69O-149.0025. Definitions

(1)(a) Actual-to-Expected (A/E) ratio: The ratio of actual incurred claims under the policy form divided by expected claims. This is equivalent to the actual annual loss ratio divided by the applicable durational loss ratios of the approved durational loss ratio table.

(b) For projected periods, the A/E ratio is the ratio of the projected claims divided by the expected claims.

(c) Both the year-by-year pattern of the A/E ratios and the aggregate past, future, and lifetime ratios shall be presented.

(2) Annually Rated Group Policies: Group policies, including major medical coverage, which meet all of the following criteria:

(a) The policies are funded on a 1-year basis to satisfy loss ratio requirements.

(b) The policies are expected to be repriced annually based on trend and demographic changes.

(c) Effects of underwriting, if any, are part of the composite assumptions so that durational claims experience is incorporated into the composite rate.

(d) Aging is not pre-funded, as in a Medicare supplement or long term care policy.

(3) Anticipated Loss Ratio: The present value of future benefits divided by the present value of future premiums computed over the entire future lifetime of the policy form. For annually rated groups, the anticipated loss ratio expected over the rating period is also referred to as the target loss ratio.

(4) Attained Age Premium Schedule: An attained age premium schedule is one in which the policyholder’s premium is dependent upon his or her age at policy renewal.

(a) The aging component of the claim cost is not pre-funded.

(b) These schedules shall be constructed so that the slope by age is substantially similar to the slope of the ultimate claim cost curve. The premiums shall form a smooth progression and, to eliminate jumps in premium caused by bracketed age groups, insurers shall use each available renewable age.

(c) These requirements do not apply to any group policy where the final premium charged is an average of the individual members.

(5) Closed Policy Form: A policy form is closed for rating purposes if the insurer has not actively offered it for sale in the previous 12 months.

(6) Credible Data:

(a) Except as provided in paragraph (b), if a policy form has 2,000 or more policies in force, then full (100 percent) credibility is given to the experience; if fewer than 500 policies are inforce, then zero (0 percent) credibility is given.

(b)1. For policy forms with low expected claims frequency, the data from the fewest number of entire calendar years, starting with the most recent experience year and looking back year by year as necessary, to the calendar year in which the accumulated claims first equal or exceed a total of 1,000 claims, shall be assigned 100 percent credibility; 200 claims shall be assigned 0 percent credibility. If 100 percent credibility is not achieved by using the most recent five year period, the data from the most recent five year period only shall be used. The determination of low expected claims frequency is determined at issue and not at different durations of the coverage.

(I) Policy forms that are determined not to be low expected claims frequency forms include, but are not limited to: Medicare Supplement, vision, dental, hospital indemnity, medical expense and other coverage described in Section 627.6561(5), F.S., as creditable coverage.

(II) Policy forms that are determined to be low expected claims frequency forms include, but are not limited to: accident, disability with benefit periods of 24 months or longer, coverage subject to the Long-Term Care Insurance Act, s. 627.9401 – 627.9408, cancer, specified disease, and critical illness.

2. For purposes of this section, a claim is counted as the first incidence or diagnosis of an event resulting in a covered benefit or series of covered benefits. It is not each provider encounter or service that may provide care or benefits due to such event.

3. A distinct incident resulting from a recurring chronic condition may be considered as a new claim if the incident triggering the claim is distinct from the incident triggering the prior claim, and the insured had recovered from the prior claim.

(c) Linear interpolation is used for inforce amounts between the low and high values in paragraph (a) or (b).

(d) For group policy forms, the numbers in this definition refer to individual group certificates or subscribers, not policies.

(e) For coverage that is not subject to paragraph (f) below,:

1. Florida only experience shall be used if it is 100 percent credible.

2.a. If Florida experience is not 100 percent credible, a combination of Florida and nationwide experience shall be used.

b. The Florida data shall be given the weight of the ratio of the Florida credibility to the nationwide credibility. For example, if Florida data is 10 percent credible and nationwide is 40 percent credible, the Florida data will be given the weight of [10%/40%] 25 percent.

c. The nationwide data shall be given the weight of the ratio of the nationwide credibility less the Florida credibility to the nationwide credibility. In the above example, the nationwide data will be given the weight of [(40%-10%)/40%] 75 percent.

d. The data is combined using the indicated weights (in the example above, the experience data would be weighted 25%/75%). The combination of the two weights will always equal 100 percent. A rate change is determined from the blended data. If the nationwide credibility is less than 100 percent, the indicated rate change is weighted by the nationwide credibility (40 percent in the above example) and medical trend, if applicable, by the compliment of the nationwide credibility (60 percent in the above example). If nationwide credibility is 100 percent, there would be no trend component.

