Pa. Code tit. 31, pt. IV, ch. 84a, app A - SPECIFIC STANDARDS FOR MORBIDITY, INTEREST AND MORTALITY

I.MORBIDITY.

(a) Minimum morbidity standards for valuation of specified individual contract health and accident insurance benefits are as follows:

(1) Disability income benefits due to accident or sickness.

(i) Contract reserves.

(A) Contracts issued on or after January 1, 1965, and prior to January 1, 1986: The 1964 Commissioners Disability Table (64 CDT).

(B) Contracts issued on or after January 1, 1993, and before January 1, 2020: The 1985 Commissioners Individual Disability Tables A (85 CIDA) or The 1985 Commissioners Individual Disability Tables B (85 CIDB).

(C) Contracts issued on or after January 1, 1986, and prior to January 1, 1993: Optional use of either the 1964 Table or the 1985 Tables.

(D) Each insurer shall elect, with respect to all individual contracts issued in any one statement year, whether it will use Tables A or Tables B as the minimum standard. The insurer may elect to use the other tables with respect to a subsequent statement year.

(E) Contracts issued on or after January 1, 2020: The 2013 IDI Valuation Table with modifiers as described in Actuarial Guideline L.

(F) An insurer may begin to use the 2013 IDI Valuation Table with modifiers at a date earlier than January 1, 2020, but not prior to January 1, 2017.

(G) Within 3 years of 2020 or the earlier date an insurer begins to use the 2013 IDI Valuation Table, the insurer may elect to apply that morbidity standard for all policies issued subject to other valuation tables if the following conditions are met:

(I)The insurer applies the morbidity standard to all inforce policies and incurred claims.

(II)The insurer elects or has elected to apply the 2013 IDI Valuation Table to all claims incurred regardless of incurral date.

(III)The insurer maintains adequate policy records on policies issued prior to 2020 that allow the insurer to apply the 2013 IDI Valuation Table appropriately.

(IV) Once an insurer elects to calculate reserves for all inforce policies based on the current morbidity standard, all future valuations must be on that basis.

(ii) Claim reserves.

(A) Claims incurred on or after January 1, 2007, and prior to January 1, 2020: The 1985 Commissioners Individual Disability Table A (85CIDA) with claim termination rates multiplied by the following adjustment factors:

Duration	Adjustment Factor
Week 1	0.366
2	0.366
3	0.366
4	0.366
5	0.365
6	0.365
7	0.365
8	0.365
9	0.370
10	0.370
11	0.370
12	0.370
13	0.370
Month 4	0.391
5	0.371
6	0.435
7	0.500
8	0.564
9	0.613
10	0.663
11	0.712
12	0.756
13	0.800
14	0.844
15	0.888
16	0.932
17	0.976
18	1.020
19	1.049
20	1.078
21	1.107
22	1.136
23	1.165
24	1.195
Year 3	1.369
4	1.204
5	1.199
6 and later	1.000

The 85 CIDA so adjusted for the computation of claim reserves shall be known as The 1985 Commissioners Individual Disability Table C (85 CIDC).

(B) For claims incurred on or after January 1, 2020, the 2013 IDI Valuation Table with modifiers and adjustments for company experience as prescribed in the Actuarial Guideline L, except for worksite disability policies with benefit periods of 24 months or less.

(C) For worksite disability policies, claim reserves may be calculated using claim run-out analysis or claim triangles or other methods that place a sound value on the reserves that are appropriate for the business and risks involved.

(D) For claims incurred prior to January 1, 2020, each insurer may elect any of the following standards to use as the minimum standard for claims incurred:

(I)The minimum morbidity standard in effect for contract reserves on currently issued contracts, as of the date the claim is incurred.

(II)The standard as defined in clause (A) or (B) applied to all open non-worksite claims, if the insurer maintains adequate claim records to allow the insurer to apply the standard defined in clause (A) or (B) appropriately. Once an insurer elects to calculate reserves for all open claims on the standard defined in clause (A) or (B), all future valuations must be on that basis. This option, with respect to clause (B), may be selected only if the insurer maintains adequate claims records for all claims incurred to use the 2013 IDI Valuation Table appropriately.

