New Jersey Administrative Code
Title 11 - INSURANCE
Chapter 4 - ACTUARIAL SERVICES
Subchapter 6 - MINIMUM RESERVE STANDARDS FOR INDIVIDUAL AND GROUP HEALTH INSURANCE CONTRACTS
Section 11:4-6.2 - Definitions
The following words and terms, when used in this subchapter, shall have the following meanings unless the context clearly indicates otherwise:
"Annual-claim cost" means the net annual cost per unit of benefit before the addition of expenses, including claim settlement expenses, and a margin for profit or contingencies. For example, the annual claim cost for a $ 100.00 monthly disability benefit, for a maximum disability benefit period of one year, with an elimination period of one week, with respect to a male at age 35, in a certain occupation might be $ 12.00; while the gross premium for this benefit might be $ 18.00. The additional $ 6.00 would cover expenses and profit or contingencies.
"Claims accrued" means that portion of claims incurred on or prior to the valuation date which results in liability of the insurer for the payment of benefits for medical services which have been rendered on or prior to the valuation date, and for the payment of benefits for days of hospitalization and days of disability which have occurred on or prior to the valuation date, which the insurer has not paid as of the valuation date, but for which it is liable, and will have to pay after the valuation date. This liability is sometimes referred to as a liability for "accrued" benefits. A claim reserve (otherwise called a claim liability for annual statement reporting purposes), which represents an estimate of this accrued claim liability, must be established.
"Claims reported" means those claims that have been incurred and the insurer has been informed that they have been incurred. If the date reported is on or prior to the valuation date, the claim is considered as a reported claim for annual statement purposes.
"Claims unaccrued" means that portion of claims incurred on or prior to the valuation date which results in liability of the insurer for the payment of benefits for medical services expected to be rendered after the valuation date, and for benefits expected to be payable for days of hospitalization and days of disability occurring after the valuation date. This liability is sometimes referred to as a liability for unaccrued benefits. A claim reserve, which represents an estimate of the unaccrued claim payments expected to be made (which may or may not be discounted with interest), must be established.
"Claims unreported" means those claims that have been incurred on or before the valuation date, and the insurer has not been informed that they have been incurred. The claim is considered as an unreported claim for annual statement purposes.
"Date of disablement" means the earliest date the insured is considered as being disabled under the definition of disability in the contract, based on a doctor's evaluation or other evidence. Normally this date will coincide with the start of any elimination period.
"Elimination period" means a specified number of days, weeks, or months starting at the beginning of each period of loss, during which no benefits are payable.
"Gross premium" means the amount of premium charged by the insurer. It includes the net premium (based on claim-cost) for the risk, together with any loading for expenses, profit or contingencies.
"Group insurance" means any policy or contract of health insurance which covers more than one person and which, for the purposes of this subchapter, includes blanket insurance and franchise insurance and any other forms of group insurance.
"Health insurance" means a contract or agreement whereby an insurer is obligated to pay or allow a benefit of pecuniary value with respect to the bodily injury, disablement, sickness, death by accident or accidental means of a human being, or because of any expense relating thereto, or because of any expense incurred in prevention of sickness, and includes every risk pertaining to any of the enumerated risks. Health insurance does not include worker's compensation.
"Level premium" means a premium calculated to remain unchanged throughout either the lifetime of the policy, or for some shorter projected period of years. The premium need not be guaranteed; in which case, although it is calculated to remain level, it may be changed if any of the assumptions on which it was based are revised at a later time. Generally, the annual claim costs are expected to increase each year and the insurer, instead of charging premiums that correspondingly increase each year, charges a premium calculated to remain level for a period of years or for the lifetime of the contract. In this case, the benefit portion of the premium is more than needed to provide for the cost of benefits during the earlier years of the policy and less than the actual cost in the later years. The building of a prospective contract reserve is a natural result of level premiums.
"Long-term care insurance" means an insurance policy or rider advertised, marketed, offered or designed to provide coverage for not less than 12 consecutive months for each covered person on an expense incurred, indemnity, prepaid or other basis; for one or more necessary or medically necessary diagnostic, preventive, therapeutic, rehabilitative, maintenance or personal care services, provided in a setting other than an acute care unit of a hospital. Such term also includes a policy or rider, which provides for payment of benefits based upon cognitive impairment or the loss of functional capacity. Long-term care insurance shall not include any insurance policy which is offered primarily to provide basic Medicare supplement coverage, basic hospital expense coverage, basic medical-surgical expense coverage, hospital confinement indemnity coverage, major medical expense coverage, disability income or related asset-protection coverage, accident only coverage, specified disease or specified accident coverage, or limited benefit health coverage.
"Modal premium" means the premium paid on a contract based on a premium term which could be annual, semi-annual, quarterly, monthly, or weekly. Thus, if the annual premium is $ 100.00 and if, instead, monthly premiums of $ 9.00 are paid then the modal premium is $ 9.00.
"Negative reserve" means a terminal reserve with a negative value. Normally the terminal reserve is a positive value. However, if the values of the benefits are decreasing with advancing age or duration it could be a negative value, called a negative reserve.
