69O-149.003: Rate Filing Procedures
69O-149.005: Reasonableness of Benefits in Relation to Premiums
69O-149.007: Annual Rate Certification (ARC) Filing Procedures
PURPOSE AND EFFECT: To provide more pooling of cancer forms and to make a few clarifications to existing provisions.
SUMMARY: Provides for more spreading of risk in cancer pools. All forms where more than half the benefits are attributable to cancer claims will be pooled, regardless of whether the benefits are paid on an indemnity or an expense basis.
SUMMARY OF STATEMENT OF ESTIMATED REGULATORY COSTS: No Statement of Estimated Regulatory Cost was prepared.
Any person who wishes to provide information regarding a statement of estimated regulatory costs, or provide a proposal for a lower cost regulatory alternative must do so in writing within 21 days of this notice.
SPECIFIC AUTHORITY: 624.424, 627.410 FS.
LAW IMPLEMENTED: 627.9175 FS.
IF REQUESTED WITHIN 21 DAYS OF THE DATE OF THIS NOTICE, A HEARING WILL BE HELD AT THE DATE,TIME AND PLACE SHOWN BELOW(IF NOT REQUESTED, THIS HEARING WILL NOT BE HELD):
DATE AND TIME: June 27, 2008, 9:00 a.m.
PLACE: 116 Larson Building, 200 East Gaines Street, Tallahassee, Florida
Pursuant to the provisions of the Americans with Disabilities Act, any person requiring special accommodations to participate in this workshop/meeting is asked to advise the agency at least 5 days before the workshop/meeting by contacting: Gerry Smith, L&H Product Review, Office of Insurance Regulation, E-mail: gerry.smith@fldfs.com. If you are hearing or speech impaired, please contact the agency using the Florida Relay Service, 1(800)955-8771 (TDD) or 1(800)955-8770 (Voice).
THE PERSON TO BE CONTACTED REGARDING THE PROPOSED RULE IS: Gerry Smith, L&H Product Review, Office of Insurance Regulation, E-mail: gerry.smith@fldfs.com
THE FULL TEXT OF THE PROPOSED RULE IS:
69O-149.003 Rate Filing Procedures.
(1)(a) Pooling. For purposes of submitting a rate filing under this part for individual policy forms and for group Medicare supplement and long-term care group policy forms, in order to encourage adequate risk sharing for all generations of policyholders, the experience of all policy forms providing similar benefits, whether open or closed, shall be combined.
1. Separate rating pools may be used for policy forms defined in subsections 69O-149.005(5) and (6), F.A.C., and for stop-loss insurance policy forms.
2. Once policy forms have been combined, they remain so for all rating purposes, unless otherwise approved by the Office. This combining of the experience of policy forms is referred to as pooling. All policy forms within a pool are reviewed based on the analysis of the aggregate experience.
3. The same percentage rate adjustment shall be applicable to all policy forms within the pool.
4. In lieu of subparagraph 3., above, percentage rate adjustments that are not the same for all policy forms within the pool shall be permitted subject to the following:
a. Resulting premium rate schedules are actuarially equivalent based on benefit differences or different regulatory standards, such as margins or retentions, between the policy forms within the pool;
b. Assumptions used to determine future experience and actuarial equivalence shall be based on the same set of common morbidity assumptions for all policy forms within the pool;
c. Policy forms with existing premium rate schedules not meeting the standards of sub-subparagraphs a. and b. above shall not be required to reduce rates to bring the policy forms into compliance, but any proposed rate adjustment shall be required to improve the relationship of the policy forms’ premium rate schedules to bring them closer to compliance with sub-subparagraphs a. and b. above; and
d. Non-uniform rate increases shall be subject to the implementation provisions of sub-sub-subparagraph 69O-149.006(3)(b)20.b.(V), F.A.C., on a revenue neutral basis as though a level percentage adjustment had been applied.
5. The experience of policies and policy forms where the rate schedule is not subject to change, such as non-cancellable policy forms and paid up policies, shall not be pooled with policy forms where the rates are subject to change.
