Current through Reg. 50, No. 13; March 28, 2025
(a) Scope and general standards.
(1) Pursuant to Insurance Code §
425.072, all
individual and group accident and health insurance coverages, including single
premium credit accident and health insurance contracts, issued on and after
January 1, 2017, are required to follow the standards and reserve requirements
provided in the valuation manual adopted by the department pursuant to
Insurance Code §
425.073.
(2) In establishing claim reserves for all
individual and group accident and health insurance coverages issued before
January 1, 2017, and single premium credit accident and health insurance
contracts issued on or after January 1, 2009, and before January 1, 2017, the
provisions of this paragraph apply. An insurer may use applicable requirements
in the valuation manual for claim reserves for valuations after December 31,
2016, and before January 1, 2019, and must use applicable requirements in the
valuation manual for claim reserves for valuations after December 31,
2018.
(3) Unless paragraph (1) or
(2) of this subsection applies, the standards in this subchapter apply to all
individual and group accident and health insurance coverages issued before
January 1, 2017, as well as single premium credit accident and health insurance
contracts issued on or after January 1, 2009, and before January 1, 2017. All
other credit insurance is not subject to the requirements provided by this
paragraph.
(4) When an insurer
determines that adequacy of its health insurance reserves requires reserves in
excess of the minimum standards specified in this subchapter, such increased
reserves must be held and must be considered the minimum reserves for that
insurer.
(5) With respect to any
block of contracts, or with respect to an insurer's health business as a whole,
a prospective gross premium valuation is the ultimate test of reserve adequacy
as of a given valuation date. Such a gross premium valuation would take into
account, for contracts in force, in a claims status, or in a continuation of
benefits status on the valuation date, the present value as of the valuation
date of: all expected benefits unpaid, all expected expenses unpaid, and all
unearned or expected premiums, adjusted for future premium increases reasonably
expected to be put into effect.
(6)
Such a gross premium valuation must be performed whenever a significant doubt
exists as to reserve adequacy with respect to any major block of contracts, or
with respect to the insurer's health business as a whole. In the event
inadequacy is found to exist, immediate loss recognition must be made and the
reserves restored to adequacy. Adequate reserves (inclusive of claim, premium,
and contract reserves, if any) must be held with respect to all contracts,
regardless of whether contract reserves are required for such contracts under
the standards required under this subchapter.
(7) Whenever minimum reserves, as defined in
this subchapter, exceed reserve requirements as determined by a prospective
gross premium valuation, such minimum reserves remain the minimum requirement
under these standards.
(b) Categories of reserves. The following
sections set forth minimum standards for three categories of health insurance
reserves: §
3.7002 of this title (relating to
Claim Reserves); §
3.7003 of this title (relating to
Premium Reserves); and §
3.7004 of this title (relating to
Contract Reserves). Adequacy of an insurer's health insurance reserves is to be
determined on the basis of all three categories combined. However, the
standards in these sections emphasize the importance of determining appropriate
reserves for each of the three categories separately.
(c) Sections 3.7006, 3.7007, 3.7008, and
3.7009. Section
3.7006 and §
3.7007 of this title (relating to
Specific Standards for Morbidity, Interest, and Mortality; and Glossary of
Technical Terms Used) are an integral part of the standards specified in
§§
3.7001-
3.7005 of this title (relating to
Introduction; Claims Reserves; Premium Reserves; Contract Reserves and
Reinsurance). Section
3.7008 of this title (relating to
Reserves for Waiver of Premium) is supplementary and is not part of the
standards as such, but is included for explanatory and illustrative purposes
only. Section
3.7006 of this title contains
specific minimum standards with respect to morbidity, interest, and mortality,
which apply to claim reserves according to year of incurral and to contract
reserves according to year of issue. Section
3.7007 of this title consists of a
glossary of technical terms used. Section
3.7008 of this title is
supplementary and deals with waiver of premium reserves. For the purchase of
existing business under certain circumstances, see §
3.7009 of this title (relating to
Purchase or Assumption of Existing Business).
