New York Codes, Rules and Regulations, Part 52, Section 52.40 - Procedures and requirements for filing of rates | New York Codes, Rules and Regulations

(a) General.

(1) Supporting material for all rate filings shall be separately set forth in an actuarial memorandum or covering letter accompanying the rates being filed.

(2) All policies, forms, manuals, schedules and other material submitted shall be in duplicate.

(3) Rate changes, additions and deletions shall be made by substituting, deleting or adding numbered pages to the rate manual or schedule of rates.

(4) If a rate filing precedes the filing of a form, reference should be made to the rate control number when the form is submitted. Subsequent correspondence should refer to both control numbers.

(b) Prohibited rating practices.

(1) No rates for any policy shall be predicated on a level premium age-at-issue basis except:

(i) with respect to conversion policies issued in accordance with sections 162 and 164 of the Insurance Law; or

(ii) when the policy form is guaranteed renewable, is noncancellable or provides that nonrenewal is subject to the consent of the superintendent. Such consent may be given only with respect to an entire class of insureds upon request in writing and determination by the superintendent that such nonrenewal is in the best interests of the public.

(2) No rates for any policy shall be predicated upon a reduced initial premium which is less than the pro rata portion of the applicable annual premium.

(c) Required rate filings for individual insurance including franchise, blanket insurance, and community-rated contracts of article 43 corporations. The following rules shall apply with respect to rates for individual insurance including franchise, blanket insurance, and community- rated contracts of article 43 corporations:

(1) A rate filing shall accompany every policy, and rider or endorsement affecting benefits, submitted to the department for approval. Any subsequent change in rates applicable to any such policy, rider or endorsement originally delivered or issued for delivery in New York shall also be submitted to the department. If a rider or endorsement affects benefits but does not result in a change of rates, a statement of such fact shall constitute the rate filing.

(2) Every insurer shall file and maintain two current New York rate manuals in convenient form. The active rate manual shall include rates for policy forms currently available and being actively marketed. The inactive rate manual shall include the currently applicable rates on policy forms no longer available or being actively marketed, where such rates have been approved or filed subsequent to the effective date of this Part. Each manual shall include the following:

(i) name of the insurer on each page;

(ii) index in alpha-numeric form number order;

(iii) identification by form number of each policy, rider or endorsement to which the rates apply, and a list of riders and endorsements which can be attached;

(iv) the schedule of rates, including, if any, policy fees, rate changes at renewal, variations based upon age, sex, occupation or other classification, separate charges for optional or miscellaneous benefits, and if rates are graded by age, a statement of whether the rates are level based on age-at-issue or attained age at time of renewal;

(v) an outline of the essential benefits, coverages, limitations, exclusions, renewal conditions, limits of the related policy forms, and the expected benefit ratio, defined in section 52.54(b) of this Part, which will be used under section 52.44 of this Part in the monitoring of actual loss ratios;

(vi) an outline of the general rules pertaining to underwriting limitations with respect to age, amounts and classifications of eligible risks and, in the case of a rider or endorsement, a complete list of the policy forms with which it will be used;

(vii) an outline of the general underwriting rules and methods of marketing the policy form, including, with respect to article 43 corporations, a rule providing that no community-rated contract may be issued to a group whose experience under a group insurance policy with any insurer, including such article 43 corporation indicates a rate in excess of the then current community rate; however, this rule does not apply to a group which does not have a sufficient number of employees or members to qualify, under the article 43 corporation's underwriting rules, for experience rating;

(viii) an occupational classification section or separate manual; and

(ix) the additional premium for impaired risks on a specified impairment or class basis; applicable rate schedules may be stated in dollar amounts or percentages of the standard premium; if classes are used, the maximum classification for each impairment shall be set forth.

(3) Every article 43 corporation shall file and maintain current the schedule of allowances used in connection with its contract forms.

