Section
1 Purpose
The purpose of this regulation is to set forth rules for the
enrollment of registered non-group carriers, requirements for the sale of
individual insurance, requirements for the filing of rates, and standards and
the process for approval of common health care plans.
Section 2 Authority
This regulation is issued pursuant to the authority vested in
the Commissioner of Banking, Insurance and Securities ("Commissioner") by Title
8 V.S.A., Sections 75,
4071,
and
4080b(c).
Section 3 Applicability and Scope
This regulation applies to any person who issues a non-group
plan. A non-group plan includes a health insurance policy, a nonprofit hospital
or medical service contract or a health maintenance organization health benefit
plan offered or issued to an individual. The term does not include disability
insurance policies, long-term care insurance policies, Medicare supplement
insurance policies, civilian health and medical program of the uniformed
services supplement policies, accident indemnity or expense policies, student
or athletic expense or indemnity policies or dental policies. The term also
does not include hospital indemnity policies or specified disease policies,
provided such policies are sold only as supplemental coverage when a common
health care plan or other comprehensive health care policy is in effect.
This regulation applies to any contract issued to or renewed
by a Vermont resident.
Section
4 Definitions
A. "Community
rating" means a rating process that produces average rates for a defined
community of insureds in the state of Vermont for the given policy period. The
averaging process includes various geographic rating areas, if any, within
Vermont, ages and genders of the Vermont insureds, industrial classifications
within Vermont, if any, Vermont claims experience and duration of coverage.
Different community rates are appropriate for the different insurance models
which may be represented by indemnity coverage, indemnity coverage with managed
care, preferred provider organizations and any other health insurance models
approved by the Commissioner.
B.
"Credibility" means a measure of the degree of statistical significance that
can be assigned to the claims experience of a plan when it is used as a basis
for projecting a future rate.
C.
"Demographic rating" means a rating process that adjusts the community rate for
a specific plan, based on that plan's deviation from the average age and gender
in the community rate.
D.
"Department" means the Department of Banking, Insurance and
Securities.
E. "Deviation plan"
means a plan, subject to the Commissioner's approval, which describes how the
premium shall deviate from a filed community rate as provided in Title
8 V.S.A. §
4080b(h)(2).
F. "Durational rating" means a rating process
that adjusts the community rate for a specific non-group, based on the
individual's deviation from the average claims experience assumed in the
community rate due to the period of time the policy has been in
force.
G. "Experience rating" means
a rating process that adjusts the community rate for a specific plan issued to
an individual or group of individuals. The experience rating plan changes the
individual's premium or rates based upon a deviation of the individual's or
group of individuals' claims experience from an average claims
experience.
H. "Geographic area
rating" means a rating process that adjusts the community rate for a specific
plan based on the deviation of the claims experience in the area where the
insured person lives from the average claims experience in the community
rate.
I. "Health insurance trend
factor" means a projection factor that is an estimate of the unit cost
increases and utilization increases that are expected to be incurred in a
health benefits plan. The estimate of unit cost increases and utilization
increases may include consideration of erosion of deductibles, medical
technology, general inflation and cost shifting.
J. "Industry rating" means a rating process
that adjusts the community rate for a specific plan, based upon the deviation
of the experience of the industrial classification of the insured from the
average experience in the community rate.
K. "Non-group plan" or "plan" has the same
meaning as found in Title
8 V.S.A., Section
4080b(a)(2). The term
"non-group plan" also includes any exempt plans listed in Section 4080b(a)(2),
if coverage enhancements to those exempt plans make them substantially similar
to any approved non-group plan.
L.
"Pre-existing condition" means the existence of symptoms which would cause an
ordinary, prudent person to seek diagnosis, care or treatment or those
conditions for which medical advice or treatment was recommended by or received
from a physician or other medical professional during the 12-month period
preceding the effective date of coverage.
M. "Tier rating" means a rating process that
assigns rates of a set of plans to one of a series of rating tiers, based upon
claims experience of the set of plans, or based upon one or a combination of
demographic, industry, and geographic rating factors.
N. "Rating manual rule" includes, but is not
limited to, any procedures, manuals, rules, or rating plans used to develop a
premium from a filed community rate.
