(a) In establishing rates for health insurance coverage offered in the small group market, the rate may vary with respect to the particular plan or coverage involved only by determining the following:
(1) Whether the plan or coverage covers an individual or family.
(2) Rating area, as established in accordance with subsection (d) of this section.
(3) Age, except that the rate may not vary by more than 3 to 1 for like individuals of different age who are age 21 and older and that the variation in rate must be actuarially justified for individuals under age 21, consistent with the uniform age rating curve under subsection (e) of this section. For purposes of identifying the appropriate age adjustment under this paragraph (a)(3) and the age band under subsection (e) of this section applicable to a specific enrollee, the enrollee's age as of the date of policy issuance or renewal must be used.
(4) Subject to § 3571N of this title, tobacco use, except that such rate may not vary by more than 1.5 to 1 and may only be applied with respect to individuals who may legally use tobacco under federal and state law. For purposes of this paragraph (a)(4), tobacco use means use of tobacco on average 4 or more times per week within no longer than the past 6 months. This includes all tobacco products, except that tobacco use does not include religious or ceremonial use of tobacco. Further, tobacco use must be defined in terms of when a tobacco product was last used.
(b) The rate established under this section must not vary with respect to the particular plan or coverage involved by any other factor not described in subsection (a) of this section.
(c) A health insurer must consider the claims experience of all enrollees in all health plans, other than grandfathered health plans, offered by such insurer in the small group market in this State, including those enrollees who do not enroll in such plans through the state health exchange, to be members of a single risk pool. A health insurer must charge the same premium rate without regard to whether the plan is offered through the state health exchange or whether the plan is offered directly from the health insurer or through an agent.
(d) In establishing rates, all health insurers offering health plans in the small group market shall use a single rating area that applies to the entire State.
(e) The following uniform age bands apply for rating purposes under paragraph (a)(3) of this section:
(1) Child age bands. — a. A single age band for individuals age 0 through 14.
b. One-year age bands for individuals age 15 through 20.
(2) Adult age bands. — One-year age bands for individuals age 21 through 63.
(3) Older adult age bands. — A single age band for individuals age 64 and older.
(f) Application of variations based on age or tobacco use. — With respect to family coverage under health insurance coverage, the rating variations permitted under paragraphs (a)(3) and (a)(4) of this section must be applied based on the portion of the premium attributable to each family member covered under the coverage.
(1) The total premium for family coverage must be determined by summing the premiums for each individual family member. With respect to family members under age 21, the premiums for no more than the 3 oldest covered children must be taken into account in determining the total family premium.
(2) If the State does not permit any rating variation for the factors described in paragraphs (a)(3) and (a)(4) of this section, as determined by the Insurance Commissioner by regulation, the State may require that premiums for family coverage be determined by using uniform family tiers and the corresponding multipliers established by the State. If the State does not establish uniform family tiers and the corresponding multipliers, the per-member-rating methodology under paragraph (f)(1) of this section applies in this State.
(3) a. In the case of the small group market, the total premium charged to a group health plan is determined by summing the premiums of covered participants and beneficiaries in accordance with paragraph (f)(1) or (f)(2) of this section, as applicable.
b. Subject to paragraph (f)(3)c. of this section, nothing in this section prevents the State from requiring health insurers to offer to a group health plan, or a health insurer from voluntarily offering to a group health plan, premiums that are based on average enrollee premium amounts, if the total group premium established at the time of applicable enrollment at the beginning of the plan year is the same total amount derived under paragraph (f)(1) or (f)(2) of this section, as applicable.
c. A health insurer that, in connection with a group health plan in the small group market, offers premiums that are based on average enrollee premium amounts under paragraph (f)(3)b. of this section must:
1. Ensure an average enrollee premium amount calculated based on applicable enrollment of participants and beneficiaries at the beginning of the plan year that does not vary during the plan year.
2. Unless the State establishes and, if applicable, CMS approves an alternate rating methodology, calculate an average enrollee premium amount for covered individuals age 21 and older, and calculate an average enrollee premium amount for covered individuals under age 21. The premium for a given family composition is determined by summing the average enrollee premium amount applicable to each family member covered under the plan, taking into account no more than 3 covered children under age 21.
3. Under applicable state law, ensure that the average enrollee premium amount calculated for any individual covered under the plan does not include any rating variation for tobacco use permitted under paragraph (a)(4) of this section. The rating variation for tobacco use permitted under paragraph (a)(4) of this section is determined based on the premium rate that would be applied on a per-member basis with respect to an individual who uses tobacco and then included in the premium charged for that individual.
4. To the extent permitted by applicable state law and, in the case of coverage offered through a federally-facilitated SHOP, as permitted by 45 C.F.R. § 156.285(a)(4), apply this paragraph (f)(3)c. uniformly among group health plans enrolling in that product, giving those group health plans the option to pay premiums based on average enrollee premium amounts.
(g) The Commissioner may adopt regulations, in accordance with the Administrative Procedures Act (Chapter 101 of Title 29), that are consistent with Chapter 25 of this title and set forth more specifically the rating standards and requirements for health insurers operating within this State.