(d) Rate filings for individual insurance, including franchise and blanket insurance written by commercial carriers, and rate filings for community-rated contracts of article 43 corporations and health maintenance organizations. All rate filings subject to this subdivision shall include the following:

(1) With respect to rates accompanying the filing of new policy forms, to the extent appropriate:

(i) the specific formulas and assumptions used in calculating gross premiums;

(ii) the expected claim costs;

(iii) identification of morbidity and mortality tables or experience studies used, sufficient explanation for evaluation of their validity, including copies of such tables if they are not currently published;

(iv) the published data of other insurers;

(v) with respect to article 43 corporations, percentage breakdown of the rates to show expected claims costs, expenses, contributions to statutory reserves and surplus;

(vi) the range of commission rates and other fees payable to agents, brokers, salesmen or other persons except regularly salaried employees, stated separately for new and renewal business;

(vii) identification of specific rate manual pages being submitted or already on file applicable to each form and any pages being replaced or withdrawn;

(viii) identification of any occupational classification manual being submitted or already on file applicable to each form;

(ix) the expected future loss ratio, the loss ratio which will be monitored under section 52.44 of this Part, and the related minimum under section 52.45 of this Part. The expected future loss ratio may recognize expected future dividends beyond the second policy year as benefits, provided modifications are made in the applicable minimum loss ratio, as described in section 52.45(e) of this Part. Such dividends may be recognized as an offset to expected premiums without such modifications to the applicable minimums. Dividends expected to be paid within the first two policy years may be recognized if the company agrees not to change the dividend scale until two years from first issue;

(x) the expected loss ratio by policy duration, where policy years three and later may be combined;

(xi) demonstration of compliance with the gross premium differential limitations as described in section 52.41 of this Part; and

(xii) methods and assumptions to be used in approximating earned premiums by duration for section 52.43(a)(1)(iii) of this Part, if exact methods will not be used.

(2) With respect to rate revisions or additions to previously approved rate filings of commercial carriers to the extent appropriate:

(i) complete experience since inception, both yearly and in total, including the most recent calendar year if the submission is as of May 1st or later. Include written and earned premiums, dividends incurred, paid and incurred claims, each reserve, and earned/incurred loss ratios;

(ii) complete experience, as above, but with premiums adjusted to a single rate schedule, identifying the schedule, whether experience is nationwide or New York State only, and the reserve bases for each year;

(iii) if applicable to policies issued prior to July 1, 1959, the method of compliance with chapters 945 and 946, Laws of 1958 (Metcalf laws);

(iv) derivation of the proposed revision in detail. This should include demonstrations, using interest assumptions from the applicable expected future loss ratio calculations, that:

(a) the expected future loss ratio, using the experience in subparagraph (ii) of this paragraph, projected through the period when rates will be effective, is at least as large as the larger benefit or loss ratio used in disclosure statements for the form, and that it meets the requirement of section 52.45 of this Part. If expected dividends are included in the calculation as benefits, then the demonstration must be that the projected expected future loss ratio be at least as large as the disclosed loss ratio when modified by section 52.45(e) of this Part;

(b) the expected lifetime loss ratio is at least as large as the disclosed loss ratio. This demonstration may use future dividends as in (a) and past dividends as benefits. If no policy was issued subsequent to the effective date of the ninth amendment to this regulation, no modification in accordance with section 52.45(e) is necessary. Otherwise, such modifications are necessary;

(c) for policies issued prior to January 1, 1983, the minimum anticipated loss ratio applicable to the policy at time of issue is to be used in place of the disclosed loss ratio referred to in clauses (a) and (b) of this subparagraph;

(v) description, in detail, of policy benefits;

(vi) complete history of previous rate revisions;

(vii) first and last years of policy issue and date of original form approval;

(viii) expected future loss ratio, expected lifetime loss ratio, and expected loss ratios by duration, as of the date of filing and as originally filed, and the basis of each. If no such loss ratios have been filed, the anticipated loss ratio as originally filed;