O. "Registered non-group carrier" ("carrier")
means any person, except an insurance agent, broker, appraiser, or adjuster,
who issues a non-group plan and who is registered and approved as such by the
Commissioner.
P. "Resident" means a
person as defined in Title
18 V.S.A., Section
9402(8). A resident also
includes a dependent as defined in Title 8 V.S.A., Section 4090 and a dependent
child attending school outside Vermont.
Section 5 Registration
No carrier may offer a non-group plan as defined in Section
3(B) of
this regulation unless such carrier registers as a non-group carrier as
required by Title
8 V.S.A., Section
4080b(c) and is approved by
the Commissioner. The following are the minimum requirements for registration
as a non-group carrier:
A. The carrier
must apply in writing to the Commissioner to be a registered non-group
carrier.
B. The carrier must either
be licensed or authorized to provide health insurance in Vermont, be a
nonprofit hospital service corporation, nonprofit medical service corporation
or be a health maintenance organization.
C. The carrier shall have all non-group
rates, health care plans and forms approved by the Department prior to using
them in Vermont.
D. The carrier
must have licensed representatives in Vermont. The carrier must identify the
representatives in the written application. If the carrier is a health
maintenance organization, it shall have a sales representative in each of its'
service areas. The service areas shall be designated in the initial
application.
E. The carrier must
designate, in writing, the name and address of a representative responsible for
answering questions and responding to complaints about underwriting and
claims.
F. The carrier must provide
insureds with a toll-free number for claims handling and customer service and
supply this number to the Department in its application.
G. All advertising material about non-group
insurance must clearly identify the product advertised as a "Non-group Health
Insurance Plan." In addition, all registered non-group insurers shall identify
the common plan(s) by name (i.e., plan "A" etc). All advertising material must
be filed with the Department prior to use. The carrier may use the advertising
material after receipt by the Department.
H. A registered non-group carrier who
qualifies under the provisions of Title
8 V.S.A., Section
4080b, and this regulation must certify in
writing by April 1 of each year that it continues to qualify. The certification
shall be signed by a member of the American Academy of Actuaries.
Section 6 Withdrawal
A carrier who intends to withdraw from the non-group market
must notify the Commissioner in writing at least six (6) months prior to
canceling or nonrenewing any policies. This notice must include the following
information:
A. a description of the
plans offered by the carrier;
B.
the number of policies and the total number of lives insured under each plan;
and
C. the planned termination
date(s).
Section 7 Common
Health Care Plans
This Section sets forth the standards and process for
approval of common health care plans as required by Title 8 V.S.A.,
4080b(e).
A. The standards and
criteria outlined in Regulation 91-4b, Section
5(1)(a) through
(h) shall be the standards adopted by this
regulation. Any changes to the standards and criteria in Regulation 91-4b shall
also apply to this regulation. Where Regulation 91-4b refers to certificate
holder, the reader should substitute "policy holder."
B. Each common health care plan must satisfy
the following minimum policy provisions:
1. A
policy offered for sale after the effective date of this regulation shall not
be canceled except for nonpayment of premium and eligibility for Medicare
coverage due to age.
2. The policy
may be nonrenewed only for the following reasons: the insured is no longer a
resident of Vermont or will not be a resident on or after the renewal date, the
carrier has withdrawn from the non-group market after notification as required
by this regulation, the carrier has withdrawn an approved plan and/or the
insured is eligible for Medicare coverage due to age.
3. The notice of cancellation for nonpayment
of premium shall provide for at least 15 days notice from the date of
mailing.
4. The notice of
nonrenewal shall provide for at least 90 days notice from the date of mailing.
If the carrier has withdrawn an approved plan, it shall provide the reasons for
nonrenewal in the notice and offer to replace the plan with an approved
plan.
5. A policy providing
coverage for a spouse or members of a family shall not terminate because of the
death of the insured. The insurer may issue a replacement policy providing
substantially the same benefits to cover the surviving spouse or other
dependents.
6. Termination or
nonrenewal of the policy for any reason other than non-payment of premium shall
provide for the payment of covered expenses from a continuous loss which
started while the policy was in force, not to exceed 12 months from the date of
termination or nonrenewal. The payment of benefits under the policy may be
conditioned upon total disability of the covered person and the coverage limits
of the policy. Policies providing pregnancy benefits shall provide for an
extension of benefits as to pregnancy commencing while the policy is in force
and for which benefits would have been payable had the policy remained in
force.
