CurrentAlabama Department of InsurancePolicy 2014-01

Clarification of Regulation 482-1-116 — Small Employer Allocation Program (age brackets and family composite premiums)

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Provides clarification of Alabama Regulation 482-1-116 implementing the Small Employer Allocation Program, including allowance of single-age brackets and describing two approved family composite premium methods (Method A and Method B) and related requirements for carriers offering small group health insurance in Alabama.

Policy Summary

PayerAlabama Department of Insurance

PolicyClarification of Regulation 482-1-116 — Small Employer Allocation Program

Policy CodePolicy Policy 2014-01

Change TypeClarification / Implementation guidance

Effective DateJan 1, 2014

Next Review Date

Key ActionIf a carrier uses a family composite method for a product in a market, the carrier must offer the method to all employers in that market and keep composite tiers unchanged until renewal.

SourceLink

2approved composite premium methods

single-ageage bracket waiver permitted

4-tierMethod B approach

immediate

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CurrentAlabama Department of InsurancePolicy 2014-01

Clarification of Regulation 482-1-116 — Small Employer Allocation Program (age brackets and family composite premiums)

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Sign up for Alabama Department of Insurance Policy 2014-01 alerts

Get alerted when Policy 2014-01 changes without checking for updates manually.

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Policy Summary

PayerAlabama Department of Insurance

PolicyClarification of Regulation 482-1-116 — Small Employer Allocation Program

Policy CodePolicy Policy 2014-01

Change TypeClarification / Implementation guidance

Effective DateJan 1, 2014

Next Review Date

Key ActionIf a carrier uses a family composite method for a product in a market, the carrier must offer the method to all employers in that market and keep composite tiers unchanged until renewal.

SourceLink

2approved composite premium methods

single-ageage bracket waiver permitted

4-tierMethod B approach

immediate

Carrier Premium Calculation and Administration

Carrier premium calculation and administration criteria

Requirements and allowable practices for carriers offering small group health insurance in Alabama under Regulation 482-1-116 as clarified by this bulletin:

Carriers may use single-age brackets despite Regulation 482-1-116-.05(a)(2) five-year limitation when federal rules require single-age rating.

Family composite premium options

Carriers may use family composite premiums and choose either Method A or Method B as described in this bulletin.
Carriers may file an alternative family composite method for Department approval.
Alternatively, a carrier may elect not to provide family composite premiums and instead bill member-level rates summed for the group.

When using a family composite method for a product in a market, the carrier must offer that method to all employers within the market for that product.

Composite premium tiers established for a policy year shall not change due to changes in enrollment until the next renewal date.

If the initial census does not represent all composite tiers, the carrier must establish any missing tiers at the beginning of the policy year using a process filed with the Department.

Tobacco adjustment factors shall not be incorporated into composite premiums; instead, tobacco adjustments must be applied to each individual employee's tier as appropriate.

Carrier Responsibilities and Offerings

Billing Rule

Require offering of composite method to all employers; fixed tiers until renewal; establish missing tiers at start of year; tobacco adjustments applied per employee

If a carrier uses a family composite method for a product in a market, the carrier must offer that method to all employers in the market for that product; composite premium tiers may not change due to enrollment changes until the next renewal. If the initial employee census does not represent all tiers, the carrier must establish any missing tiers at the start of the policy year using a process filed with the Department. Tobacco adjustment factors must not be incorporated into composite premiums and instead must be applied to each individual employee's tier as appropriate.

Offer the family composite method to all employers in the product market.
Do not alter composite premium tiers mid-policy for enrollment changes; changes only at renewal.
File and use a Department‑filed process to establish any tiers not represented on the initial census at the policy year start.
Apply tobacco adjustment factors to individual employee tiers — do not include them in composite premiums.

Key Definitions: Age Brackets and Family Composite Methods

Age bracket waiver / single-age brackets

Waiver descriptionThe Regulation 482-1-116 five-year age bracket limitation is waived for carriers that wish to use single-age brackets when federal rules require single-age rating.

Regulatory basisRegulation 482-1-116-.05(a)(2) ordinarily prohibits age brackets smaller than five years, but this bulletin waives that limitation for single-age use.

Applicable statuteAla. Code Section 27-52-21(a) directs the Commissioner to establish conditions consistent with federal regulation and NAIC models for the Small Allocation Program.

Effect on carrier rating practiceCarriers may implement single-age rating in place of five-year age bands where required by federal rules.

Family composite premiums — Method A and Method B

Method A (two-tier average)