(ix) a statement that the rates approved by the superintendent will be applied to all policies originally delivered or issued for delivery in New York, regardless of place of current residence;

(x) the accumulated value of each item in subparagraph (i) of this paragraph, except for reserves, such accumulation being made from the midpoint of each calendar year to December 31st of the most recent year for which data is submitted. Such accumulation shall employ the interest assumptions used in the applicable expected future loss ratio calculation, and shall be used in the demonstration required by subparagraph (iv) of this paragraph;

(xi) when a requested rate revision has been accepted for approval, revised rate manual pages reflecting the revision. If the revision is expressed as a percentage of existing rates, and the rates are part of the inactive rate manual, the insurer may file a single "multiplier" manual page duly referenced in the table of contents, which reflects the approved percentage revision to be applied to the manual pages which follow in lieu of a complete set of revised rate manual pages.

(3) With respect to applications for revisions of previously approved rates of article 43 corporations and health maintenance organizations:

(i) information with respect to claim or utilization frequencies, claim costs and expenses shown for all contracts and riders, or for each coverage separately if more than one coverage is provided by a contract or rider, for a period of at least two years prior to the calendar year in which the new rates are effective, even though rates for some contracts, riders or coverages are not being changed;

(ii) the information required in subparagraph (i) of this paragraph projected for a period not more than two years beyond the effective date of the new rates;

(iii) a summary of projected changes in claim or utilization frequency, average claim costs and expenses;

(iv) the current financial condition of the corporation and the financial condition projected to the effective date of the new rates and to the end of the period during which the new rates will be in effect;

(v) the projected operating results for the period during which the new rates will be in effect, showing premiums, claims and expenses;

(vi) such additional information as may be needed in order to assist the superintendent in determining whether the application shall become effective as filed, shall become effective as modified, or shall be disapproved;

(vii) as respects rate adjustment applications where such adjustment is only requested to reflect anticipated payments to or from the demographic or specified medical condition pooling funds, such applications shall contain such information as may be needed in order to assist the superintendent in determining the amount of the adjustment which is necessary in order to recognize such payments. Such information shall be in lieu of the material requested in subparagraphs (i), (ii), (iii) and (vi) of this paragraph; and

(viii) a jurat subscribed to by the corporation's president or chief executive officer, treasurer or chief financial officer, and chief actuary or, if the corporation has no chief actuary, the person responsible for preparing this rate application. All testimony of the corporation's directors, employees, agents or representatives made at any public hearing ordered by the superintendent with respect to the terms of this application shall be subscribed to under oath. The form of this jurat shall be as follows: (Note: Modify jurat if any of these persons are not in the employment of the insurer or HMO.)

(insert name), president (or chief executive officer), (insert name), treasurer (or chief financial officer), (insert name),

chief actuary (or person responsible for preparing this application), of the (name of insurer or HMO) being duly sworn, each deposes and says that they are the above described employees of the said insurer or HMO and hereby affirm that the information in this premium rate application including all schedules and exhibits thereto has been prepared in accordance with the applicable provisions of Parts 52, 360 and 361 of Title

11 of the Official Compilation of Codes, Rules and Regulations of the State of New York

(Regulations 62, 145 and 146) and the most recent instructions of the New York State

Insurance Department and to the best of their knowledge and belief is accurate and complete.

________, ________, ________

President Treasurer Chief Actuary

Subscribed and sworn to before me this day of

(e) Required rate filings for group insurance including master group contracts of article 43 corporations. The following rules shall apply with respect to rates for group insurance including master group contracts of article 43 corporations:

(1) A rate filing shall accompany every policy, and rider or endorsement affecting benefits submitted to the department for approval unless schedules of rates or formulas applicable to such forms have been previously filed, in which case the rates shall be identified by reference to specific page number(s) of the manual, formulas or schedules on file. If the filing contains rate manual pages, the requirements contained in paragraph (2) of this subdivision for group rate manual submissions must be satisfied.

