WHAT GROUPS?

1. Groups affected: two through 25 lives.
   
2. Effective date: 1/1/96, sections 28 and 36 effective 1/1/97.
   
3. Coverages affected: basic hospital, medical and dental, but not dental nor vision plans.
   
4. Supplemental Coverages: permitted at an additional cost.

RATING

5. Rating factor classification limited to: industry, age, sex, geographical area, family composition, group size and employer contribution amounts. May apply to the Commissioner for justifiable variance.
6. Claims experience rate adjustment increases limited to 15% per year or proration thereof for claims experience health status and duration.
7. Index rate between a class of business must not exceed 20% spread, and not vary within a class of business by 25%.
8. May not vary any one group's premium rate by more than 25% of the index rates.
9. Industry classification may not exceed lowest factor by more than 25%, not exceed 20% in 1997.
10. Plans contracted before 1996 may have higher rate increases for the years 1997 - 2000.

UNDERWRITING

11. Guaranteed renewable at Group's option.
12. Underwriting guidelines must establish and implement uniform written rules.
13. No prohibit industry list.
14. Preexisting Condition Exclusionary Period limited to:
    (a) six months if enrolled by means of:
    (i) Open Enrollment
    (ii) qualification as a Late Enrollee; and (b) twelve months if not a qualified Late Enrollee and enrolls after the close of the Open Enrollment Period, and not applicable if gap in time between prior carrier and current carrier is 90 days or less.
15. Affiliation Period - flat sixty day alternative to Pre-Existing Condition and Waiting Periods (180 days for Late Enrollment)>
16. May establish not more than nine classes of business; no involuntary transfer between classes.

INDIVIDUAL ELIGIBILITY

17. No exclusion of eligible employees or dependents if:
    (a) was covered by the prior carrier;
    (b) loss prior coverage by termination, ineligibility, etc.
    (c) requests coverage in 30 days of such termination;
    (d) switch between plans is permitted
    (e) court order requires coverage QMDSO, etc.

18. Dependent students covered to age 24 years.
    
19. Eligible Employees must work a minimum of 30 hours per week.
    

    SALES

20. Service Area - not required to offer plans outside of standard service area.
21. Must file and deliver a disclosure brochures within specified disclosures NRS689B.027 plus basis of right to re-rate, renewability, and PXC before contract issuance.
22. Conversion policy required for indemnity insurance plans.

Small Employer Group Business in Nevada

Advantages and Disadvantages

1. Profitable line of business when properly managed; large number of small groups can mean less variance.
2. Large number of potential insureds - approximately 89% of all employers in Nevada are between two and twenty-five, which represents at least 100,000 potential insureds.
3. Small groups have potential for growth of lives and premium.
4. Helps build agency force and experience such that they can better capture large clients.
5. Issue method can be streamlined to make cost effective issue of quotation and groups.
6. Use of limited number of Schedules of Benefits makes it easier to understand the products, eliminated legacy documents and maintenance, sales force feels comfortable with the products and make better presentations through repetition.
7. Large number of presentations means more public exposure for the company name and sales.
8. Local presence is advantageous over out-of-state marketers in underwriting and business selection when this type of business is subject to fraud and abuse (also new antifraud laws).
9. Tight underwriting guidelines and strict issuance procedures ensure underwriting stability.

10. Three year loss-ration down-turn cycle is pronounced, and roll-over/purging is now prohibited.
11. High business turn-over, agent 'stirring' and rate sensitivity.
12. Burdensome work-flow volume on the underwriting department , may need to increase u/w staff.
13. Administrative, u/w and sales staff requires experienced, higher caliber employees to handle increased claim flow, complaint flow, inquiries and employer questions or alternatively you will need a large bureaucracy of lessor qualified employees.<
14. Onerous PCX and Waiting Period controls or is eliminated entirely in subsequent legislative sessions to comply with the NAIC model, however, biannual sessions may take many years to complete the model plan.
15. Expect law to change over time increasing the administrative burden on insurers, i.e. reporting requirements, periodic filing requirements, actuarial certification requirements (1997), etc..
16. Rate structures will be controlled over time by DOI/legislation to produce uniform community rates, with limits on rate increases for experience, industry classification and demographics.
17. Once qualified as a small group offering insurer, carrier is trapped to continue offering this business line. Model rules say if company fails to register as a small group offerer, company is precluded from this marketplace for 2 1/2 years. Once company is on the program, the company is at the whim of the DOI and legislature.
18. Nevada has many undesirable groups and industry classifications, higher rates causes dissatisfaction by agents with the u/w department and development of a 'bad' reputation.
19. A lot of marketing material gets used for more presentations per sale with the associated costs.
20. Must go head-to-head with experienced and well financed organizations like Boston Mutual with aggressive rates, London reinsurance, political connections and intentions,
21. Reinsurance can be difficult to locate and can be expensive. Some reinsurers are predatory with naive regional insurers who get in to this business is forced to absorb the prior period losses.
22. Demography of small groups tend to higher claim levels, catastrophic claims and fluctuations until relative stability is achieved by a large block of business.
23. Single state offering tend to destabilize the block of business for reasons of local fluctuations; whereas multiple state offerings with wide demographic distribution of insureds tends to stabilize the block of business.
24. Conversion policy required for indemnity insurance plans.

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