A. 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 seventy-five percent (75%) of the aggregate amount of premiums earned
in the case of group policies, or
ii. At least sixty-five percent (65%) of the
aggregate amount of premiums earned in the case of individual
policies.
b. These ratios
shall be 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 such 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, as specified in Section
15(G)(13), that the
anticipated loss ratio can be expected to meet the appropriate loss ratio
standards.
(3) For policies issued
prior to January 1, 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 Subsection A(1)(a)(i) and (ii) when combined with actual experience
beginning with April 1, 1996 to date; and
c. The appropriate loss ratio requirement
from Subsection A(1)(a)(i) and (ii) over the entire future period for which the
rates are computed to provide coverage.
B. Refund or Credit Calculation.
(1) An issuer shall collect and file with the
Superintendent by May 31 of each year the data contained in the applicable
reporting form contained in Appendix A 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) 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 issued prior to January 1, 1992, the issuer shall make the refund or
credit calculation separately for all individual policies combined and all
other group policies combined for experience after April 1, 1996.
(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 13-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 Premium Rates.
An issuer of Medicare supplement policies and certificates
(including those issued before the effective date of this Rule) in this State
shall file annually its rates, rating schedule, and supporting documentation
for approval by the Superintendent in accordance with the filing requirements
and procedures prescribed by Section
15(G).
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 Superintendent, in accordance
with the applicable filing procedures of this State:
(1)
a.
Appropriate premium adjustments necessary to produce minimum loss ratios as
anticipated for the current premium for the applicable policies or
certificates. The supporting documents as necessary to justify the adjustment
shall accompany the filing.
b. An
issuer shall make premium adjustments necessary to produce an expected loss
ratio under the policy or certificate to conform to minimum loss ratio
standards for Medicare supplement policies and which are expected to result in
a loss ratio at least as great as the minimum ratio 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 Superintendent, the Superintendent 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.
D. Public Hearings.
The Superintendent 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 (including those issued before the effective
date of this Rule) 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 deemed appropriate by the
Superintendent.
