Haw. Code R. § 16-12-7 - Loss ratio standards and refund or credit of premium
(a) The following provisions of this
subsection establish loss ratio standards:
(1)
(A) A
Medicare supplement policy form or certificate form shall not be delivered or
issued for delivery unless the policy form or certificate form can be expected,
as estimated for the entire period for which rates are computed to provide
coverage, to return to policyholders and certificate holders in the form of
aggregate benefits (not including anticipated refunds or credits) provided
under the policy form or certificate form:
(i)
At least 75 per cent of the aggregate amount of premiums earned in the case of
group policies; or
(ii) At least 65
per cent of the aggregate amount of premiums earned in the case of individual
policies;
(B) Calculated
on the basis of incurred claims experience or incurred health care expenses
where coverage is provided by a health maintenance organization on a service
rather than reimbursement basis and earned premiums for the period and in
accordance with accepted actuarial principles and practices. Incurred health
care expenses where coverage is provided by a health maintenance organization
shall not include:
(i) Home office and
overhead costs;
(ii) Advertising
costs;
(iii) Commissions and other
acquisition costs;
(iv)
Taxes;
(v) Capital costs;
(vi) Administrative costs; and
(vii) Claims processing
costs.
(2) All
filings of rates and rating schedules shall demonstrate that expected claims in
relation to premiums comply with the requirements of this section when combined
with actual experience to date. Filings of rate revisions shall also
demonstrate that the anticipated loss ratio over the entire future period for
which the revised rates are computed to provide coverage can be expected to
meet the appropriate loss ratio standards.
(3) For purposes of applying subparagraph
(a)(1)(A) of this section and paragraph (c)(3) of section
16-12-7.3 only, group policies issued as a result of solicitations of individuals through
the mails or by mass media advertising (including both print and broadcast
advertising) shall be deemed to be group policies.
(4) For policies issued prior to September 3,
1992, expected claims in relation to premiums shall meet:
(A) The originally filed anticipated loss
ratio when combined with the actual experience since inception;
(B) The appropriate loss ratio requirement
from clauses (a)(1)(A)(i) and (ii) when combined with actual experience
beginning with the effective date of this section; and
(C) The appropriate loss ratio requirement
from clauses (a)(1)(A)(i) and (ii) over the entire future period for which the
rates are computed to provide coverage.
(b) The following provisions of this
subsection apply to refund or credit calculations:
(1) An issuer shall collect and file with the
commissioner by May 31 of each year the data contained in the applicable
reporting form contained in Appendix A (Exhibit D (revised 2019)), located at
the end of this chapter, which is made a part of this section, for each type in
a standard Medicare supplement benefit plan.
(2) If on the basis of the experience as
reported the benchmark ratio since inception (ratio 1) (Exhibit E (revised
2019)) exceeds the adjusted experience ratio since inception (ratio 3), then a
refund or credit calculation is required. The refund calculation shall be done
on a statewide basis for each type in a standard Medicare supplement benefit
plan. For purposes of the refund or credit calculation, experience on policies
issued within the reporting year shall be excluded.
(3) For the purposes of this section,
policies or certificates issued prior to September 3, 1992, the issuer shall
make the refund or credit calculation separately for all individual policies
(including all group policies subject to an individual loss ratio standard when
issued) combined and all other group policies combined for experience after the
effective date of this section. The first report shall be due by May 31,
1999.
(4) A refund or credit shall
be made only when the benchmark loss ratio exceeds the adjusted experience loss
ratio and the amount to be refunded or credited exceeds a de minimis level. The
refund shall include interest from the end of the calendar year to the date of
the refund or credit at a rate specified by the Secretary of Health and Human
Services, but in no event shall it be less than the average rate of interest
for thirteen-week Treasury notes. A refund or credit against premiums due shall
be made by September 30 following the experience year upon which the refund or
credit is based.
(c)
Annual filing of rates. An issuer of Medicare supplement policies and
certificates issued before or after the effective date of this chapter in this
State shall file annually its rates, rating schedule, and supporting
documentation including ratios of incurred losses to earned premiums by policy
duration for approval by the commissioner in accordance with the filing
requirements and procedures prescribed by the commissioner. The supporting
documentation shall also demonstrate in accordance with actuarial standards of
practice using reasonable assumptions that the appropriate loss ratio standards
can be expected to be met over the entire period for which rates are computed.
The demonstration shall exclude active life reserves. An expected third-year
loss ratio which is greater than or equal to the applicable percentage shall be
demonstrated for policies or certificates in force less than three years. As
soon as practicable, but prior to the effective date of enhancements in
Medicare benefits, every issuer of Medicare supplement policies or certificates
in this State shall file with the commissioner, in accordance with the
applicable filing procedures of this State:
(1)
(A)
Appropriate premium adjustments necessary to produce loss ratios as anticipated
for the current premium for the applicable policies or certificates. The
supporting documents necessary to justify the adjustment shall accompany the
filing.
(B) An issuer shall make
the premium adjustments as are necessary to produce an expected loss ratio
under the policy or certificate as will conform with minimum loss ratio
standards for Medicare supplement policies and which are expected to result in
a loss ratio at least as great as that originally anticipated in the rates used
to produce current premiums by the issuer for the Medicare supplement policies
or certificates. No premium adjustment which would modify the loss ratio
experience under the policy other than the adjustments described herein shall
be made with respect to a policy at any time other than upon its renewal date
or anniversary date.
(C) If an
issuer fails to make premium adjustments acceptable to the commissioner, the
commissioner may order premium adjustments, refunds, or premium credits deemed
necessary to achieve the loss ratio required by this section.
(2) Any appropriate riders,
endorsements, or policy forms needed to accomplish the Medicare supplement
policy or certificate modifications necessary to eliminate benefit duplications
with Medicare. The riders, endorsements, or policy forms shall provide a clear
description of the Medicare supplement benefits provided by the policy or
certificate.
(3) An issuer shall
file a certification signed by a qualified actuary stating that premium rates
meet the minimum benefit and loss ratio standards required in article 10A of
chapter 431, HRS, and this chapter. In determining the accuracy of any
certification, the commissioner may require the issuer to submit any additional
information.
(d) Public
hearings. The commissioner may conduct a public hearing to gather information
concerning a request by an issuer for an increase in a rate for a policy form
or certificate form issued before or after the effective date of this chapter
if the experience of the form for the previous reporting period is not in
compliance with the applicable loss ratio standard. The determination of
compliance is made without consideration of any refund or credit for the
reporting period. Public notice of the hearing shall be furnished in a manner
as provided by law.
Notes
State regulations are updated quarterly; we currently have two versions available. Below is a comparison between our most recent version and the prior quarterly release. More comparison features will be added as we have more versions to compare.
No prior version found.