6. The rate increase for a Medicare supplement form may be adjusted, on a revenue neutral basis, to mitigate the impact on the refund credit calculation required for the form pursuant to Rule 69O-156.011, F.A.C., where the company can demonstrate that without such adjustment, the rate increase will result in refunds being required.
7. Notwithstanding the provisions of subsection 69O-149.0025(22), F.A.C., the experience of all policy forms with at least 50% of anticipated claims costs within the form at the time of the filing attributed to cancer claims and claims related to the cancer treatment shall be combined. This percentage of anticipated claims would be determined over the next projection year. If so indicated, notwithstanding the provisions of subparagraph 69O-149.003(1)(a)2., F.A.C., form(s) may be required to move from one pool to another. In such a situation, all experience associated with a form likewise changes pools. When forms are moved into a pool, all forms shall be reevaluated subject to 4. above with any rate increase due to the transfer of experience being phased in over a three year period.
(b) Credibility. In analyzing the experience of policy forms, and to improve the statistical credibility and predictability of anticipated experience, credible data shall be used.
(2) Filing Format for Individual Policies and Group Policies and Certificates.
(a)1. All filings shall be made in accordance with paragraph (b) below.
2.a. For purposes of the rules in this part and the time periods in Section 627.410, F.S., a filing is considered “filed” with the Office upon the receipt of the material required by paragraph (b), on business days between the hours of 8:00 a.m. and 5:00 p.m. eastern time. Filings received after 5:00 p.m. shall be considered to be received the following business day.
b. For purposes of the rules in this Part, the term “filed” does not mean “approved.” The term “filed” refers to the date on which the filing is filed with the Office and is the date on which the approval process of Section 627.410, F.S., commences.
c. Filings shall be made on a company distinct basis.
(b) A health insurance rate filing shall consist of the following items:
1. A brief letter explaining the type and nature of the filing. The letter shall indicate if the filing is for a new policy form, a benefit revision, a rate revision, justification of existing rates, or a resubmission. If the filing is a resubmission, the letter shall indicate the Florida filing number of the prior filing.
2. Form OIR-B2-1507, “Office of Insurance Regulation Life and Health Forms and Rates Universal Standardized Data Letter” as adopted in Rule 69O-149.022, F.A.C., completely filled out in accordance with Form OIR-B2-1507A, “Office of Insurance Regulation Life and Health Forms and Rates Universal Standardized Data Letter Instruction Sheet” as adopted in Rule 69O-149.022, F.A.C.
3. The actuarial memorandum, completed as required by Rule 69O-149.006, F.A.C.
4. Rate pages that define all proposed rates, rating factors and methodologies for determining rates applicable in the state. For companies that have a complete rate manual on file with the Office, only the pages that are being changed need to be filed, unless requested by the Office.
(3) Filings shall be submitted electronically to https://iportal.fldfs.com/.
(4)(a) Every insurer submitting a rate filing shall be notified as to whether the filing has been affirmatively approved by the Office or has been disapproved by the Office within any statutory review period of the date of receipt of the filing.
(b) Submissions that do not include the required material to meet the definition of a filing, or that include material that is illegible, shall not be accepted and shall be returned as incomplete without processing.
(c) Every insurer submitting a rate filing which does not comply with the requirements of Rules 69O-149.002 through 69O-149.006, F.A.C., or for which the Office determines that additional information is necessary for a proper review, will be notified of the additional information necessary within the statutory limit. Every insurer shall submit the required data by a date certain stated in the clarification letter, to allow the Office sufficient time to perform a proper review. Failure to correct the filing by the date certain in the clarification letter will result in an affirmative disapproval of the filing by the Office.