C. For a 12-month
period from the effective date of coverage a registered non-group carrier may
limit coverage for pre-existing conditions. A registered non-group carrier
shall waive any pre-existing conditions for all new policy holders and their
dependents, who produce evidence of continuous health benefit coverage (whether
group or non-group) during the previous nine months. This waiver may be
conditioned upon the prior policy having provided substantially equivalent
coverage to the coverage provided by the new policy.
D. No policy which is the subject of this
regulation, can be issued, delivered, renewed or advertised unless the
following minimum benefits are available:
1.
Dependent children coverage must be provided where coverage would otherwise end
for a child at a limiting age as required by Title 8 V.S.A., Section
4090.
2. Newborn coverage for
routine and other care must be provided without notice or additional premiums
for 31 days after birth. Coverage shall include well baby care, injury,
sickness, necessary care and treatment of medically diagnosed congenital
defects and birth abnormalities as provided by Title
8 V.S.A., Section
4092.
3. Home health care coverage with the minimum
coverage described in Title
8 V.S.A., Section
4095 and
4096
must be offered as an option.
4.
Alcoholism treatment must be provided for the necessary care and treatment of
alcohol dependency as required by Title 8 V.S.A., Section 4098.
5. Coverage for screening by low-dose
mammography must be provided as required by Title
8 V.S.A., Section
4100a.
6. Maternity coverage must be provided and
shall be treated as any other sickness for all insureds covered by the policy
as required under Regulation 89-1.
Section 8 Other Non-Group Plans
All non-group plans must satisfy the minimum policy
provisions provided in Section 7(B)(C) and (D) of this
regulation.
Section 9 Health
Plan Advisory Committee
A. The process for
the approval of the Common Health Care Plan shall be as outlined in Regulation
91-4b, Section
5(2)(f).
Any changes to Section
5(2)(f)
shall be incorporated into this regulation. Language in Section
5(2)(f)
referring to group carrier shall be interpreted to mean non-group carrier when
applying it to this regulation.
Section 10 Solicitation
A registered non-group carrier shall make available to each
resident of Vermont all non-group plans approved by the Commissioner. A
registered non-group carrier shall not take any action that would prevent or
discourage a resident from purchasing any plan offered by the carrier. The
carrier must list all plans that it is offering for sale in Vermont in any rate
filing covered by this regulation to the Commissioner.
A registered non-group carrier which is also a health
maintenance organization may limit applications for approved plans to residents
in its service area. The health maintenance organization must state in its rate
filing the service area for the plans approved by the Commissioner and how the
sale may be limited.
Section
11 Community Rating Methodology
A. To be considered acceptable by the
Commissioner, the community rates submitted by a registered non-group carrier
must be effective for at least a twelve-month policy period.
B. Premiums shall be submitted for "single,"
"two person," (two adults or one adult and one child) and "family" membership
classifications. Other or different classifications may be filed and used,
provided they are approved by the Commissioner.
C. Community rates shall be calculated in
such a manner that appropriate and separate rates are available for each
insurance model for each month in which accounts renew or new accounts are
written. Compliance with this requirement can be accomplished in many ways,
some of which are listed here:
1. A set of
community rates are calculated for a twelve-month period. The rates are to be
effective for at least twelve months for accounts renewing in that month.
Monthly trend factors may be applied to community rates for the remaining
eleven months of renewals, all of which are to be effective for twelve months.
Filings should be made no more frequently than twice a year.
2. Other methodologies that are submitted to
and approved by the Commissioner, but filings should be made no more frequently
than quarterly.
D.
Medical underwriting and screening to exclude or individually rate non-group
insureds is not allowed. Therefore, the community rating plan for a registered
non-group carrier may not contain any provisions for adjustments that are based
upon medical underwriting and/or medical screening.
E. Proposed community rates should be based
upon reasonable projections of Vermont non-group experience that has been
incurred by the registered non-group carrier. To the extent that the carrier's
Vermont claims experience is not deemed to be fully credible, it can be
combined with the carrier's non-group experience from other states, if that
experience is adjusted to reflect Vermont benefit differences, demographic
differences, geographic differences, etc., that, if not otherwise made, would
render the out-of-state experience invalid for Vermont insureds. Carriers may
be required to provide such Vermont-based data as the Commissioner deems
necessary.