(2) Group rate manual submissions.

(i) Every insurer shall file and maintain current a schedule of manual rates or formulas which, to the extent applicable, shall include the following:

(a) the name of insurer on each page;

(b) table of contents;

(c) an outline of the essential benefits, coverages, limitations and exclusions to which the rate applies;

(d) a schedule of the premium rates, rules and classification of risks including any loading for age, sex and industry;

(e) a definition of single risk for purpose of size discounts;

(f) a definition and schedule of premium discounts for self-administration or self- accounting;

(g) the manner of computation and instruction for interpolating and extrapolating rates; and

(h) a schedule of commissions and fees.

(ii) The submission of rate manual pages should include the following information separate from the rate manual pages:

(a) specific reference to sections, pages and edition dates of rates submitted, deleted or revised; and

(b) justification of rates being submitted or revised, including reference to relevant information used in the development of such justification and a demonstration that the applicable minimum loss ratio of section 52.45 of this Part will be met.

(3) Filings of forms on a one-case basis shall include the following information:

(i) insurer's name;

(ii) name and location of policyholder;

(iii) form number if a policy or, if a rider, the policy form number to which the rider is attached;

(iv) an outline of the essential benefits, coverages, limitations and exclusions to which the rate applies;

(v) if rates are derived from or contained in the group rate manual, the specific page number(s) where the applicable rates are found and the actual rates being used;

(vi) if rates for the form are neither derived from nor contained in the group rate manual, the actual rate being used, the nature and extent of any deviation from the manual rate and justification for such deviation; and

(vii) a statement of consistency with filed rates.

(4) Every article 43 corporation shall file and maintain current the schedule of allowances used in connection with its contract forms.

(f) Experience-rated group insurance of insurers other than article 43 corporations. The following rules shall apply to the readjustment of the rate of premium for those policies rated in accordance with subsections (g), (h) and (j) of section 4235 of the Insurance Law.

(1) Policies may be experience-rated in accordance with a written plan or formula approved by the board of directors of the insurer or designee thereof, provided that:

(i) any such plan or formula shall not unfairly discriminate between groups with similar risk characteristics (other than claim experience, health status or duration since issue) with respect to credibility factors, stop-loss limits or other rate fluctuation controls;

(ii) the subparagraph of section 4235(c)(1) under which coverage is written or the current availability of a particular plan of insurance underwritten by the insurer for any such group are not acceptable risk classification factors under any such plan or formula, however, age, sex, occupation, location, industry, family composition and other factors affecting utilization and expense are acceptable risk classification factors; and

(iii) any such plan or formula shall not permit the selective nonrenewal of a group or insured person thereunder solely because of claim experience or health status.

(2) Except as provided in paragraph (3) of this subdivision, policies insuring less than 50 persons at the inception of the experience-rating period, excluding dependents, may be experience-rated in accordance with a plan or formula accepted for filing by the superintendent, provided that:

(i) any such plan or formula shall not result in a renewal rate for any group which is more than 50 percent higher than the rate determined under the insurer's rate manual for new business filed pursuant to subdivision (e) of this section for a group with similar risk characteristics, notwithstanding claim experience, health status or duration since issue. Where a policy form is no longer available or actively marketed, the percentage change in the maximum rate for each rating period shall not exceed the percentage change in the new business rate for the same rating period for the policy form with benefits most nearly comparable to the benefits under the policy form which is no longer available or actively marketed;

(ii) any such plan or formula shall not result in a rate change for any group on renewal which exceeds the sum of:

(a) the percentage change in the new business rate for such similar group from the first day of the prior period to the first day of the new period, adjusted to reflect changes in coverage or the group's risk characteristics, notwithstanding claim experience, health status, or duration since issue; and

(b) 15 percent, adjusted pro rata for rating periods less than one year. Where a policy form is no longer available or actively marketed, the maximum rate change on renewal shall not exceed the maximum renewal rate change as described in the previous sentence for the current actively marketed policy form with benefits most nearly comparable to the benefits under the policy form which is no longer available or actively marketed;