(5)(a) Insurers with fewer than 1,000 Florida policyholders, under medical expense forms with coverage meeting the definition of Section 627.6561(5)(a)2., F.S., or any form or pooled group of Medicare supplement forms with fewer than 1,000 nationwide policyholders, or medical expense forms with coverage meeting the definition of Section 627.6561(5)(a)2., F.S., may, at their option, file a streamlined rate increase filing where the annualized rate increase does not exceeding annual medical trend as provided in subsection (6) below.
(b) The number indicated in paragraph (5)(a) above represents the individual primary insureds and does not include spouses or dependants.
(c) For group coverage, the number indicated in paragraph (5)(a) above represents the individual certificateholders or subscribers.
(d) For Medicare supplement business, this provision applies for each type considered separately: Standard, Pre-standard and Select Medicare supplement coverage.
(e) The filing:
1. Shall be made in accordance with paragraph 69O-149.003(2)(b), F.A.C.; and
2. Shall provide a certification that the filing includes all forms with similar benefits in lieu of the actuarial memorandum referenced in subparagraph 69O-149.003(2)(b)3., F.A.C.
(f) This provision is an option available to the company. The company may choose, at its option, to make a complete filing in accordance with paragraph 69O-149.003(2)(b), F.A.C., including a complete actuarial memorandum in accordance with Rule 69O-149.006, F.A.C.
(6) No change.
Specific Authority 624.308(1), 624,424(1)(c), 627.410(6)(b), (e) FS. Law Implemented 119.07(1)(b), 624.307(1), 626.9541(1), 627.410 FS. History–New 7-1-85, Formerly 4-58.03, 4-58.003, Amended 8-23-93, 4-18-94, 8-22-95, 4-4-02, 10-27-02, 6-19-03, Formerly 4-149.003, Amended 5-18-04, 12-22-05,_________.
69O-149.005 Reasonableness of Benefits in Relation to Premiums.
(1) Benefits will be determined to be reasonable in relation to the premium rates charged if the premium schedule is not excessive, not inadequate and not unfairly discriminatory. In determining whether a premium schedule satisfies these requirements, the Office will consider all items presented in the filing with special emphasis placed on the information included in the actuarial memorandum.
(2) A premium schedule is not excessive if the following are true:
(a) For a new policy form, group or individual,
1. Tthe anticipated loss ratio is not less than the indicated adjusted entry in the loss ratio tables, in subsection (4), below.
2. The insurer does not knowingly price any individual rate within the rate schedule to be charged to an insured to be excessive. This requirement does not apply to any group policy where the final premium charged to the employer is an average of the premium charged to the individual members.
(b)1. For individual forms, and group policy forms other than annually rated group policy forms, approved on or after 2/1/94 or issued on or after 6/1/94, the Premium Schedule satisfies the following:
a. An Anticipated Loss Ratio test such that the present value of projected claims is not less than the present value of expected claims over the entire future lifetime of the form. This is equivalent to the present value of the future A/E ratio not being less than 1.0; and
b. The current lifetime loss ratio, as defined in subparagraph 69O-149.006(3)(b)24., F.A.C., is not less than the initial filed loss ratio for the form as may be subsequently amended and approved pursuant to this rule chapter.
2. For annually rated group policy forms, the target loss ratio is not less than the loss ratio anticipated in the current premium schedule, as may be subsequently amended and approved pursuant to this rule chapter.
(c) For an existing Individual Policy Form issued up to 6/1/94 for forms approved prior to 2/1/94, the Premium Schedule satisfies subparagraphs 1. and 2., below:
1. The anticipated Loss Ratio is not less than the initial filed loss ratio; and
2. The current lifetime Loss Ratio is not less than the initial filed loss ratio.
(d) For an existing group policy form issued up to 6/1/94 for forms approved prior to 2/1/94, the anticipated loss ratio is not less than the appropriate adjusted entry in the loss ratio tables in subsection (3), below.
