|
(a)Minimum aggregate loss ratio standard. A Medicare supplement individual or group policy form shall not be delivered or issued for delivery unless the individual or group policy 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 aggregated benefits (not including anticipated refunds or credits) provided under the individual policy form or group policy form, 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 applicable period, not including any changes in additional reserves, and in accordance with generally accepted actuarial principles and practices: (1)at least 75% of the aggregate amount of premiums earned in the case of group policies; or (2)at least 65% of the aggregate amount of premiums earned in the case of individual policies. (b)Health maintenance organization loss ratio standard. A health maintenance organization loss ratio, where coverage is provided on a service rather than reimbursement basis, shall be calculated on the basis of incurred claims experience or incurred health care expenses 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: (1)home office and overhead costs; (2)advertising costs; (3)commissions and other acquisition costs; (4)taxes; (5)capital costs; (6)administrative costs; and (7)claims processing costs. (c)Calendar year experience loss ratio standard. For the most recent calendar year, the ratio of incurred losses to earned premiums for all policies or certificates which have been in force for three years or more, as of December 31st of the most recent year, shall be equal to or greater than: (1)at least 75% in the case of group policies; and (2)at least 65% in the case of individual policies. (d)Filing of rates and rating schedules. 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. For individual or group policies issued prior to March 1, 1992, the provisions of paragraph (3) of this subsection must be met with respect to expected claims in relation to premiums. For purposes of submitting a rate filing under this section, policy forms, whether for open or closed blocks of business, providing for similar benefits shall be combined. However, for purposes of the required combination set out in this section, issuers may distinguish between policy forms providing for similar benefits for individuals 65 years of age or over and policy forms providing for similar benefits for individuals under age 65. Once policy forms have been combined, they remain so for all rating purposes. When forms have been so combined, a rate revision request shall not differentiate between the experience of the individual forms. Where significant inconsistencies between rate levels exist between forms providing similar benefits, some deviation in rate revision shall be allowed to reduce the significant inconsistencies. (1)Each Medicare supplement policy or certificate form shall be accompanied, upon submission for approval, by an actuarial memorandum. Such memorandum shall be prepared and signed by a qualified actuary in accordance with generally accepted actuarial principles and practices, and shall contain the information listed in the following subparagraphs: (A)the form number that the actuarial memorandum addresses; (B)a brief description of benefits provided; (C)a schedule of rates to be used; (D)a complete explanation of the rating process, including assumptions, claims data, methodology, and formulae used in developing the gross premium rates; (E)a statement of what experience base will be used in future rate adjustments; (F)a certification that the anticipated aggregate loss ratio is at least 65% (for individual coverage) or at least 75% (for group coverage), which certification should include a statement of the period over which the aggregate loss ratio is expected to be realized; (G)a table of anticipated loss ratio experience for representative issue ages for each year from issue over the period of time over which the aggregate loss ratio is to be realized; and (H)a certification that the premiums are reasonable in relation to the benefits provided. (2)Subsequent rate adjustment filings, except for those rates filed solely due to a change in the Part A calendar year deductible, shall also provide an actuarial memorandum, prepared by a qualified actuary, in accordance with generally accepted actuarial principles and practices, which memorandum shall contain the information in the following subparagraphs. (A)The form number addressed by the actuarial memorandum shall be included. (B)A brief description of benefits provided shall be included. (C)A schedule of rates before and after the rate change shall be included. (D)A statement of the reason and basis for the rate change shall be included. (E)A demonstration and certification by the qualified actuary shall be included to show that the past plus future expected experience after the rate change will result in an aggregate loss ratio equal to, or greater than, the required minimum aggregate loss ratio. (i)This rate change and demonstration shall be based on the experience of the named form in Texas only, if that experience is fully credible, as set out in paragraph (3) of this subsection. (ii)The rate change and demonstration shall be based on experience of the named form nationwide, with credibility factors as set out in paragraph (3) of this subsection applied, if the named form is used nationwide and the Texas experience is not fully credible. (iii)The rate change and demonstration shall be based on experience of the named form in Texas only, with credibility factors as set out in paragraph (3) of this subsection applied, if the named form is used in Texas only and the Texas experience is not fully credible. (F)For policies or certificates in force less than three years, a demonstration shall be included to show that the third-year loss ratio is expected to be equal to, or greater than, the applicable percentage. (G)A certification by the qualified actuary that the resulting premiums are reasonable in relation to the benefits provided shall be included. (3)For purposes of this subsection, if a group or individual policy form has 2,000 or more policies in force, then full credibility (100%) shall be given to the experience. If fewer than 500 policies are in force, then no credibility (0%) shall be given to the experience. The principle of linear interpolation shall be used for in-force numbers between 500 and 