NECESSITY, FUNCTION, AND CONFORMITY:
304.38-150 provides that the Commissioner of
Insurance may promulgate administrative regulations necessary for the proper
administration of KRS Chapter 304, Subtitle 38.
304.38-050 requires, in part that any
schedule of fees or other periodic charges to be paid by enrollees and
submitted to the commissioner is to be accompanied by adequate supporting
information to show that such charges or fees are not excessive, inadequate, or
unfairly discriminatory. This administrative regulation establishes the minimum
amount of supporting information which may be considered adequate.
(1) Terms defined in
304.38-030 shall have the meanings stated
expenditures" are health care service costs that are covered by a health
maintenance organization and are rendered by providers not under contract with
the HMO. These are expenditures for health care services for which the HMO is
(3) "Actuary" means a
member of the American Academy of Actuaries, a qualified Health Service
Corporation Actuary or a person who has demonstrated to the commissioner that
his qualifications are substantially equivalent to those required for such
rating system" means a system of fixing rates of payments for health services.
Under such system, rates of payments may be determined on a per-person or
per-family basis and may vary with the number of persons in a family, but
except as otherwise authorized, such rates must be equivalent for all
individuals and for all families of similar composition.
(5) "Capitation rates" are the per-person
rates which form the basis of a community rating system.
(6) "Contingency reserve" means the
unassigned funds held over and above any known or estimated liabilities of the
organization for the protection of its enrollees against insolvency of the
(1) Rates will be considered
excessive if it appears that their use will result in an unjustified
accumulation of a contingency reserve in excess of that prescribed in
(2) Rates will be considered inadequate if it
appears that their use will result in a contingency reserve less than that
(3) If the HMO's contingency reserves fall
outside of the range defined herein, the commissioner may require the HMO to
submit new budget projections, a revised estimate, certified by an actuary, of
the appropriate contingency reserve level and/or rate filings to correct the
(4) An unfairly
discriminatory rate is a rate for a person or class of persons which gives that
person or class an advantage or a disadvantage in comparison with others
involving essentially the same hazards, services, deductibles, copayments or
expense factors. Charges applicable to an en-rollee shall not be individually
determined based on the status of his health.
(5) Community rating is not mandated by these
rules, but an HMO which proposes to use another rating system should be
prepared to demonstrate that its rating system does not violate the principles
of these rules.
filing, any demonstration of the need for additional contingency reserves, or
qualification of the HMO for waiver of the deposit requirements of
shall take the following factors
(a) Benefit type, including the
proportion of uncovered expenditures and the potential for loss from
Underwriting classifications, such as individual enrollees, small groups,
Medicare complementary enrollees, etc., which may differ significantly in
classification, including any characteristics which would cause delay in
implementation of rate increases and any limited risk arrangements.
(d) Concentration of risk, such as the result
of environmental hazards in a limited geographic area or the existence of a
single large group.
which should differ between uncovered expenditures and directly provided
services and between services and administrative charges.
(f) Competition, which affects the degree to
which fluctuation of actual-to-expected results may be covered in rates charged
and inversely the degree to which contingency reserves must be relied upon to
lessen the impact of such fluctuations.
(g) Catastrophes and epidemics, to the extent
not considered elsewhere, and to the extent not covered by insurance or
(h) Mandated benefits
for which rating information may not exist.
(i) Provider contracts, as they affect the
level of uncovered expenditures.
(j) Health care development. This should be
explained as a budgetary item, and any reserve for such development should be
separate from the organization's contingency reserve.
(k) Fluctuation in asset values and
Contents of Rate Filing. Each rate filing shall include:
(1) A cover letter outlining the scope and
reason for the filing.
certification by an actuary as to the appropriateness of the proposed
(3) The capitation rates
for the plan affected and the formula to be used in deriving rates to be
charged from the capitation rates, if the filing is for community
(4) The organization's
budget for the period for which rates are to be effective, which should be in
such form as to relate easily to the elements (capitations, benefit variations,
etc.) of the proposed rates.
Sufficient recent financial data to support the proposed budget and any
(6) Any other supporting
information which the organization may wish to include or which the
commissioner deems necessary to determine whether the proposed rates should be
approved or disapproved.