(3) Loss Ratios for Individual Policies and Group Certificates issued up to 6/1/94 for forms approved prior to 2/1/94. The loss ratios in the table in paragraph (d), below, are adjusted pursuant to paragraph (a), (b), or (c), below, where
I = (CPI-U, year N-1)/103.9
N-1 is the calendar year immediately preceding the calendar year (N) in which the rate filing is submitted in Florida, and
CPI-U is the consumer price index for all urban consumers, for all items and for all regions of the U.S. combined, as determined by the U.S. Department of Labor, Bureau of Labor Statistics; and the CPI-U for any year is the value as of September.
(a) If the average annual premium per individual policy or group certificate, (X), is less than $ 300xI, then the minimum loss ratio is adjusted to R´ by the following formula: R' = R x ((800xI + X)/(1100xI)), where the reduction cannot exceed 10 percentage points.
(b) If the average annual premium per individual policy or group certificate, (X) exceeds $ (I*2000), then the minimum loss ratio is adjusted to R' by the following formula: R' = R*((I*9000)+X)/(I*11000)). R' cannot exceed R by more than 10 percentage points.
(c) For group insurance certificates, there is an additional adjustment R''.
1. For E greater than 0 and less than or equal to 100
R'' = R' x ((550 + E) / 550)
2. For E greater than 100
R'' = R' x ((6400 + E) / 5500)
3. E is normally the average number of certificateholders in a group rating class.
4. However, where a group is composed of subgroups, e.g., multiple employer trusts, E is the average number of certificateholders per subgroup. Where a group is composed of certificateholders issued as a result of solicitations of individuals through the mail or by mass media advertising, including both print and broadcast advertising, E shall be 50. In no event will R'' be greater than 80%. The average annual premium (X) shall be per certificate under a group policy and shall be estimated by the insurer based on an anticipated distribution of business considering all significant criteria having a rate difference. Such estimate shall assume an annual mode for all certificates, i.e., the fractional premium loading shall not affect the average annual premium or anticipated loss ratio calculation. The value of X shall be determined on the basis of the rates being filed.
(d) Loss Ratio Table:
|
Renewal Clauses |
Loss Ratio in % |
|
Optionally Renewable |
60 |
|
Conditionally Renewable |
55 |
|
Guaranteed Renewable |
55 |
|
Non-cancellable |
50 |
|
Non-renewable |
50 |
(4) Loss Ratios for Individual Policies and Group Certificates approved on or after 2/1/94 or issued on or after 6/1/94. These tables are not applicable to Medicare Supplement or Long-Term Care Policy Forms. The minimum loss ratios for those policy forms are found in Rule Chapters 69O-156 and 69O-157, F.A.C., respectively.
(a) The loss ratios in the tables below are adjusted in accordance with the following formula, where
R = the loss ratio from the table,
A = the average annual premium per individual policy or per group certificate,
R' = the adjusted loss ratio, and
I is as defined in subsection 69O-149.005(3), F.A.C.
Then R' = (A-25I)R/A and R' cannot be more than 10 percentage points less than R, for coverage with at least 12 months and pro rata for coverage with less than 12 months, nor less than 50 percent; except R' cannot be less than 45 percent as to accident only non-cancellable policies.
(b) Loss Ratio Table – Group Policy Forms
|
|
|
Medical Indemnity or any policy with an average annual premium per certificate less |
|
|
Medical Expense |
than $1000 |
|
Group Size |
Loss Ratio |
Loss Ratio |
|
Fewer than 51 certificates |
65% |
57.5% |
|
51 through 500 certificates |
70% |
62.5% |
|
All others |
75% |
67.5% |
(c)1. Loss Ratio Table – Individual and Stop-loss Policy Forms.
|
|
Medical Expense |
Medical Indemnity, Loss of Income |
|
Renewal Clause |
Loss Ratio % |
Loss Ratio |
|
Non-Cancellable |
55% |
50% |
|
Non-Renewable |
60% |
55% |
|
Guaranteed Renewable |
65% |
60% |
|
All Other |
70% |
65% |
|
Minimum Acceptable |
55% |
50% |
2. For purposes of determining the minimum required loss ratio for stop-loss policies, the average annual premium for purposes of determining the R' above, shall be the average premium per employee covered by the employer’s stop-loss policy.
