Alabama Administrative Code
Title 482 - ALABAMA DEPARTMENT OF INSURANCE
Chapter 482-1-115 - ALABAMA HEALTH INSURANCE PLAN
Section 482-1-115-.08 - Funding Of The Plan

(a) The Board shall establish premium rates for the Plan as provided in Subparagraph (b). Separate schedules of premium rates based on age, sex and geographical location may apply for individual risks. Premium rates and schedules shall be submitted to the Commissioner for approval prior to use.

(b) The Board, with the assistance of the Commissioner, shall determine a standard risk rate by considering the premium rates charged by other insurers offering health insurance coverage to individuals. The standard risk rate shall be established using reasonable actuarial techniques, and shall reflect anticipated experience and expenses for such coverage. Initial rates for the Plan shall not be less than 125 percent of rates established as applicable for individual standard risks. Subject to the limits provided in this subparagraph subsequent rates shall consider the expected costs of claims including recovery of prior losses, expenses of operation, investment income of claim reserves, and any other cost factors subject to the limitations described herein. In no event shall Plan rates exceed 200 percent of rates applicable to individual standard risks.

(a) The Board shall have the authority to assess participating insurers in accordance with the provisions of this rule, and to make advance interim assessments as may be reasonable and necessary for the Plan's organizational and interim operating expenses. Any such interim assessments are to be credited as offsets against any regular assessments due following the close of the fiscal year.

(b) Following the close of each fiscal year, the Board shall determine the net premiums (premiums less administrative expense allowances), the Plan expenses of administration and the incurred losses for the year, taking into account investment income and other appropriate gains and losses. The deficit incurred by the Plan shall be recouped by assessments apportioned by the Board among participating insurers.

(c) Each participating insurer's assessment shall be determined by multiplying the total assessment of all participating insurers as determined in Subparagraph (b) by a fraction, the numerator of which equals that participating insurer's premium and subscriber contract charges for health insurance written in the state during the preceding calendar year and the denominator of which equals the total of all health insurance premiums by all participating insurers. For purposes of this assessment calculation, health insurance premiums shall exclude Medicare supplement health insurance premiums.

(d) If assessments exceed the Plan's actual losses and administrative expenses the excess shall be held at interest and used by the Board to offset future losses or to reduce future assessments. As used in this Paragraph (2), "future losses" include reserves for incurred but not reported claims.

(e) Each participating insurer's assessment shall be determined annually by the Board based on annual statements and other reports deemed necessary by the Board and filed by the participating insurer with the Commissioner.

(f) A participating insurer may petition the Commissioner for an abatement or deferment of all or part of an assessment imposed by the Board. The Commissioner may abate or defer, in whole or in part, such assessment if, in the opinion of the Commissioner, payment of the assessment would endanger the ability of the participating insurer to fulfill its contractual obligations. In the event an assessment against a participating insurer is abated or deferred in whole or in part, the amount by which such assessment is abated or deferred shall be assessed against the other participating insurers in a manner consistent with the basis for assessments set forth in this Paragraph (2). The participating insurer receiving such abatement or deferment shall remain liable to the Plan for the deficiency for four (4) years.

(g) Each participating insurer may offset any applicable premium taxes otherwise payable in respect of health insurance premiums paid to them by the amount of any assessment applied to them pursuant to this Paragraph (2). The offset must be against premium taxes incurred in respect of premiums paid in the same calendar year as the assessment. If the participating insurer is not subject to premium taxes on health insurance premiums it receives, the assessment made under this Paragraph (2) may be reduced by the premium taxes which would otherwise have been payable had it been so subject.

Author: Elizabeth Bookwalter, Associate Counsel