3. The analysis in subparagraph 2. above is equivalent to determining the indicated rate increase from the Florida only data and the total nationwide data separately, and then weighting the resulting rate changes from each distinct analysis by the credibility of each distinct component. In the example above, the Florida rate increase would be weighted by 10 percent, the nationwide rate increase would be weighted by 30 percent (40%-10% = the non-Florida credibility component) and trend would be weighted by the complement of the nationwide credibility (1-40%) 60 percent.

(f) Due to the geographic pricing of medical expense coverage, Florida-only data shall be used. When Florida data is not fully credible, the complement of the experience credibility factor shall be weighted with medical trend.

(7) Durational Loss Ratio Table: The table of annual loss ratios where a loss ratio is the ratio of incurred claims divided by earned premium for each policy duration, by policy duration determined from the original actuarial memorandum when the form was first approved.

(a)1.a. The company shall adjust the durational loss ratio table when the average annual premium at the time of filing results in a loss ratio standard pursuant to the provisions of subsection 69O-149.005(4), F.A.C., that is changed by at least .5 percent from the current lifetime loss ratio standard for the form.

b. Each loss ratio in the durational loss ratio table shall be increased by the ratio of the loss ratio standard determined from the current average annual premium divided by the prior lifetime loss ratio standard;

2.a. When the loss ratio is adjusted pursuant to subparagraph (a)1. above, the lifetime loss ratio standard for the form shall be the prior lifetime standards weighted by the accumulated earned premiums applicable to each standard with the weight for the new lifetime loss ratio standard being the present value of projected premiums.

b. If the company is unable to provide the historical information necessary to calculate the appropriate weighting, the new standard will be the lifetime loss ratio as determined by subparagraph (a)1. above.

(b) The approved durational loss ratio table is the durational loss ratio table contained in the filing when the form was originally approved, or any subsequent durational loss ratio table filed where the Office explicitly approved the table. The present value of these durational loss ratios is designated as the lifetime target loss ratio.

(8) Earned Premium:

(a) The portion of the total premium paid by the insured attributable to the period of coverage elapsed. This includes all modal loadings, fees, or charges that are required to be paid by the insured.

(b) Premium shall be earned uniformly over the period for which coverage is provided.

(c) Sections 627.6043(2) and 627.6645(4), F.S., provide that the company may have a short rate table approved. If approved, the short rate table is used in lieu of uniform earning (pro-rata) for determining refunds upon cancellation, and shall not be incorporated for rate filing purposes.

(9) Entire Future Lifetime: The maximum period over which the policy would be in effect if not terminated by action of the insurer or the insured.

(a) For individual and group policies other than annually rated group policies, the minimum acceptable period for calculation purposes is the number of years before fewer than 5 percent of the original policyholders or certificateholders remain inforce. This period is determined using the anticipated termination rates for the form.

(b) For annually rated group policies, the entire future lifetime is the rating period.

(10) Expected Claims:

(a) The actual earned premium or, for projected periods the projected premium, times the applicable policy durational loss ratio from the approved durational loss ratio table which was in effect for the time period covered by the premiums.

(b) For annually rated group policies, this reflects the actual target loss ratio for the group; i.e., reflecting different retention loads based on group differences.

(11) Franchise Policies: These are considered to be individual policies under these rules unless the franchise policies are health benefit plans under Section 627.6699, F.S. In this event, the franchise policies will be considered to be group policy forms.

(12) Group Insurance Policy Form: Any insurance provided by a group master contract issued to any entity representing a group specified in Chapter 627, Part VII, F.S., such as a trust, an association, a union, an employer, or a group established primarily for the purpose of providing insurance coverage.

