DEPARTMENT OF REGULATORY AGENCIES
Division of Insurance
3 CCR 702-4
Life, accident and health
Proposed Amended Regulation 4-6-7
CONCERNING PREMIUM RATE SETTING FOR SMALL GROUP HEALTH PLANS
Section 1	Authority
Section 2	Scope and Purpose
Section 3	Applicability and Scope
Section 4	Definitions
Section 5	Premium Rate Setting
Section 6	Use of Composite Rates
Section 7	Rate Filings and Actuarial Certifications
Section 8	Enforcement
Section 9	Severability
Section 10	Effective Date
Section 11	History
Section 1	Authority
This regulation is promulgated under the authority of Sections 10-1-109(1), 10-16-102(10)(b)(II), 10-16-104.9, 10-16-105(6.5), 10-16-105(7.2), 10-16-105(8)(f), and 10-16-109, Colorado Revised Statutes.
Section 2	Scope and Purpose
The purpose of this regulation is to establish and implement rules for setting premiums for small group health benefit plans.  This regulation concerns: applicability and scope of Colorado’s small group health rating laws; carriers’ obligations to provide coverage; premium rate setting; use of composite rates; rate filings; and actuarial certifications.
Section 3	Applicability and Scope
This regulation shall apply to all small group carriers and health benefit plans subject to the small group laws of Colorado.
Section 5.	Premium Rate Setting
A.	Calculating Premium Rates Adjusted for Case Characteristics
3.	Acceptable Case Characteristic Factor Categories - For all small employer policies carriers choosing to modify the unique index rate by the use of case characteristics must utilize one or more of the categories listed below.  Carriers shall develop a rating factor for each category, which is actuarially based.
b	Geographic Location -
(2)	Approval to subdivide categories eight and nine above into two or more subcategories must be obtained in advance.  The material provided to support the subdivision(s) shall be based upon statistically-credible data using the Division of Insurance’s credibility standard and/or other actuarially-determined standards.  The Division’s credibility standard is 2,000 life-years and 2,000 claims per year. (See Section 5 (A)(7)(c)(ix)(2)  6 (K) of Amended Colorado Insurance Regulation 4-2-11).
4.	Limits on Certain Case Characteristic Adjustments - For all small group health benefit plans issued or renewed for a small employer on or after September 30, 2004, rating adjustments based on health status, claims experience, and standard industrial classification shall not result in a rate that deviates from the carrier’s filed rate by more than a ten percent increase (10%) or a twenty-five percent decrease (25%).  Upward deviations may only be based on standard industrial classification.  Health status and claims experience may not be used in the determination of any upward deviation from the filed rate.  
5.	Limits on Renewal Rates – A small employer carrier may make an upward adjustment to a small employer’s renewal premium not to exceed fifteen percent annually due to claims experience, health status, standard industrial classification or tobacco use.  The final rate may not deviate from a small employer carrier’s filed rate by more than a ten percent increase (10%) or a twenty-five percent decrease (25%).  Any increase above the filed rate due to the renewal adjustment must be based only upon standard industrial classification or tobacco use.  
Section 7.	Rate Filings and Actuarial Certification
C.	Pursuant to Section 10-16-105(6.5), C.R.S., all carriers who sell, or offer for sale, policies subject to the requirements of this regulation, must submit an annual actuarial rate certification to the Division of Insurance prior to March 1 of each calendar year.  Note - this certification may be combined with the Company’s Annual Rate Report.  (See Section 5 (C) (8) of Amended Colorado Insurance Regulation 4-2-11.)  Certifications shall be sent to the Colorado Division of Insurance, Attention:  Rates and Forms Section.  The certification must be signed by a qualified actuary and must contain at least the following:
Section 10.	Effective Date
This Amended Regulation will be effective for policies, which are issued or renewed on or after September 30, 2004. January 1, 2008.  
Section 11.	History
Emergency Regulation 94-E-4; Effective October 20, 1994.
Emergency Regulation 95-E-2; Effective January 20, 1995.
Hearing date: December 8, 1994; Effective March 1, 1995.
Hearing date: April 2, 1998; Effective June 1, 1998, Amended Sections 2, 3, 4, 5, 6, 7 & 10.
Hearing date: October 2, 2000; Effective January 1, 2001, Amended Sections 5 & 6.
Hearing date: September 4, 2002; Effective January 1, 2003.  
Hearing date: February 4, 2003; Effective March 31, 2003, Amended Sections 1, 5, 10 & 11.  
Emergency Regulation 03-E-6, Effective September 1, 2003.
Hearing date: October 1, 2003; Effective December 1, 2003, Amended Sections 4, 5, 6, 7, 10 & 11.  
Hearing date: February 2, 2004; Effective April 1, 2004, Amended Sections 5, 10, & 11.  
Hearing date: August 4, 2004, Effective September 30, 2004.  
Hearing date: August 30, 2007, Effective January 1, 2008, Amended Sections 5, 7, 10, & 11.