Title I, Subtitle A
population among the types of coverage or type of cov-
erage options.
(b) LIMITATION ON VARIATION BY AGE.—
(1) IN GENERAL.—Any variation in premium
rates by age under subsection (a)(1) for age classes
of individuals under 65 years of age may not result
in the ratio of the highest age rate to the lowest age
rate exceeding the limiting ratio described in para-
graph (2).
(2) LIMITING RATIO.—For purposes of para-
graph (1), the limiting ratio described in this para-
graph is—
(A) 4-to-1, for premiums for months in
1997,
(B) 3.67-to-1, for premiums for months in
1998,
(C) 3.33-to-1, for premiums for months in
1999, and
(D) 3-to-1, for premiums for months in
2000 and any succeeding year.
(3) SEPARATE AGE CLASSES FOR INDIVIDUALS
65 YEARS OF AGE OR OLDER.—The Secretary shall
establish one or more separate age classes for indi-
viduals 65 years of age or older.
Title I, Subtitle A
(4) PREEMPTION.—For preemption of State
laws relating to establishment of premium rates, see
section 6105.
(c) GEOGRAPHIC AREA VARIATIONS.—For purposes
of subsection (a)(2), a State—
(1) may not identify an area that divides a 3-
digit zip code, a county, or all portions of a metro-
politan statistical area,
(2) shall not permit premium rates for coverage
offered in a portion of an interstate metropolitan
statistical area to vary based on the State in which
the coverage is offered, and
(3) may, upon agreement with one or more ad-
jacent States, identify multi-state geographic areas
consistent with paragraphs (1) and (2).
(d) ADMINISTRATIVE VARIATIONS.—
(1) 
EXPENSE
CATEGORIES.—Expense 
cat-
egories shall be established under subsection (a)(5)
by a carrier in a manner that only reflects dif-
ferences based on marketing, commissions, and simi-
lar expenses. Such categories shall take into account
health plan purchasing organizations.
(2) LIMITATION
ON
VARIATIONS.—The vari-
ation provided among expense categories under sub-
section (a)(5) may not result in a premium for the
Title I, Subtitle A
highest expense category exceeding 120 percent of
the premium for the lowest expense category.
(e) PREMIUM RATING IN GROUP HEALTH PLANS.—
The premium rate established under a group health plan
for health insurance coverage may not vary within a bene-
fit design except by the factors described in subsection (a)
and subject to the limitation specified in subsection (b).
(f) ACTUARIAL CERTIFICATION.—Each carrier that
offers health insurance coverage in a State shall file annu-
ally with the State commissioner of insurance a written
statement by a member of the American Academy of Actu-
aries (or other individual acceptable to the commissioner)
that, based upon an examination by the individual which
includes a review of the appropriate records and of the
actuarial assumptions of the carrier and methods used by
the carrier in establishing premium rates for applicable
health insurance coverage—
(1) the carrier is in compliance with the appli-
cable provisions of this section, and
(2) the rating methods are actuarially sound.
Each such carrier shall retain a copy of such statement
for examination at its principal place of business.
(g) CONSTRUCTION.—The provisions of this section
shall apply to premium rates established by carriers for
multiple employer welfare arrangements that are fully-in-
Title I, Subtitle A
sured or for fully-insured coverage offered with respect to
individuals and small employers in the individual/small
group market. Such premium rates shall apply based on
the fair rating area in which the covered individual or em-
ployee resides to reflect the population in the individual/
small group market.
SEC. 1022. COORDINATION WITH PREMIUM ASSISTANCE
CERTIFICATE PROGRAM.
Each carrier or group health plan providing qualified
health coverage shall accept and apply (as a reduction
against premiums otherwise imposed) any premium cer-
tificate issued under a State premium assistance program
under part A of title XXI of the Social Security Act.
SEC. 1023. ESTABLISHMENT OF RISK ADJUSTMENT MECHA-
NISMS.
(a) ESTABLISHMENT OF STANDARDS.—
(1) DEVELOPMENT OF MODELS.—
(A) IN GENERAL.—The Secretary shall re-
quest the NAIC to develop, within 9 months
after the date of the enactment of this Act and
in consultation with the American Academy of
Actuaries, a model risk adjustment system com-
posed of one or more risk adjustment mecha-
nisms under which premiums applicable to
health insurance coverage in the individual/
Title I, Subtitle A
small group market and coverage under small
employer pooling arrangements and under mul-
tiple employer welfare arrangements that are
fully insured (without regard to whether such
an arrangement is offered through an associa-
tion) would be adjusted to take into account
such factors as may be appropriate to predict
the future need and the efficient use of services
by covered individuals in the market. Such fac-
tors may include the age, gender, geographic
residence, health status, or other demographic
characteristics of individuals enrolled in such
plans and shall include consideration of enroll-
ment of a disproportionate share of individuals
who enroll during the initial open enrollment
period under section 1005(b)(1).
(B) 
PROMULGATION
AS
PROPOSED
RULE.—If the NAIC develops such model with-
in such period, the Secretary shall publish the
model as a proposed rule under section 553 of
title 5, United States Code. If the NAIC has
not developed such model within such period,
the Secretary shall publish (not later than 60
days after the end of such period) a proposed