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. 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 Subsection A(1) of this section and Subsection C(3) of
Rule
10.15 only, 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 individual policies.
4. For
policies issued prior to July 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 26, 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
commissioner 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
or certificates issued prior to July 1, 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 April 26,
1996. The first report shall be due by May 31, 1998.
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 Premium Rates.
An issuer of Medicare supplement policies and certificates
issued before or after the effective date of this regulation, 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 (3) 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
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 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.
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 regulation, 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 commissioner.
