within a period of sixty (60) days following the commencement of coverage of the small employer. A newly eligible employee or dependent of the reinsured small employer may be reinsured within sixty (60) days of the commencement of his or her coverage;

   4. 4.

      1. a. The program shall not reimburse a reinsuring carrier with respect to the claims of a reinsured employee or dependent until the carrier has incurred an initial level of claims for such employee or dependent of Five Thousand Dollars ($5,000.00) in a calendar year for benefits covered by the program. In addition, there insuring carrier shall be responsible for ten percent(10%) of the next Fifty Thousand Dollars ($50,000.00)of benefit payments during a calendar year, and the program shall reinsure the remainder. A reinsuring carrier's liability under this subparagraph shall not exceed a maximum limit of Ten Thousand Dollars($10,000.00) in any one (1) calendar year with respect to any reinsured individual.
      2. b. The board annually shall adjust the initial level of claims and the maximum limit to be retained by the carrier to reflect increases in costs and utilization within the standard market for health benefit plans within the state. The adjustment shall not be less than the annual change in the medical component of the "Consumer Price Index for All Urban Consumers" of the Department of Labor, Bureau of Labor Statistics, unless the board proposes and the Commissioner approves a lower adjustment factor;
   5. 5. A small employer carrier may terminate reinsurance with the program for one or more of the reinsured employees or dependents of a small employer on any anniversary of the health benefit plan;
   6. 6. Premium rates charged for reinsurance by the program to a health maintenance organization that is federally qualified under 42 U.S.C. Sec. 300c(c)(2)(A), and as such is subject to requirements that limit the amount of risk that may be ceded to the program that is more restrictive than those specified in paragraph 4 of this subsection, shall be reduced to reflect that portion of the risk above the amount set forth in paragraph 4 of this subsection that may not be ceded to the program, if any; and
   7. 7. A reinsuring carrier shall apply all managed care and claims handling techniques, including utilization review, individual case management, preferred provider provisions, and other managed care provisions or methods of operation consistently with respect to reinsured and nonreinsured business.

10. J.

    1. 1. The board, as part of the plan of operation, shall establish a methodology for determining premium rates to be charged by the program for reinsuring small employers and individuals pursuant to this section. The methodology shall include a system for classification of small employers that reflects the types of case characteristics commonly used by small employer carriers in the state. The methodology shall provide for the development of base reinsurance premium rates which shall be multiplied by the factors set forth in paragraph 2 of this subsection to determine the premium rates for the program. The base reinsurance premium rates shall be established by the board, subject to the approval of the Commissioner, and shall be set at levels which reasonably approximate gross premiums charged to small employers by small employer carriers for health benefit plans with benefits similar to the standard health benefit plan, adjusted to reflect retention levels required under this act.

    2. 2. Premiums for the program shall be as follows:

       1. a. an eligible employee or dependent may be reinsured for a rate that is five (5) times the base reinsurance premium rate for the individual established pursuant to this paragraph, and

       2. b. an entire small employer group may be reinsured for a rate that is one and one-half (1 1/2) times the base reinsurance premium rate for the group established pursuant to this paragraph. However, in no event shall the reinsurance premium for any entire group be less than five (5) times the lesser of:

          1. (1) the lowest base reinsurance rate applicable to any insured employee, or
          2. (2) the lowest base reinsurance rate applicable to any insured dependent in the group.
    3. 3. The board periodically shall review the methodology established under paragraph 1 of this subsection, including the system of classification and any rating factors, to ensure that it reasonably reflects the claims experience of the program. The board may propose changes to the methodology which shall be subject to the approval of the Commissioner.
    4. 4. The board may consider adjustments to the premium rates charged by the program to reflect the use of effective cost containment and managed care arrangements.
11. K. If a health benefit plan for a small employer is entirely or partially reinsured with the program, the premium charged to the small employer for any rating period for the coverage issued shall meet the requirements relating to premium rates set forth in Section 6515 of Title 36 of the Oklahoma Statutes.

12. L.

    1. 1. Prior to March 1 of each year, the board shall determine and report to the Commissioner the program net loss for the previous calendar year, including administrative expenses and incurred losses for the year, taking into account investment income and other appropriate gains and losses.

    2. 2. Any net loss for the year shall be recouped by assessments of reinsuring carriers.

