| (a) Scope and general standards.
(1) Pursuant to Insurance Code §425.072, all individual
and group accident and health insurance coverages, including single
premium credit accident and health insurance contracts, issued on
and after January 1, 2017, are required to follow the standards and
reserve requirements provided in the valuation manual adopted by the
department pursuant to Insurance Code §425.073.
(2) In establishing claim reserves for all individual
and group accident and health insurance coverages issued before January
1, 2017, and single premium credit accident and health insurance contracts
issued on or after January 1, 2009, and before January 1, 2017, the
provisions of this paragraph apply. An insurer may use applicable
requirements in the valuation manual for claim reserves for valuations
after December 31, 2016, and before January 1, 2019, and must use
applicable requirements in the valuation manual for claim reserves
for valuations after December 31, 2018.
(3) Unless paragraph (1) or (2) of this subsection
applies, the standards in this subchapter apply to all individual
and group accident and health insurance coverages issued before January
1, 2017, as well as single premium credit accident and health insurance
contracts issued on or after January 1, 2009, and before January 1,
2017. All other credit insurance is not subject to the requirements
provided by this paragraph.
(4) When an insurer determines that adequacy of its
health insurance reserves requires reserves in excess of the minimum
standards specified in this subchapter, such increased reserves must
be held and must be considered the minimum reserves for that insurer.
(5) With respect to any block of contracts, or with
respect to an insurer's health business as a whole, a prospective
gross premium valuation is the ultimate test of reserve adequacy as
of a given valuation date. Such a gross premium valuation would take
into account, for contracts in force, in a claims status, or in a
continuation of benefits status on the valuation date, the present
value as of the valuation date of: all expected benefits unpaid, all
expected expenses unpaid, and all unearned or expected premiums, adjusted
for future premium increases reasonably expected to be put into effect.
(6) Such a gross premium valuation must be performed
whenever a significant doubt exists as to reserve adequacy with respect
to any major block of contracts, or with respect to the insurer's
health business as a whole. In the event inadequacy is found to exist,
immediate loss recognition must be made and the reserves restored
to adequacy. Adequate reserves (inclusive of claim, premium, and contract
reserves, if any) must be held with respect to all contracts, regardless
of whether contract reserves are required for such contracts under
the standards required under this subchapter.
(7) Whenever minimum reserves, as defined in this subchapter,
exceed reserve requirements as determined by a prospective gross premium
valuation, such minimum reserves remain the minimum requirement under
these standards.
(b) Categories of reserves. The following sections
set forth minimum standards for three categories of health insurance
reserves: §3.7002 of this title (relating to Claim Reserves); §3.7003
of this title (relating to Premium Reserves); and §3.7004 of
this title (relating to Contract Reserves). Adequacy of an insurer's
health insurance reserves is to be determined on the basis of all
three categories combined. However, the standards in these sections
emphasize the importance of determining appropriate reserves for each
of the three categories separately.
(c) Sections 3.7006, 3.7007, 3.7008, and 3.7009. Section
3.7006 and §3.7007 of this title (relating to Specific Standards
for Morbidity, Interest, and Mortality; and Glossary of Technical
Terms Used) are an integral part of the standards specified in §§3.7001
- 3.7005 of this title (relating to Introduction; Claims Reserves;
Premium Reserves; Contract Reserves and Reinsurance). Section 3.7008
of this title (relating to Reserves for Waiver of Premium) is supplementary
and is not part of the standards as such, but is included for explanatory
and illustrative purposes only. Section 3.7006 of this title contains
specific minimum standards with respect to morbidity, interest, and
mortality, which apply to claim reserves according to year of incurral
and to contract reserves according to year of issue. Section 3.7007
of this title consists of a glossary of technical terms used. Section
3.7008 of this title is supplementary and deals with waiver of premium
reserves. For the purchase of existing business under certain circumstances,
see §3.7009 of this title (relating to Purchase or Assumption
of Existing Business).
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