(2) Hospital benefits, surgical benefits and maternity benefits (scheduled benefits or fixed time period benefits only).

(i) Contract reserves.

(A) Contracts issued on or after January 1, 1955, and before January 1, 1982: The 1956 Intercompany Hospital-Surgical Tables.

(B) Contracts issued on or after January 1, 1982: The 1974 Medical Expense Tables, Table A, Transaction of the Society of Actuaries, Volume XXX, pg. 63. Refer to the paper (in the same volume, pg. 9) to which this 1974 table is appended, including its discussions, for methods of adjustment for benefits not directly valued in Table A: "Development of the 1974 Medical Expense Benefits," Houghton and Wolf.

(ii) Claim reserves. Claim reserves are to be determined as provided in § 84a.4(d) (relating to claim reserves).

(3) Cancer expense benefits (scheduled benefits or fixed time period benefits only).

(i) Contract reserves. Contracts issued on or after January 1, 1986: The 1985 NAIC Cancer Claim Cost Tables.

(ii) Claim reserves. Claim reserves are to be determined as provided in § 84a.4(d).

(4) Accidental death benefits.

(i) Contract reserves. Contracts issued on or after January 1, 1965: The 1959 Accidental Death Benefits Table.

(ii) Claim reserves. Actual amount incurred.

(5) Single Premium Credit Health and Accident Insurance.

(i) Contract reserves:

(A) Contracts issued on or after January 1, 2007:

(I) Plans having less than a 30-day elimination period: The 85 CIDA with claim incidence rates increased by 12%.

(II) Plans having a 30-day and greater elimination period: The 85 CIDA for a 14 day elimination period with claim incidence rates increased by 12%.

(B) Contracts issued prior to January 1, 2007:

(I) Optional use of either:

(a)The mean of the amounts of unearned premium calculated from gross premiums in force on the pro rata basis and the Rule of 78 basis.

(b)The standard as defined in I(a)(5)(i)(A) applied to all contracts.

(II) If reserves are calculated on the standard defined in I(a)(5)(i)(A), future calculations must be on that basis.

(ii) Claim Reserves: Claim reserves are to be determined as defined in § 84a.4(d).

(6) Other individual contract benefits.

(i) Contract reserves. For other individual contract benefits, morbidity assumptions are to be determined as provided in § 84a.6(b)(1)(ii) (relating to contract reserves).

(ii) Claim reserves. For benefits other than disability, claim reserves are to be determined as provided in § 84a.4(d).

(b) Minimum morbidity standards for valuation of specified group contract health and accident insurance benefits are as follows:

(1) Disability income benefits due to accident or sickness.

(i) Where the regulation references this Appendix.

(A) Contract reserves.

(I) Certificates issued prior to January 1, 1993: The same basis, if any, as that employed by the insurer as of January 1, 1993.

(II) Certificates issued on or after January 1, 1993: The 1987 Commissioners Group Disability Income Table (87CGDT).

(B) Claim reserves.

(I) For claims incurred on or after January 1, 1993: The 1987 Commissioners Group Disability Income Table (87CGDT).

(II) For claims incurred prior to January 1, 1993: Claim reserves are to be determined as provided in § 84a.4(d) (relating to claim reserves).

(ii) Where the regulation does not reference this Appendix, the minimum morbidity standards are set forth in Actuarial Guideline XLVII.

(2) Single Premium Credit Health and Accident Insurance.

(i) Contract reserves.

(A) Contracts issued on or after January 1, 2007:

(I) Plans having less than a 30-day elimination period: The 85 CIDA with claim incidence rates increased by 12%.

(II) Plans having a 30-day and greater elimination period: The 85 CIDA for a 14 day elimination period with claim incidence rates increased by 12%.

(B) Contracts issued prior to January 1, 2007:

(I) Optional use of either:

(a) The mean of the amounts of unearned premium calculated from gross premiums in force on the pro rata basis and the Rule of 78 basis.