(5)(a) Group conversion insurance, other than long-term care and medicare supplement insurance, issued on either a group or an individual basis, is exempt from the loss ratios required above.
(b) The loss ratio for group conversion insurance shall not be less than 120 percent.
(c) The insurer may charge the excess of the group conversion loss ratio over that required for group insurance on active lives to the experience for insurance on active lives.
(d) The premium to be charged for group conversion insurance subject to Section 627.6675, F.S., shall not exceed the limits of Section 627.6675(3), F.S., based on the standard risk rates as established in Part X of this rule chapter.
(6) Blanket Insurance is exempt from the loss ratios required above. The minimum loss ratio for blanket insurance is 65%.
(7) As provided by Section 627.411(3)(a), F.S., the minimum loss ratio in the above tables for health insurance coverage as described in Section 627.6561(5)(a)2., F.S., shall be at least 65 percent.
(8) Anticipated loss ratios lower than those otherwise required by this part shall not be permitted unless the insurer demonstrates that the proposed loss ratios are in accordance with sound actuarial principles; do not result in unfair discrimination in sales practices; and are otherwise in substantial compliance with the requirements of this part.
(9) A premium schedule shall not be disapproved on the grounds of inadequacy if:
(a) The expected profit margin on the policy form is non-negative. This margin equals the sum of premium income and investment income, minus the sum of benefit payments, expenses, taxes and contingency margins;
(b) The premium schedule incorporates for the entire future lifetime of the policy, the projected entire effects of insurance trend; and
(c) The premium schedule is determined such that if all assumptions are satisfied, the annual rate increases needed will not be greater than medical trend, as defined in subparagraph 69O-149.006(3)(b)18., F.A.C.
(10) through (14) No change.
(15) Rates charged for periods where a certification has been made to the office that the rates, at the time of the certification, met the standards of Florida law and promulgated rules and which after investigation by the office have been determined to fail to meet such standards, or are for periods where the insurer has failed to make the required annual filing, shall constitute an unfair and deceptive trade practice in violation of Section 626.9541(1)(e), F.S.
(a) In making the determination that the benefits are not reasonable in relationship to the rates charged for any rating period, the office shall make its determination based on the information used and relied upon by the actuary, as well as all company related information and other information that was readily available to the company’s actuary upon using due diligence, which information would provide an impact to the analysis using generally accepted actuarial standards and practices, at the time the certification was made.
(b) For purposes of this rule, the office shall limit its investigation of rates to the period beginning twelve months subsequent to the date of the most recent rate filing, filed under Section 627.410(7)(b)1., F.S., explicitly approved by the office, e.g. the office shall limit its investigation to rates charged after 7/1/07 where the last approved rate was 7/1/06.
(c) If the office determines that such violation has occurred:
1. The insurer may agree that any subsequent rate increase to existing insureds shall be implemented over a period equal to the length of time the rates charged have failed to comply with the provisions of Section 627.410(6) or (7), F.S. and these rules. The rate for any new insured shall be an adequate rate approved by the office.
2. Benefit enhancements, rate reductions, rate credits refunds, or any combination thereof, shall be determined to return the rates to a level that meet the standards of these rules, to be implemented through a filing submitted to the Office for approval within 30 days of the determination by the Office that such a violation has occurred.
(d) If the insurer does not agree to the corrective actions outlined in paragraph (c), then the Office may pursue administrative action and remedies, including the penalties provided by Section 624.418, F.S.
(e) Nothing in this rule effects or limits in anyway the remedies and penalties that are available under Chapter 626, Part IX, F.S.
Specific Authority 624.308(1), 626.9611, 627.410(6)(b), (d), (e) FS. Law Implemented 626.9541(1), 627.410(6)(d), (e), 627.410(7), 627.411(1)(a), (e), 627.9175 FS. History–New 7-1-85, Formerly 4-58.05, 4-58.005, Amended 4-18-94, 11-20-02, Formerly 4-149.005, Amended 5-18-04, 11-2-06, 6-18-07,_______.
