01.
Loss Ratio Standards.
(3-31-22)
a. A Medicare supplement policy form
or certificate form will not be delivered or issued for delivery unless the
policy form or certificate form can be expected, as estimated for the entire
period for which rates are computed to provide coverage, to return to
policyholders and certificateholders in the form of aggregate benefits (not
including anticipated refunds or credits) provided under the policy form or
certificate form. (3-31-22)
i. At least
seventy-five percent (75%) of the aggregate amount of premiums earned in the
case of group policies; or (3-31-22)
ii. At least sixty-five percent (65%) of the
aggregate amount of premiums earned in the case of individual policies;
(3-31-22)
b. Calculated
on the basis of incurred claims experience or incurred health care expenses
where coverage is provided by a managed care organization on a service rather
than reimbursement basis 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 managed care organization will not include:
(3-31-22)
i. Home office and overhead costs;
(3-31-22)
ii. Advertising costs;
(3-31-22)
iii. Commissions and
other acquisition costs; (3-31-22)
iv. Taxes; (3-31-22)
v. Capital costs; (3-31-22)
vi. Administrative costs; and
(3-31-22)
vii. Claims processing
costs. (3-31-22)
c. All
filings of rates and rating schedules 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 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. Demonstrations, at a minimum, account for: (3-31-22)
i. Lapse rates; (3-31-22)
ii. Medical trend and rationale for trend;
(3-31-22)
iii. Assumptions
regarding future premium rate revisions; and (3-31-22)
iv. Interest rates for discounting and
accumulating. (3-31-22)
d. For purposes of applying Paragraphs
051.01.a. and 056.05.b., only, policies issued as a result of solicitations of
individuals through the mails or by mass media advertising (including both
print and broadcast advertising) are individual policies.
(3-31-22)
02.
Refund or Credit Calculation. (3-31-22)
a. An issuer collects and files with the
director by May 31 of each year the data contained in the applicable reporting
form as defined by NAIC Model Regulation (Attachments) and accessible on the
Department website for each type in a standard Medicare supplement benefit
plan. (3-31-22)
b. If on the basis
of the experience as reported the benchmark ratio since inception (ratio one
(1)) exceeds the adjusted experience ratio since inception (ratio three (3)),
then a refund or credit calculation is needed. The refund calculation is 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 is excluded. (3-31-22)
c. For policies or certificates issued prior
to July 1, 1992, the issuer makes the refund or credit calculation separately
for all individual policies (including all group policies subject to an
individual loss ratio standard when issued) combined and all other group
policies combined for experience after July 1, 1992. (3-31-22)
d. A refund or credit is made only when the
benchmark loss ratio exceeds the adjusted experience loss ratio and the amount
to be refunded or credit exceeds a de minimis level. The refund includes
interest from the end of the calendar year to the date of the refund or credit
at a rate specified by the Secretary, but in no event less than the average
rate of interest for thirteen (13) week Treasury notes. A refund or credit
against premiums due is made by September 30 following the experience year upon
which the refund or credit is based. (3-31-22)
03.
Annual Filing of Premium
Rates. An issuer of Medicare supplement policies and certificates in
this state annually files its rates, rating schedule, and supporting
documentation including ratios of incurred losses to earned premiums by policy
duration for approval by the director in accordance with the filing
requirements and procedures prescribed by the director. The supporting
documentation demonstrates 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. The
demonstration excludes active life reserves. An expected third-year loss ratio
which is greater than or equal to the applicable percentage is demonstrated for
policies or certificates in force less than three (3) years. As soon as
practicable, but prior to the effective date of enhancements in Medicare
benefits, every issuer of Medicare supplement policies or certificates in this
state files with the director, in accordance with the applicable filing
procedures of this state: (3-31-22)
a.
Appropriate premium adjustments necessary to produce loss ratios as anticipated
for the current premium for the applicable policies or certificates. The
supporting documents accompanying the filing need to justify the adjustment.
(3-31-22)
i. An issuer's adjustments need to
produce an expected loss ratio under the policy or certificate that conforms to
minimum loss ratio standards for Medicare supplement policies and which are
expected to result in a loss ratio at least as great as that originally
anticipated in the rates used to produce current premiums by the issuer for the
Medicare supplement policies or certificates. No premium adjustment which would
modify the loss ratio experience under the policy other than the adjustments
described herein is made with respect to a policy at any time other than upon
its renewal date or anniversary date. (3-31-22)
ii. If an issuer fails to make premium
adjustments acceptable to the director, the director may order premium
adjustments, refunds, or premium credits deemed necessary to achieve the loss
ratio prescribed by Section
051. (3-31-22)
b. Any appropriate riders, endorsements, or
policy forms needed to accomplish the Medicare supplement policy or certificate
modifications necessary to eliminate benefit duplications with Medicare. The
riders, endorsements, or policy forms provides a clear description of the
Medicare supplement benefits provided by the policy or certificate.
(3-31-22)