Projections of the base claims experience forward to the
period for which the proposed community rates are designed to be effective
should be accomplished with the use of an appropriate health insurance trend
factor.
F. In addition to
the expected claims cost, the carrier's community rates may contain appropriate
allowances for administrative expenses, taxes, profit and the cost for
reinsurance, if any, and other elements used by the carrier.
G. The approved community rates for a given
benefit package may be adjusted for the following rating classifications upon
approval of a deviation plan by the Commissioner:
1. demographics;
2. geographic area;
3. industrial class;
4. experience;
5. tier rating;
6. durational rating; and
7. other classifications approved by the
Commissioner.
After July 1, 1993, the premium charged shall not deviate
above or below the community rate filed by the carrier by more than 40 percent
(40%) for two years and thereafter, 20 percent
(20%).
H. The
registered carrier must file and request approval from the Commissioner of all
rating manual rules.
Section
12 Restrictions Relating to Premium Increases
A. The percentage of increase in the premium
charged to an individual account for the same coverage for a new rating period
may not exceed twenty percent (20%).
B. Notwithstanding Section A of this
paragraph, a carrier may seek relief from the premium increase limitation by
requesting a determination from the Commissioner that such a limitation will
have a substantial adverse effect on the financial soundness and safety of the
carrier.
Section 13
Approval of Community Rates, Deviation Plans and Methodology
A. Each registered carrier shall file its
community rates and the method used to derive them at least sixty days prior to
their first intended use. The rates filed may not be used until approved by the
Commissioner.
B. The filing should
contain, at a minimum, the following information:
1. a description of the base claims
experience data;
2. actuarial
support for the health insurance trend factor used to project the base claims
experience data forward to the rating period and a copy of the data used to
calculate the trend factors;
3. a
description of each element of retention;
4. a description of all other adjustments or
elements included in or used to calculate the rates;
5. an identification of the effective date
that the rates were designed for and the effective period of the rates. One way
to appropriately make this identification would be to include a statement in
the filing similar to the following:
"These rates have been designed to apply to (identify the
plans), renewing on or after XX/XX/XX and will remain in effect for twelve
months for each renewal."; and
6. a description of the rating
classifications and rating rules that make up the deviation plan, including a
demonstration of how the requirement that the premium for any given insured
shall not deviate by more than 40% from the carrier's approved community rate.
After July 1, 1995, the above information shall be submitted based on a
deviation of not more than 20 percent.
C. The following statements by a qualified
actuary who is a member of the American Academy of Actuaries must be included
with each filing:
1. that the rates and
proposed rating methodology meet all the requirements of this
regulation;
2. that the rates are
reasonable in relation to the benefits provided, and that they are neither
excessive, deficient, nor unfairly discriminatory; and
3. that the proposed rates anticipate at
least a 70% loss ratio for the period of time the rates will remain in
effect.
D. Filings made
after the initially-approved filing should also identify what changes, if any,
are made in the use of rating classification factors as compared to the last
filing. Similarly, if no changes are proposed in the use of rating
classification factors as compared to the last filing, this should also be
noted. The rating factors shall be applied in their entirety without exception
or adjustment.
E. Once a rating
plan with rating classifications has been approved, a carrier must apply the
rating factors or rating manual rules in a uniform manner to all
accounts.
F. The filing form shown
in Attachment 1 shall be used for each rate submission to the
Commissioner.
Section 14
Underwriting Standards for Registered Non-Group Carriers
A. A registered non-group carrier shall
guarantee acceptance of all applicants who are residents of Vermont for any
approved plan offered by the carrier. A registered non-group carrier shall,
upon application by a resident of Vermont who is currently insured by another
carrier, accept the application and provide a policy of insurance under an
approved plan without imposing any additional restrictions for pre-existing
conditions or waiting periods. The carrier may restrict coverage only to the
extent provided in Title
8 V.S.A., Section
4080b(g). A registered
non-group carrier shall also guarantee acceptance for each spouse of an
applicant and dependent children including disabled children.
B. Insurers may gather medical information
from insured persons in order to make informed decisions concerning reinsurance
or for other non-underwriting purposes.