69O-149.007 Annual Rate Certification (ARC) Filing Procedures.
(1) This rule applies to filings made pursuant to Section 627.410(7)(b)2., F.S., in which no rate change is proposed.
(2) The filings required by this rule shall be on an individual company basis.
(3) This rule is not applicable for Medicare supplement coverage. Medicare supplement forms are subject to Rule 69O-149.003, F.A.C.
(4) Non-cancellable coverages which are no longer available for sale and which have not been sold or marketed for at least 5 years and are in compliance with the reasonableness standards of Rule 69O-149.005, F.A.C., shall be exempt from the filing requirements of this rule. If a company is subsequently discovered not to have met the standards, they shall, in addition to other administrative remedies, be required to enhance benefits and make premium refunds to bring the form into full compliance with the loss ratio standards of Rule 69O-149.005, F.A.C.
(5) An ARC filing shall consist of:
(a) A cover letter indicating the nature of the filing;
(b) Form OIR-B2-1507, as adopted in Rule 69O-149.022, F.A.C.; Form OIR-B2-1507, “Office of Insurance Regulation Life and Health Forms and Rates Universal Standardized Data Letter” as adopted in Rule 69O-149.022, F.A.C., completely filled out in accordance with Form OIR-B2-1507A, “Office of Insurance Regulation Life and Health Forms and Rates Universal Standardized Data Letter Instruction Sheet” as adopted in Rule 69O-149.022, F.A.C.; and
(c) A certification by an actuary, that is in accordance with subparagraph 69O-149.006(3)(b)28., F.A.C. In addition, the certification should include a statement that, based on current experience and projection assumptions, rates schedules are not forecast to increase over the next twelve (12) months.
(6) A filing shall include only forms that are pooled together for rating purposes as provided by subsection 69O-149.003(1), F.A.C. Separate filings shall be made for separate rating pools.
(7) For noncredible blocks of business on a nationwide basis, the company may request a waiver of the requirement. The request shall be made annually and be accompanied by a letter indicating the nature of the filing, the type of product, and the reason for the request.
(8) When a company using a current rate schedule is unable to demonstrate that the minimum loss ratio standards in Rule 69O-149.005, F.A.C., are met, it shall make a rate filing with the Office pursuant to Rule 69O-149.003, F.A.C., to reduce rates, enhance benefits, make refunds, or a combination of these to satisfy the standards.
(a) A company may make a certification in compliance with this rule without such change to benefits, refunds, or premiums if the A/E ratio for the past experience periods are, both in pattern and aggregate value, consistently at or in excess of .85; or
(b) For rating pools that are not fully credible, the company may make a certification in compliance with this rule if both the lifetime A/E ratio and the future A/E ratio are at or in excess of .85 when assuming best estimate assumptions in determining projected values.
(c) If the certification in paragraph (a) or (b) is unable to be made, and the company has been in compliance with these rules, the company shall make a rate filing pursuant to Rule 69O-149.003, F.A.C., to reduce rates, enhance benefits, make refunds, or a combination of these which shall target a future A/E ratio of at least 1.0.
(9) A company may request exemption from all future ARC filings upon demonstration that the form or rating pool consists only of policy forms which are no longer available for sale and:
(a) The company has no other form with similar benefits that is currently available for sale,
(b) The accumulated experience from inception to date exceeds the required lifetime loss ratio standard for the form,
(c) The present value of future premiums is less than 10 percent of the accumulated value of past earned premiums or the data is 0 percent credible, and
(d) The company certifies that it will not increase premiums in the future.
(10) All filings made pursuant to this rule shall be on a company distinct basis and submitted electronically to https://iportal.fldfs.com.
Specific Authority 624.308 FS. Law Implemented 627.410 FS. History–New 5-14-92, Amended 11-20-02, Formerly 4-149.007, Amended 5-18-04, 11-2-06,_________.