134
in conjunction with, or apart from, the registration
required under paragraph (1) as the applicable regu-
latory authority may be authorized to require under
State law.
‘‘(b) GUARANTEED ISSUE.—
‘‘(1) IN GENERAL.—Subject to the succeeding
provisions of this subsection, a carrier that offers a
health plan to small employers located in a commu-
nity must offer the same plan to any other small
employer located in the community.
‘‘(2) TREATMENT
OF
HEALTH
MAINTENANCE
ORGANIZATIONS.—
‘‘(A) 
GEOGRAPHIC
LIMITATIONS.—A
health maintenance organization may deny cov-
erage under a plan to a small employer whose
employees are located outside the service area
of the organization, but only if such denial is
applied uniformly without regard to health sta-
tus or insurability.
‘‘(B) SIZE LIMITS.—A health maintenance
organization may apply to the applicable regu-
latory authority to cease enrolling new small
employer groups in its small employer health
plan (or in a geographic area served by the
plan) if it can demonstrate that its financial or
135
administrative capacity to serve previously en-
rolled groups and individuals (and additional in-
dividuals who will be expected to enroll because
of affiliation with such previously enrolled
groups) will be impaired if it is required to en-
roll new groups.
‘‘(3) GROUNDS
FOR
REFUSAL
TO
ISSUE
OR
RENEW.—
‘‘(A) IN GENERAL.—A carrier may refuse
to issue or renew or terminate a plan only for—
‘‘(i) nonpayment of premiums,
‘‘(ii) fraud or misrepresentation, and
‘‘(iii) failure to meet minimum partici-
pation rates (consistent with subparagraph
(B)).
‘‘(B) MINIMUM PARTICIPATION RATES.—A
carrier may require, with respect to a small em-
ployer health plan, that a minimum percentage
of full-time, permanent employees eligible to en-
roll under the plan be enrolled, so long as such
percentage is enforced uniformly for all employ-
ment groups of comparable size.
‘‘(c) MINIMUM PLAN PERIOD.—A carrier may not
offer to, or issue with respect to, a small employer a small
employer health plan with a term of less than 12 months.
136
‘‘(d) GUARANTEED RENEWABILITY.—
‘‘(1) IN GENERAL.—
‘‘(A) GENERAL RULE.—Subject to the suc-
ceeding provisions of this subsection, each small
employer health plan must be renewed, at the
option of the employer or employment-related
organization described in section 2308(a)(2),
unless the plan is terminated for the reasons
specified in subsection (b)(3)(A) or under sub-
paragraph (B).
‘‘(B) TERMINATION OF BLOCK OF BUSI-
NESS.—A carrier need not renew a health plan
with respect to such an employer or employ-
ment-related organization if the carrier—
‘‘(i) is terminating the block of busi-
ness that includes the plan, and
‘‘(ii) provides notice to the employer
or organization covered under the plan of
such termination at least 90 days before
the date of expiration of the plan.
In the case of such a termination, the insurer
may not provide for issuance of any small em-
ployer health plan in any block of business dur-
ing the 5-year period beginning on the date of
termination of such block of business.
137
‘‘(C) CONSTRUCTION
RESPECTING
ADDI-
TIONAL STATE DISCLOSURE REQUIREMENTS.—
Subparagraph (B)(ii) shall not be construed as
preventing the applicable regulatory authority
from specifying the information to be included
in the notice under such subparagraph or in re-
quiring such notice to be provided at an earlier
date.
‘‘(2) NOTICE
AND
SPECIFICATION
OF
RATES
AND ADMINISTRATIVE CHANGES.—
‘‘(A) NOTICE.—The small employer carrier
of a small employer health plan shall provide
for notice, at least 30 days before the date of
expiration of the health plan, of the terms for
renewal of the plan. Except with respect to
rates and administrative changes, the terms of
renewal (including benefits) shall be the same
as the terms of issuance.
‘‘(B) RENEWAL RATES SAME AS ISSUANCE
RATES.—The carrier may change the terms for
such renewal, but the premium rates charged
with respect to such renewal shall be the same
as that for a new issue.
‘‘(C) 
RATES
CANNOT
CHANGE
MORE
OFTEN THAN MONTHLY.—
138
‘‘(i) IN GENERAL.—A small employer
carrier may not change the premium rates
established with respect to any block of
business for a small employer health plan
more often than monthly.
‘‘(ii) APPLICATION OF NEW RATES.—
In the case of a plan issued which becomes
effective in a month, the premium rates es-
tablished under clause (i) for that month
shall apply to all months during the 12-
month period beginning with that month.
In the case of a plan renewal which is ef-
fective for a 12-month period beginning
with a month, the premium rates estab-
lished under clause (i) with respect to that
month shall apply to all months during 12-
month renewal period.
‘‘(3) PERIOD OF RENEWAL.—The period of re-
newal of each small employer health plan shall be for
a period of not less than 12 months.
‘‘(e) NO DISCRIMINATION BASED ON HEALTH STA-
TUS FOR CERTAIN SERVICES.—An small employer health
plan may not deny, limit, or condition the coverage under
(or benefits of) the plan with respect to required health
services based on the health status, claims experience, re-
139
ceipt of health care, medical history, or lack of evidence
of insurability, of an individual.
‘‘SEC. 2304. RATING PRACTICES FOR SMALL EMPLOYER
HEALTH PLANS.
‘‘(a) COHESIVE RATING SYSTEM AND ACTUARIAL
CERTIFICATION.—
‘‘(1) IN GENERAL.—The premiums (including
reference premium rate, as defined in section
2308(c)(6)) for all small employer health plans of
the same entity shall—
‘‘(A) be established based on a single cohe-
sive rating system which is applied consistently
for all employer groups and is designed not to
treat groups, after the second effective year (as
defined in subsection (c)), differently based on
health status or risk status; and
‘‘(B) be actuarially certified annually.
‘‘(2) ACTUARIAL
CERTIFIED
DEFINED.—For
purposes of paragraph (1)(B), a plan is considered
to be ‘actuarially certified’ if there is a written state-
ment, by a member of the American Academy of Ac-
tuaries or other individual acceptable to the applica-
ble regulatory authority that a small employer car-
rier is in compliance with this section, based upon
the individual’s examination, including a review of
140
the appropriate records and of the actuarial assump-
tions and methods utilized by the carrier in estab-
lishing premium rates for applicable health plans.
‘‘(b) USE OF COMMUNITY-RATING.—
‘‘(1) IN GENERAL.—Except as provided in para-
graph (2):
‘‘(A) 
COMMUNITY
RATING
WITHIN
A
BLOCK OF BUSINESS.—The reference premium
rate charged for a small employer health plan
with similar benefits in a community within a
block of business shall be the same for all small
employers and shall be the same regardless of
the age, sex, health status, or number of indi-
viduals in the family covered under the plan.
‘‘(B) LIMITING VARIATION ON REFERENCE
PREMIUM
RATES
AMONG
BLOCKS
OF
BUSI-
NESS.—
‘‘(i) IN
GENERAL.—Except as pro-
vided in clause (iii), the reference premium
rate charged for small employer health
plans with similar benefits in any commu-
nity for the most expensive block of busi-
ness shall not exceed 120 percent of such
rate charged for such plan for the least ex-
pensive block of business.