C. Medical underwriting or screening to
exclude or limit coverage is not allowed. The community rating plan for a
registered non-group carrier may not contain any provisions for adjustments
that are based on medical underwriting and/or medical screening.
D. Registered non-group carriers must accept
all applications for non-group coverage from residents of Vermont. The carrier
may require proof of current Vermont residency. In addition, the carrier may
require appropriate records which demonstrate bona fide residency in Vermont.
(The intention is to protect the financial integrity of registered non-group
carriers from adverse selection.)
E. Registered non-group carriers are required
to renew each plan as the policy anniversary date comes due. In addition, all
dependents must be renewed, unless the insured or dependent is no longer a
resident of Vermont or ceases to be a qualified dependent pursuant to Title 8
V.S.A., Section 4090. If the registered non-group carrier has the necessary
information, it shall confirm in writing, at least 30 days prior to renewal,
the premium at which the policy is to be renewed.
Section 15 Agent/Broker Reimbursement
Agent/broker reimbursement may not be based on or related to
the case characteristics or experience of an account. Commission levels of a
carrier must be uniform for all accounts.
Section 16 Separability
Should a court hold any provision of this regulation invalid
in any circumstances, the invalidity shall not affect any other provisions or
circumstances.
Section 17
Effective Date
This regulation initially became effective April 1, 1994 and
these amendments will become effective January 1, 1998.
Attachment 1
WORKSHEET
The purpose of this worksheet is to provide the Commissioner
with appropriate information to judge the reasonableness of premium rates
submitted by registered non group carriers. While it can be used by the carrier
to actually determine its premium rates, it need not be. The carrier is free to
use its own techniques. However, the carrier is required to then provide the
base claims cost information requested, as well as the expected claims cost for
the period of the proposed rates. The resulting trend factor will be reviewed
by the Commissioner for reasonableness.
The carrier is required to file for approval each time any
rate for non group coverage is proposed to change.
The worksheet should be filled out with information for the
coverage offered by the registered non group carrier. If other coverage produce
health care trend factors different than the trend factor shown in Item 6, the
coverage and associated trend factors should be identified on a separate sheet
of paper, and attached to the worksheet. Space is provided in Item 10 for
different trend factors for the same coverage with different deductibles and/or
coinsurance.
In Item 1, please insert the incurred claims for a recent 12
month period for this coverage. Ideally, the 12 month incurred claims would
have 3 months of runout and would then be completed to the fully incurred level
with an estimate of unpaid claims.
In Item 2, the amount of claims in excess of any medical stop
loss attachment point are posted.
Item 3 is the difference between Item 1 and Item 2.
The earned contract months exposed to risk for the coverage
during the 12 month incurred period should be entered at Item 4.
The incurred claims cost per contract month (monthly pure
premium) in Item 5 is calculated by dividing Item 3 by the "Total" contract
months in Item 4.
Carriers who use this form to actually calculate their rates
will enter their average annual trend factor at Item 6, and compound it for the
appropriate number of months in the projection span in Item 7. The compounded
trend factor is applied to the base claims cost in Item 5, and the resulting
expected claims cost is entered at Item 8.
Carriers who develop their expected claims cost using some
other method should fill in Item 8, and then develop the trends that result
from their process, and fill them in at Items 6 and 7.
The carrier's allocation of the total claims cost in Item 8
into single, two person, and family components is shown in Item 9.
If, for example, the primary product is a $ 100 deductible
comprehensive major medical coverage, other deductible coverage claims costs
are filled in at Item 10, along with average annual trend factors comparable to
the one reported in Item 6.
Retention elements are reported in Item 11 b through g, both
on a dollar basis and a percent of premium basis.
The total premium rates are filled in at Item 12. The claims
cost in Item 9 and the retention in Item 11 are combined to produce these
premium rates.
Premium rates for the same period for the same coverage one
year earlier are inserted at Item 13, and the annual rate increase is entered
at Item 14.
Registered Carrier ___
Coverage ___
Effective Date ___
1. Base incurred claims * for the 12 month
___ period ___.
2. Incurred claims
in excess of reinsurance ___ attachment point, if applicable **
3. Incurred claims adjusted for the removal
___ of claims in excess of reinsurance attachment point (1) - (2)
4. Earned contract months exposed to risk
during the same 12 month experience period.
a) Single ___
b) 2 Person ___
c) Family ___
d) Total ___
5. Incurred claims cost per contract month
___ (pure premium) for the 12 month period, excluding claims in excess of the
reinsurance attachment point. (3) / (4d)
* State this on a fully incurred basis. This is a combined
statistic for single, two person, family, and other types of membership
classifications.