(iii) any such plan or formula shall not permit the use of a group's claims experience, health status or duration since issue in readjusting the rate of premium until the number of employee or member life/years of experience equals or exceeds 50 and shall adjust a group's incurred claims to remove unexpected, nonrecurring, catastrophic claims; and

(iv) any such plan or formula shall describe the risk classification factors, underwriting rules and participation requirements as well as transition rules applicable to existing groups with significant composition changes or to the negotiated takeover of one or more classes of policies of another insurer.

(3) The rate of premium for policies insuring less than 50 persons at the inception of the rating period, excluding dependents, shall not be readjusted based upon claim experience, health status or duration of coverage since issue where:

(i) each person covered must satisfy the insurer's evidence of insurability requirements when initially eligible for coverage under the policy; or

(ii) the group or persons representing such group are not provided with reasonable written disclosure as part of the solicitation and sales materials, of the extent to which a group's claims experience, health status or duration since issue will be used by the insurer to establish or adjust the rate of premium for such group.

(4) Experience of a preceding insurer or insurers may be relied on to the extent such experience is available according to a plan or formula filed with the department to produce higher or lower rates than those otherwise applicable in the first policy year.

(5) Any provision contained in the policy with respect to retrospective rate adjustment or retention by the insurer shall be based on specific factors used in retrospective rating formulas or plans filed with the department.

(6) For purposes of this subdivision, the terms group and policy shall also refer to employers which establish or participate in groups described in subparagraph (B), (D) or (H) of section 4235 (c)(1) of the Insurance Law and to the insurance written thereunder which insures the employees of such employers.

(7) The superintendent may accept for filing a plan or formula, or an amendment thereof, which does not comply with one or more of the rules contained in this subdivision upon satisfactory demonstration that such noncompliance is reasonably related to the financial condition of the insurer and will not result in rates which are unreasonable, inequitable or unfair under the circumstances.

(g) Experience-rated group insurance of article 43 corporations. The following rules shall apply to the adjustment of the rate of premium based on the experience of any contract of master group insurance as provided for under section 4305 (a) (b) or (c) of the Insurance Law:

(1) Contracts of master group insurance may be experience-rated only in accordance with a formula or plan previously furnished to the department. Such formula or plan shall include a retention designed to provide for a contribution to surplus.

(2) Any such plan or formula of experience rating may include provision for a rate stabilization reserve provided that the terms under which the rate stabilization reserve is created are included in the master group contract or separate written agreement previously approved by the department and which upon termination of the group contract impose an obligation on the plan in respect to the application of the funds represented by such reserve.

(3) Experience of a preceding insurer or insurers may be relied on to the extent available according to a plan or formula filed with the department to produce higher or lower rates than those otherwise applicable in the first policy year.

(h) Special rules for rates applicable to benefits under the disability benefits law. The following rules shall be applicable with respect to policies providing statutory benefits pursuant to article IX of the Workers' Compensation Law:

(1) Rate schedules for groups of 50 or more insured persons shall be based on a premium for each $10 of weekly benefit or a percentage of weekly payroll. Such weekly payroll shall be limited to two times the maximum weekly disability benefits law benefit per employee.

(2) For groups of less than 50 insured persons, a simplified rate structure such as monthly per capita rates may be used.

(i) Special rules for franchise insurance rates. The following rules shall apply to rates for franchise insurance:

(1) Rates shall not unfairly discriminate between cases of the same class. Rates may recognize age, sex, occupation, location, industry, marital status, family composition and other factors affecting utilization.

(2) With respect to employee-employer franchise, rates shall be self-supporting and reasonably related to the mortality and morbidity assumptions used by the insurer for group insurance, except where it is demonstrated to the satisfaction of the superintendent that some other basis is appropriate.