(b) The standard as defined in I(a)(5)(i)(A) applied to all contracts.

(II) If reserves are calculated on the standard defined in I(a)(5)(i)(A), future calculations must be on that basis.

(ii) Claim reserves. Claim reserves are to be determined as defined in § 84a.4(d).

(3) Other group contract benefits.

(i) Contract reserves. For other group contract benefits, morbidity assumptions are to be determined as provided in § 84a.6(b)(1)(ii) (relating to contract reserves).

(ii) Claim reserves. For benefits other than disability, claim reserves are to be determined as provided in § 84a.4(d).

II. INTEREST

(a) Contract reserves.

(1)The maximum interest rate is the maximum rate permitted by 40 Pa.C.S. §§ 7111-7127 (relating to valuation of reserves for contracts and policies) in the valuation of whole life insurance issued on the same date as the health and accident insurance contract and with a guarantee duration of more than 20 years.

(b) Claim reserves.

(1) For claim reserves on policies that require contract reserves, the maximum interest rate is the maximum rate permitted by 40 Pa.C.S. §§ 7111-7127 in the valuation of whole life insurance issued on the same date as the claim incurral date and with a guarantee duration equal to the maximum benefit period.

(2) For claim reserves on policies not requiring contract reserves, the maximum interest rate (I) shall be the calendar year statutory valuation interest rates as defined by:

I = .02 + .8 * (R- .03)

Where R is the average, over a period of 12 months, ending June 30 of the calendar year of the claim incurral date, of the monthly average of the composite yield on seasoned corporate bonds, as published by Moody's Investors Service, Inc. and the results rounded to the nearer 1/4 of 1%.

III. MORTALITY.

(a) For individual contracts and group certificates issued prior to the insurer's operative date, the mortality basis used shall be according to a table permitted by law for the valuation of whole life insurance issued on the same date as the health and accident insurance individual contract or group certificate.

(b) For individual contracts and group certificates issued on or after the insurer's operative date and prior to January 1, 1989, the mortality basis shall be according to either the 1958 CSO Mortality Table or the 1980 CSO Male and Female Mortality Tables, but without use of selection factors.

(c) Unless subsection (d) applies, the mortality basis used for individual contracts and group certificates issued on or after January 1, 1989, except long-term care individual contracts and group certificates issued on or after January 1, 1999, shall be according to a table, but without use of selection factors, permitted by law for the valuation of whole life insurance issued on the same date as the health and accident insurance contract. For long-term care individual contracts and group certificates issued on or after January 1, 1999, the mortality basis used shall be the 1983 Group Annuity Mortality Table without projection. For long-term care insurance individual policies and group certificates issued on or after January 1, 2007, the mortality basis used shall be the 1994 Group Annuity Mortality Static Table.

(d) Other mortality tables adopted by the National Association of Insurance Commissioners (NAIC) and promulgated by the Commissioner may be used in the calculation of the minimum reserves if appropriate for the type of benefits and if approved by the Commissioner. The request for approval shall include the proposed mortality table and the reason that the standard specified in subsection (c) is inappropriate.

(e) For single premium credit insurance using the 85CIDA table, no separate mortality shall be assumed.

Notes

Pa. Code tit. 31, pt. IV, ch. 84a, app A

The provisions of this Appendix A amended September 17, 1999, effective 9/18/1999, 29 Pa.B. 4864; amended July 14, 2006, effective 1/1/2007, 36 Pa.B. 3367; amended October 22, 2021, effective 10/23/2021, 51 Pa.B. 6600.

The provisions of this Appendix A amended under sections 206, 506, 1501 and 1502 of The Administrative Code of 1929 (71 P.S. §§ 66, 186, 411 and 412); sections 301.1 and 311.1 of The Insurance Department Act of 1921 (40 P.S. §§ 71.1 and 93); and 40 Pa.C.S. § 7124(c)(1) and (2).

This appendix cited in 31 Pa. Code § 84a.4 (relating to claim reserves); and 31 Pa. Code § 84a.6 (relating to contract services).