** This refers to the reinsurance attachment point for the
period of the rates discounted at the health insurance trend factor to the base
experience period.
6. Health
insurance trend factor *** ___ stated on an average annual basis.
7. Health insurance trend factor compounded
___ as necessary for the projection span from the base experience period to the
period of the proposed rates.
a) State the
period of the proposed rates.
. First effective date ___
. Last effective date ___
. Length of rate guarantee ___
b) State the projection span from the base
experience period to the period of the rates in terms of numbers of months.
___
8. Expected claims
cost per contract (pure premium) ___ for the period of the proposed rates,
excluding claims in excess of the reinsurance attachment point. (5 x
7)
9. Allocation of the expected
claims cost into single, two person and family classifications:
|
Single
|
___
|
|
Two Person
|
___
|
|
Family
|
___
|
*** The trend factor should include the effects of the fixed
deductibles under a comprehensive major medical product, and the fixed
reinsurance attachment point under all coverage.
10. Expected claims costs trends for other
deductible and coinsurance combinations.
|
Average Annual
|
|
Health Insurance
|
|
Coverage
|
Single
|
Two Person
|
Family
|
Trend Factor
|
|
___
|
___
|
___
|
___
|
___
|
|
___
|
___
|
___
|
___
|
___
|
|
___
|
___
|
___
|
___
|
___
|
|
___
|
___
|
___
|
___
|
___
|
|
___
|
___
|
___
|
___
|
___
|
|
___
|
___
|
___
|
___
|
___
|
11.
Elements of the proposed composite rate expressed as a percent of total rate
and as a dollar amount.
|
|
Amount |
%
|
|
a.
|
Expected claims cost (Item 8)
|
___
|
___
|
|
b.
|
Administrative expense
|
___
|
___
|
|
c.
|
Commissions
|
___
|
___
|
|
d.
|
Taxes
|
___
|
___
|
|
e.
|
Profit or contribution to
reserves/surplus
|
___
|
___
|
|
f.
|
Reinsurance expense
|
___
|
___
|
|
g.
|
Other
|
___
|
___
|
|
Total
|
___
|
100%
|
12.
Premium rates (Item 9 loaded with Item 11, b through g)
|
Single
|
___
|
|
Two Person
|
___
|
|
Family
|
___
|
13.
Premium rates for the same period one year earlier.
|
Single
|
___
|
|
Two Person
|
___
|
|
Family
|
___
|
14.
Annual rate increase
|
Single
|
___
|
|
Two Person
|
___
|
|
Family
|
___
|
15.
Please list all plans being offered for sale in Vermont. Please list the form
number and the product name. Use other sheets of paper, if you need more room.
___
Attachment 2
Work Sheet
The purpose of this work sheet is to provide the Commissioner
with the information required in Section 11, G, H and Sections 13, B.4 about
adjustments to the Community Rates. Adjustments based on medical underwriting
and health status are not allowed. However, adjustments for demographics,
geographic area, industry, claims experience, experience of the tier to which
the individual is assigned, the duration of the individual's policy and other
adjustments that may be approved by the Commissioner are allowed, as long as
the total adjustment falls within the limiting bands.
1. Please identify the specific types or
adjustments that will be used by your company by placing a check next to the
appropriate adjustment.
|
AGE/GENDER
|
___
|
|
AREA
|
___
|
|
INDUSTRY
|
___
|
|
EXPERIENCE
|
___
|
|
TIER
|
___
|
|
DURATION
|
___
|
|
OTHER
|
___
|
2. If
"OTHER" has been checked, please describe the adjustment in full.
3. For each adjustment that is checked,
please demonstrate how the factor was determined and what sources were
used.
4. For each adjustment that
is checked, please show what adjustment factors will be used and demonstrate
how they will be applied. Please provide tables of adjustment factors for each
type of adjustment.
5. Please
demonstrate how the use of the adjustment factors will be controlled to produce
no more than a 40% variation in the community rate for two years.
