Rules & Regulations of the State of Tennessee
Title 0780 - Commerce and Insurance
Subtitle 0780-01 - Insurance Division
Chapter 0780-01-92 - Rules Related to Form and Rate Filings for Health Insurance Coverage Not Subject to the Authority of the Patient Protection and Affordable Care Act of 2010
Section 0780-01-92-.08 - REASONABLENESS OF BENEFITS IN RELATION TO PREMIUMS

Universal Citation: TN Comp Rules and Regs 0780-01-92-.08

Current through September 24, 2024

(1) New Forms

With respect to a new form, benefits may be considered reasonable in relation to premiums provided the anticipated loss ratio is at least as great as shown in the following table:

Type of	Renewal Clause
Coverage	OR	CR	GR	NC
Medical Expense	60%	55%	55%	50%
Loss of Income and Other	60%	55%	50%	45%

Definitions of Renewal Clause

OR - Optionally Renewable: renewal is at the option of the insurance company.

CR - Conditionally Renewable: renewal can be declined by the insurance company only for stated reasons other than deterioration of health.

GR - Guaranteed Renewable: renewal cannot be declined by the insurance company for any reason, but the insurance company can revise rates on a class basis.

NC - Non-Cancellable: renewal cannot be declined nor can rates be revised by the insurance company.

If satisfactory justification is submitted to the Department of Insurance for a policy form, including riders and endorsements, under which the expected average annual premium per policy is $100 or more but less than $200, the company may be permitted to subtract up to 5 percentage points from the numbers in the table above, or if less than $100, subtract up to 10 percentage points.

The average annual premium per policy and the average anticipated loss ratio shall be computed by the insurer based on an anticipated distribution of business by all applicable criteria having a price difference, such as age, sex, amount, dependent status, rider frequency, etc., except assuming an annual mode for all policies (i.e., the fractional premium loading shall not affect the average annual premium or anticipated loss ratio calculation).

(2) Rate Revisions.

With respect to filings of rate revisions for a previously approved form, benefits may be considered reasonable in relation to premiums provided the following standards are met:

(a) With respect to policies issued on and after the effective date of the revision, the standards are the same as in Paragraph (1) of this Rule, except that the average annual premiums shall be determined based on an actual rather than an anticipated distribution of business.

(b) With respect to policies issued prior to the effective date of the revision, both subparagraph (a) above and this subparagraph (b) shall be at least as great as the standards in Paragraph (1) of this Rule:

1. The anticipated loss ratio over the entire period for which the revised rates are computed to provide coverage;

2. The ratio of (i) to (ii) where:

(i) is the sum of the accumulated benefits, from the original effective date of the form to the effective date of the revision, and the present value of future benefits, and

(ii) is the sum of the accumulated premiums, from the original effective date of the form to the effective date of the revision, and the present value of the future premiums, such present values to be taken over the entire period for which the revised rates are computed to provide coverage, and such accumulated benefits and premiums to include an explicit estimate of the actual benefits and premiums from the last date as of which an accounting has been made to the effective date of the revision. Interest shall be used in the calculation of these accumulated benefits and premiums and present values only if it is a significant factor in the calculation of this loss ratio.

3. Other methods, in addition to those in this Paragraph (2) may be used to calculate rate revisions. However, the minimum anticipated loss ratio thus calculated must be at least as great as the standards in Paragraph (1), with consideration given active life reserves, and such methods must be approved by the Insurance Commissioner.

(3) Anticipated loss ratios different from those indicated in Paragraphs (1) and (2) above will require justification based on the special circumstances that may be applicable.

(a) Examples of coverages that may receive special consideration are as follows:

1. accident only;

2. short term non-renewable, e.g., airline trip; student accident;

3. specified peril, e.g., cancer, common carrier; and

4. other special risks.

(b) Examples of other factors that may receive special consideration are as follows:

1. marketing methods, giving due consideration to acquisition and administration costs and to premium mode;

2. extraordinary expenses;

3. high risk of claim fluctuation because of the low loss frequency or the catastrophic or experimental nature of the coverage; and

4. product features such as long elimination periods, high deductibles and high maximum limits.

(4) Companies are urged to review their experience periodically and to file rate revisions, as appropriate, in a timely manner to avoid the necessity of later filing of exceptionally large rate increases.

Authority: T.C.A. §§ 4-5-206, 56-1-212, 56-2-201, 56-2-301, 56-26-102, 56-26-103, 56-26-114, 56-26202,56-27-112, 56-28-106, 56-29-117, 56-32-107 and Public Law 111-148 as amended by Public Law 111-152 (2010).

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