2,000. For group policy forms, the reference in this paragraph to the number of in-force policies means the number of in-force certificates under group policies. For purposes of this section, "in force" means either the average number of policies in force for the experience period used to support the need for a rate revision, or the number of policies in force as of the ending date of the experience period used to support the need for a rate revision. Once an issuer makes a decision as to which definition it will apply to a particular policy form, such decision is irrevocable. An issuer may submit specific alternate credibility standards to the department for consideration. In order for an alternate standard of credibility to be acceptable for application, the issuer must demonstrate that the standards are based on sound actuarial principles, and that the resulting loss ratios are in substantial compliance with the requirements of subsections (a), (b) and (c) of this section. (4)For individual policies issued prior to March 1, 1992, the expected claims in relation to premiums shall meet: (A)the originally-filed anticipated loss ratio when combined with the actual experience since inception; (B)a loss ratio of at least 65% when combined with actual experience beginning with June 1, 1996 to date; and (C)a loss ratio of at least 65% over the entire future period for which the rates are computed to provide coverage. (e)Annual filing of premium rates required. Every issuer of Medicare supplement policies and certificates issued before or after March 1, 1992 in this state shall file annually its rates, rating schedule, and supporting documentation, including ratios of incurred losses to earned premiums for the most recent calendar year broken down by calendar year of issue or by policy duration, for purposes of demonstrating that the issuer is in compliance with the loss ratio standards, and for approval by the Department in accordance with the filing requirements of this section and the requirements of §3.3323 of this title (relating to Increases to Premium Rates). 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. Such 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 years. The annual filing requirements in this subsection shall be as follows: (1)the NAIC Medicare supplement experience exhibit which summarizes the experience of each individual form with business in force in Texas; (2)the NAIC Medicare supplement experience exhibit which summarizes the experience of each group form with business in force in Texas; (3)rates and rating schedules for each form with business in force in Texas; (4)a certification by the qualified actuary that the policies or certificates in force less than three years are anticipated to produce a third-year loss ratio which is greater than or equal to the applicable loss ratio percentage; and (5)a certification by the qualified actuary that the expected losses in relation to premiums over the entire period for which the policy is rated comply with the required minimum aggregate loss ratio standard. (f)Refund or credit calculation. An issuer shall collect and file with the commissioner by May 31 of each year the data contained in the "Medicare Supplement Refund Calculation Form," published as Figure 1 to this section, for each type in a standard Medicare supplement benefit plan. This form is published by the Texas Department of Insurance and copies of this form are available from the Life/Health Group, Mail Code 106-1A of the Texas Department of Insurance, P.O. Box 149104, Austin, Texas 78714-9104. (1)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. (2)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 13-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. (3)For an individual or group policy or certificate issued prior to March 1, 1992, the issuer, for purposes of complying with this subsection, shall make the refund or credit calculation separately for all individual policies combined and all group policies combined for experience after June 1, 1996. Attached Graphic (g)Premium adjustments to conform with minimum standards for loss ratios. As soon as practicable, but prior to the effective date of enhancements to Medicare benefits, every issuer of Medicare supplement insurance policies, contracts, or coverage in this state shall file with the commissioner, in accordance with the applicable filing procedures of this state, the items required in paragraphs (1) and (2) of this subsection. (1)Appropriate premium adjustments necessary to produce loss ratios as anticipated for the current premium for the applicable policies or contracts shall be filed. Documents necessary to justify the adjustment shall accompany the filing. (A)Every issuer of Medicare supplement insurance or benefits to a resident of this state pursuant to the Insurance Code, Article 3.74 shall make premium adjustments: (i)necessary to product an expected loss ratio under the policy or contract as will conform with the minimum loss ratio standards for Medicare supplement policies; and (ii)expected to result in a loss ratio at least as great as that originally anticipated in the rates used to produce current premium by the issuer for the Medicare supplement insurance policies or contracts. (B)No premium adjustment which would modify the loss ratio experience under the policy, other than the adjustments described in this subsection, should 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 insurance modifications necessary to eliminate benefit duplications with Medicare shall be filed. The riders, endorsements, or policy forms shall provide a clear description of the Medicare supplement benefits provided by the policy or contract. (h)Maintenance of data. Incurred claims and earned premium experience shall be maintained for each policy form with business in force in Texas, by calendar year of issue, and shall be made available to the Texas Department of Insurance.
This agency hereby certifies that the adoption has been reviewed
by legal counsel and found to be a valid exercise of the agency's legal authority.
Filed with the Office of
the Secretary of State on April 20, 2005
TRD-200501645 Gene C. Jarmon
General Counsel and Chief Clerk
Texas Department of Insurance
Effective date: May 10, 2005
Proposal publication date:
November 26, 2004
For further information, please call: (512) 463-6327
|