       1. a. The board shall establish, as part of the plan of operation, a formula by which to make assessments against reinsuring carriers. The assessment formula shall be based on:

          1. (1) each reinsuring carrier's share of the total premiums earned in the preceding calendar year from health benefit plans delivered or issued for delivery to small employers in this state by reinsuring carriers, and
          2. (2) each reinsuring carrier's share of the premiums earned in the preceding calendar year from newly issued health benefit plans delivered or issued for delivery during the calendar year to small employers in this state by reinsuring carriers.
       2. b. The formula established pursuant to subparagraph a of this paragraph shall not result in any reinsuring carrier having an assessment share that is less than fifty percent (50%) nor more than one hundred fifty percent (150%) of an amount which is based on the proportion of the reinsuring carrier's total premiums earned in the preceding calendar year from health benefit plans delivered or issued for delivery to small employers in this state by reinsuring carriers to the total premiums earned in the preceding calendar year from health benefit plans delivered or issued for delivery to small employers in this state by all reinsuring carriers.
       3. c. The board may, with approval of the Commissioner, change the assessment formula established pursuant to subparagraph a of this paragraph from time to time as appropriate. The board may provide for the shares of the assessment base attributable to total premium and to the previous year's premium to vary during a transition period.
       4. d. Subject to the approval of the Commissioner, the board shall make an adjustment to the assessment formula for reinsuring carriers that are approved health maintenance organizations which are federally qualified under 42 U.S.C. Sec. 300 et seq., to the extent, if any, that restrictions are placed on them that are not imposed on other small employer carriers.

    3. 3.

       1. a. Prior to March 1 of each year, the board shall determine and file with the Commissioner an estimate of the assessments needed to fund the losses incurred by the program in the previous calendar year.
       2. b. If the board determines that the assessments needed to fund the losses incurred by the program in the previous calendar year will exceed five percent (5%) of total premiums earned in the previous calendar year from health benefit plans delivered or issued for delivery to small employers in this state by reinsuring carriers, the board shall evaluate the operation of the program and report its findings, including any recommendations for changes to the plan of operation, to the Commissioner within ninety (90) days following the end of the calendar year in which the losses were incurred. The evaluation shall include an estimate of future assessments and consideration of the administrative costs of the program, the appropriateness of the premiums charged, the level of insurer retention under the program and the costs of coverage for small employers. If the board fails to file a report with the Commissioner within ninety (90)days following the end of the applicable calendar year, the Commissioner may evaluate the operations of the program and implement such amendments to the plan of operation the Commissioner deems necessary to reduce future losses and assessments.
       3. c. If assessments in each two (2) consecutive calendar years exceed five percent (5%) of total premiums earned in the previous calendar year from health benefit plans delivered or issued for delivery to small employers in this state by reinsuring carriers, the program shall be eligible to receive additional financing as provided in Section 9 of this act.
    4. 4. If assessments exceed net losses of the program, the excess shall be held at interest and used by the board to offset future losses or to reduce program premiums. As used in this paragraph, "future losses" includes reserves for incurred but not reported claims.
    5. 5. Each reinsuring carrier's proportion of the assessment shall be determined annually by the board based on annual statements and other reports deemed necessary by the board and filed by the reinsuring carriers with the board.
    6. 6. The plan of operation shall provide for the imposition of an interest penalty for late payment of assessments.
    7. 7. A reinsuring carrier may seek from the Commissioner a deferment from all or part of an assessment imposed by the board. The Commissioner may defer all or part of the assessment of a reinsuring carrier if the Commissioner determines that the payment of the assessment would place the reinsuring carrier in a financially impaired condition. If all or part of an assessment against a reinsuring carrier is deferred, the amount deferred shall be assessed against the other participating carriers in a manner consistent with the basis for assessment set forth in this subsection. The reinsuring carrier receiving the deferment shall remain liable to the program for the amount deferred and shall be prohibited from reinsuring any individuals or groups with the program until such time as it pays the assessments.
13. M. Neither the participation in the program as reinsuring carriers, the establishment of rates, forms or procedures, nor any other joint or collective action required by this section and Section 9 of this act shall be the basis of any legal action, criminal or civil liability, or penalty against the program or any of its reinsuring carriers either jointly or separately.
14. N. The board, as part of the plan of operation, shall develop standards setting forth the manner and levels of compensation to be paid to agents for the sale of basic and standard health benefit plans. In establishing such standards, the board shall take into consideration the need to ensure the broad availability of coverages, the objectives of the program, the time and effort expended in placing the coverage, the need to provide on-going service to the smaller employer, the levels of compensation currently used in the industry and the overall costs of coverage to small employers selecting these plans.
15. O. The program shall be exempt from any and all taxes.

Laws 1994, HB 2256, c. 211, § 8, emerg. eff. July 1, 1994.