"1956 Intercompany Hospital Surgical Tables" means those tables developed by the Task Force 4, a Subcommittee of the Society of Actuaries Joint Committee on Health Insurance, and adopted by the National Association of Insurance Commissioners ("NAIC") in December 1956, as the standard for valuation of individual health insurance benefits. See page 334 to 410 of Volume IX of the Transactions of the Society of Actuaries (Society of Actuaries, 1957; www.soa.org) for the tables.
"1959 Accidental Death Benefits Table" means the table adopted by the NAIC in December 1964 as the standard for valuation of accidental death benefits included in health insurance policies. See pages 749 to 762 of Volume XI of the Transactions of the Society of Actuaries (Society of Actuaries, 1959; www.soa.org) for the table.
"1964 Commissioners Disability Table" means the table adopted by the NAIC in December 1964 as the minimum standard for valuation of individual disability benefits. See pages AII-1 to AII-6 of the 1965 Proceedings of the NAIC, Volume I, for the table.
"1974 Medical Expense Table" means the table adopted by the NAIC in June 1981 as a minimum standard for valuation of medical expense benefits. See Transactions of the Society of Actuaries, Volume XXX, pg. 63, (Society of Actuaries, 1978; www.soa.org) for the table. Refer to the paper (in the same volume, pg. 9) to which this table is appended, including its discussions, for methods of adjustment for benefits not directly valued in Table A: "Development of the 1974 Medical Expense Benefits," Houghton and Wolf.
"1983 Group Annuity Mortality Table" means the mortality table developed by the Society of Actuaries Committee on Annuities and adopted as a recognized mortality table for the valuation of annuities in December of 1983 by the NAIC. See pages 414 to 415 of the 1984 Proceedings of the NAIC, Volume I, for the table.
"1985 Commissioners Individual Disability Tables A and B" mean the tables adopted by the NAIC in December 1985 as standards for the valuation of individual disability income benefits. See pages 449 to 601 of Volume XXXVII of the Transactions of the Society of Actuaries (Society of Actuaries, 1985; www.soa.org) for Table A. See pages 469 to 540 of the 1985 Proceedings of the NAIC, Volume I for Table B.
"1985 NAIC Cancer Claim Cost Tables" means the tables adopted by the NAIC in June 1985 as a standard for the valuation of policies. See pages 609 to 623 of the 1986 Proceedings of the NAIC, Volume I for the tables.
"1987 Commissioners Group Disability Income Table" means the table adopted by the NAIC in December 1987 as the standard for the valuation of group long-term disability benefits. See pages 393 to 458 of Volume XXXIX of the Transactions of the Society of Actuaries (Society of Actuaries, 1987; www.soa.org) for the table.
"Preliminary term reserve method" means a method of valuation whereby the valuation net premium for each year falling within the preliminary term period is exactly sufficient to cover the expected incurred claims of that year, so that the terminal reserves will be zero at the end of the year. As of the end of the preliminary term period, a new constant valuation net premium (or stream of changing valuation premiums) becomes applicable such that the present value of all such premiums is equal to the present value of all claims expected to be incurred following the end of the preliminary term period.
"Present value of amounts not yet due on claims" means the reserve for "claims unaccrued," which may be discounted at interest.
"Rating block" means a grouping of contracts determined by the valuation actuary based on common characteristics filed with the Commissioner, such as policy form or forms having similar benefit designs.
"Reserve" means and includes all items of benefit liability, whether in the nature of incurred claim liability or in the nature of contract liability relating to future periods of coverage, and whether the liability is accrued or unaccrued. An insurer under its contracts promises benefits which result in:
1. Claims which have been incurred, that is, for which the insurer has become obligated to make payment, on or prior to the valuation date. On these claims, payments expected to be made after the valuation date for accrued and unaccrued benefits are liabilities of the insurer which should be provided for by establishing claim reserves; or
2. Claims which are expected to be incurred after the valuation date. Any present liability of the insurer for these future claims should be provided for by the establishment of contract reserves and unearned premium reserves.
"Terminal reserve" means the reserve at the end of a contract year, and is defined as the present value of benefits expected to be incurred after that contract year minus the present value of future valuation net premiums.
"Unearned premium reserve" means the reserve which values that portion of the premium paid or due to the insurer which is applicable to the period of coverage extending beyond the valuation date. Thus, if an annual premium of $ 120.00 was paid on November 1, $ 20.00 would be earned as of December 31 and the remaining $ 100.00 would be unearned. The unearned premium reserve could be on a gross basis as in this example, or on a valuation net premium basis.
"Valuation Manual" means the manual of valuation instructions adopted by the National Association of Insurance Commissioners, as specified in N.J.S.A. 17B:19-1.1, 17B:19-2.1, 17B:19-11, 17B:19-12, 17B:19-13, and 17B:19-14 or as subsequently amended.
"Valuation net modal premium" means the modal fraction of the valuation net annual premium that corresponds to the gross modal premium in effect on any contract to which contract reserves apply. Thus if the mode of payment in effect is quarterly, the valuation net modal premium is the quarterly equivalent of the valuation net annual premium.
