| (III) disclosure of the analysis performed to determine why a rate adjustment is necessary, which pricing assumptions were not realized and why, and what other actions taken by the insurer have been relied on by the actuary; and (IV) a statement that policy design, underwriting and claims adjudication practices have been taken into consideration; (V) composite rates reflecting projections of new certificates in the event that it is necessary to maintain consistent premium rates for new certificates and certificates receiving a rate increase; (iv) a statement that renewal premium rate schedules are not greater than new business premium rate schedules except for differences attributable to benefits, unless sufficient justification is provided to the department; and (v) sufficient information for review of the premium rate schedule increase by the department. (B) All premium rate schedule increases shall be determined in accordance with the following: (i) exceptional premium rate increases shall provide that 70% of the present value of projected additional premiums from the exceptional premium rate increase will be returned to policyholders in benefits; (ii) premium rate schedule increases shall be calculated such that the sum of the accumulated value of incurred claims, without the inclusion of active life reserves, and the present value of future projected incurred claims, without the inclusion of active life reserves, will not be less than the sum of the following: (I) the accumulated value of the initial earned premium multiplied by 58%; (II) 85% of the accumulated value of prior premium rate schedule increases on an earned basis; (III) the present value of future projected initial earned premiums multiplied by 58%; and (IV) 85% of the present value of future projected premiums not in subclause (III) of this subparagraph on an earned basis; (iii) If a policy form has both exceptional premium rate increases and other increases, the values in subclauses (II) and (IV) of clause (ii) of this subparagraph will also include 70% for exceptional rate increase amounts; and (iv) All present and accumulated values used to determine rate increases shall use the maximum valuation interest rate for contract reserves as specified in Subchapter GG of this chapter. The actuary shall disclose as part of the actuarial memorandum the use of any appropriate averages. (C) For each rate increase that is effected, the insurer shall file for review by the department updated projections, as defined in paragraph (2)(A)(iii)(I) of this subsection, annually for the next three years on the anniversary of the implementation of the rate increase, and shall include a comparison of actual results to projected values. The department may extend the period for filing updated projections to more than three years if actual results are not consistent with projected values from prior projections submitted by the insurer. For group insurance policies that meet the conditions in subparagraph (K) of this paragraph, the projections required by this paragraph shall be provided to the policyholder in conjunction with filing the projections with the department. (D) If any premium rate in the revised premium rate schedule is greater than 200% of the comparable rate in the initial premium schedule, the insurer shall file for review by the department, every five years following the end of the required period in subparagraph (C) of this paragraph, lifetime projections, as defined in paragraph (2)(A)(iii)(I) of this subsection. For group insurance policies that meet the conditions in subparagraph (K) of this paragraph, the projections required by this paragraph shall be provided to the policyholder in conjunction with filing the projections with the department. (E) If the department determines that the actual experience following a rate increase does not adequately match the projected experience filed by the insurer and that the current projections under moderately adverse conditions demonstrate that incurred claims will not exceed proportions of premiums specified in subparagraph (B) of this paragraph, the department may require the insurer to implement any of the following: (i) premium rate schedule adjustments; or (ii) other measures to reduce the difference between the projected and actual experience. (F) In determining whether the actual experience adequately matches the projected experience under subparagraph (E) of this paragraph, consideration shall be given to paragraph (2)(A)(iii)(V) of this subsection, if applicable. (G) If the majority of the policies or certificates to which the increase is applicable are eligible for the contingent benefit upon lapse, the insurer shall file: (i) a plan, subject to the department's approval, for improved administration or claims processing designed to eliminate the potential for further deterioration of the policy form requiring further premium rate schedule increases, or both, or to demonstrate that appropriate administration and claims processing have been implemented or are in effect; otherwise the department may impose the condition in subparagraph (H) of this paragraph; and (ii) the original anticipated lifetime loss ratio, and the premium rate schedule increase that would have been calculated according to subparagraph (B) of this paragraph had the greater of the original anticipated lifetime loss ratio or 58% been used in the calculations described in paragraph (2)(B)(ii)(I) and (III) of this subsection. (H) For a rate increase filing that meets the criteria in clauses (i) - (iii) of this subparagraph, the department shall review, for all policies included in the filing, the projected lapse rates and past lapse rates during the 12 months after the date each increase becomes effective to determine if significant adverse lapsation has occurred or is anticipated: (i) the rate increase is not the first rate increase requested for the specific policy form or forms; (ii) the rate increase is not an exceptional premium rate increase; and (iii) the majority of the policies or certificates to which the increase is applicable are eligible for the contingent benefit upon lapse. (I) In the event significant adverse lapsation has occurred, is anticipated in the filing, or is evidenced in the actual results as presented in the updated projections provided by the insurer after the date of the requested rate increase, the department may determine that a rate spiral exists. Following the determination that a rate spiral exists, the department may require the insurer to offer to all in force insureds subject to the rate increase, without underwriting, the option to replace existing coverage with one or more reasonably comparable products being offered by the insurer or its affiliates. (i) The offer shall: (I) be subject to the approval of the department; (II) be based on actuarially sound principles, but not be based on attained age; and (III) provide that maximum benefits under any new policy accepted by an insured shall be reduced by comparable benefits already paid under the existing policy. (ii) The insurer shall maintain the experience of all the replacement insureds separate from the experience of insureds originally issued the policy forms. In the event of a request for a rate increase on the policy form, the rate increase shall be limited to the lesser of: (I) the maximum rate increase determined based on the combined experience; and (II) The maximum rate increase determined based only on the experience of the insureds originally issued the form plus 10%. (J) If the department determines that the insurer has exhibited a persistent practice of filing inadequate initial premium rates for long-term care insurance, the department may, in addition to the provisions of subparagraph (H) of this paragraph, prohibit the insurer from any of the following: (i) filing and marketing comparable coverage for a period not to exceed five years; or (ii) offering all other similar coverages and limiting marketing of new applications to the products subject to recent premium rate schedule increases. (K) Subparagraphs (E), (H) and (I) of this paragraph shall not apply to group insurance issued to one or more employers or labor organizations, or to a trust or to the trustees of a fund established by one or more employers or labor organizations, or a combination thereof, for employees or former employees or a combination thereof or for members or former members or a combination thereof, of the labor organizations, where: (i) the policies insure 250 or more persons, and the policyholder has 5,000 or more eligible employees of a single employer; or (ii) the policyholder, and not the certificate holders, pays a material portion of the premium, which shall be not less than 20% of the total premium for the group in the calendar year prior to the year during which a rate increase is filed. |
| Source Note: The provisions of this §3.3831 adopted to be effective February 15, 1990, 15 TexReg 544; amended to be effective July 20, 1992, 17 TexReg 4769; amended to be effective May 8, 1997, 22 TexReg 3786; amended to be effective January 6, 2002, 26 TexReg 10886 |