(3) With respect to association or union franchise:

(i) Rates shall be self-supporting and shall be reasonably related to the mortality and morbidity assumptions used by the insurer for individual insurance, except where it is demonstrated to the satisfaction of the superintendent that some other basis is appropriate. Rates may differ from those used for comparable individual accident and health insurance if it is shown to the satisfaction of the superintendent that any difference results from demonstrable savings in marketing, underwriting, policy issue and administrative expenses. If no comparable plan of individual insurance is filed or approved for the insurer, rates used by the insurer for comparable group insurance shall be deemed to be self-supporting if it is shown to the satisfaction of the superintendent that marketing, underwriting, policy issue, administrative, mortality and morbidity costs will not exceed those for such group insurance.

(ii) Franchise cases may be experience-rated on the basis of an equitable plan or formula approved by the superintendent applicable to all franchise cases of the same class.

(j) Group commissions, compensations, fees and allowances. Schedules of rates of commissions, compensation, fees and allowances required to be filed under section 4235 (h) of the Insurance Law shall be filed as part of the group rate manual and shall contain at least the following information:

(1) the basis upon which such schedules apply (e.g., a percentage of the annual premium, a dollar amount per certificate, or a dollar amount per $100 of weekly indemnity);

(2) if applicable to premiums, the premiums to which they apply (e.g., monthly, annual, first year or renewal);

(3) any variations in the application of such schedules based on policy years, alternative scales, grading, type of coverage, category of agent, territories or any other variable including a clear explanation of the variable;

(4) if based on administrative services, the nature of the services and the allowances therefor; and

(5) the applicability of any revisions and identification of pages being added, deleted or substituted.

(k) Special rules for the submission of rates and supporting documentation applicable to individual and group Medicare supplement policies. The following rules shall be applicable in addition to the other requirements of this section.

(1) All filings of rates and rating schedules shall demonstrate that expected claims in relation to premiums comply with the requirements of section 52.45(i) of this Part when combined with actual experience to date. Filings of rate revisions shall identify the number of persons insured under the New York issued policies or certificates for which revision is requested and 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.

(2) An issuer of Medicare supplement policies and certificates issued before or after May 1, 1992 in this State shall file annually with the submission required in paragraph (3) of this subdivision its rates, rating schedule and supporting documentation including ratios of incurred losses to earned premiums by policy duration for approval by the superintendent in accordance with the filing requirements and procedures prescribed by the superintendent. 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 and certificates in force less than three years.

(3) 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 shall file with the superintendent, in accordance with the applicable filing procedures of this State:

(i) appropriate premium adjustments necessary to produce loss ratios as anticipated for the current premium for the applicable policies or certificates. Such supporting documents as necessary to justify the adjustment shall accompany the filing; and

(ii) an issuer shall make such premium adjustments as necessary to produce an expected loss ratio under such policy or certificate as will conform with 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 such Medicare supplement policies or certificates.

(4) Except for nonprofit health service, hospital service or medical expense indemnity corporations, no premium adjustment which would modify the loss ratio experience under the policy other than the adjustments described in paragraph (3) of this subdivision shall be made with respect to the policy at any time other than upon its renewal date or anniversary date, as may be approved by the superintendent.

(5) The superintendent may conduct a public hearing to gather information concerning a request by an issuer for an increase in a rate for a policy form or certificate form issued before or after May 1, 1996 if the experience of the form for the previous reporting period is not in compliance with the applicable loss ratio standard. The determination of compliance is made without consideration of any refund or credit for the reporting period. Public notice of the hearing shall be furnished in a manner deemed appropriate by the superintendent.

(6) A community rating methodology must be applied to all policies and certificates of Medicare supplement insurance. Community rating means a rating methodology in which the premium for all persons covered by a policy or contract form is the same based on the experience of the entire pool of risks covered by that policy or contract form without regard to age, sex, health status or occupation. Refunds, rebates, credits or dividends based on such factors are also prohibited.