(13) Group Size:

(a) For Group Insurance Policy Forms insuring employer/employee relationships, the group size is the average number of certificates per employer.

(b) For other types of groups, the group size is the number of certificates issued in the state of Florida for out-of-state group master contracts or the average number of certificates per master contract issued in the state of Florida for in-state groups, up to a maximum of 50 certificates.

(14) Incurred Claims: Claims occurring within a fixed period, whether or not paid during the same period, under the terms of the policy form.

(15) Line of Business: For rating purposes, the Office recognizes the following types of policy forms:

(a) Medical Expense: Policy forms that pay benefits based on the actual costs charged for hospital care (in or out patient), health care provider services, durable medical equipment, drugs, blood, medical supplies, x-ray and radiology services, lab work or like services which are reasonable and medically necessary and are not otherwise excluded under the policy.

1. The Policy Form will be considered a “medical expense” policy if at least 50 percent of total benefits of the policy based upon expected claim costs are subject to medical trend.

2. The following coverages will not be considered medical expense insurance:

a. Medicare Supplement insurance.

b. Long Term Care insurance.

c. Coverage supplemental to liability insurance.

d. Workers’ compensation or similar insurance.

e. Automobile medical payment insurance.

(b) Medical Indemnity: Policy forms that pay a predetermined, specified, fixed benefit for services provided.

1. Claim costs under these forms are generally not subject to medical trend, although they may be subject to utilization changes.

2. Policy forms that can use this structure include hospital indemnity, dread disease, and accident policy forms.

(c) Medicare Supplement: Policy forms as defined in Part VIII of Chapter 627, F.S.,

(d) Long Term Care: Policy forms as defined in Part XVIII of Chapter 627, F.S.

(e) Loss of Income: Policy forms which pay a regular income as long as the insured is disabled but not beyond the benefit period.

(16) New Policy Form: A policy form that is proposed for approval to the Office and has no policies issued or inforce.

(17) Policy Form or Form: A single policy form or any collection of policy forms that have been combined for rating purposes. A collection once combined continues to be combined.

(18) Premium Schedule: The collection of rates to be charged encompassing base rates and any modifying factors.

(19) Rate Change: Any change to the premium schedule being charged.

(20) Renewal Clauses:

(a) Optionally Renewable: Renewal can be declined on any individual or group contract at the option of the insurer.

(b) Conditionally Renewable: Renewal can be declined by class, by geographic area or for stated reasons other than deterioration of health. The insurer may revise rates on a class basis.

(c) Guaranteed Renewable includes:

1. Policy forms where the renewal cannot be declined by the insurer for any reason other than fraud, misrepresentation, failure to pay the premium when due, or expiration of the contract, but the insurer can revise rates on a class basis.

2.a. Policy forms subject to Section 627.6425 or 627.6571, F.S.

b. When an insurer discontinues offering a particular policy form for health insurance coverage pursuant to Section 627.6425(3)(a), F.S.:

(I) The nonrenewal of coverage shall occur on the policy anniversary;

(II) The offer of new coverage pursuant to Section 627.6425(3)(a)2., F.S., shall be considered a renewal of coverage and shall be renewed on the policy anniversary at the same class basis as the coverage being discontinued.

(III) If the forms do not have consistent class definitions, the class shall be determined based on the original application and underwriting status of the individual when the discontinued coverage was first issued.

(IV) For policy forms subject to Section 627.6571, F.S., the renewal or nonrenewal of coverage shall be coincident with the effective date of coverage when the group is rerated, which is generally the annual anniversary of the group.

(d) Non-Cancelable: Renewal cannot be declined for any reason other than fraud, misrepresentation, or failure to pay the premium when due, and that rates cannot be revised by the insurer.

(e) Non-Renewable: A contractual provision exists which prevents a policy duration of more than a specific period, which shall be no more than 1 year.

(21) Select and Ultimate Premium Schedule: Any premium schedule which has premiums that vary based on the time elapsed since issuance of the policy. These do not include rate schedules that reduce due to temporary risk charges, a one-time policy fee, or policyholder action to reduce benefits.

(22) Similar Benefits:

(a) Policy forms shall be considered to have similar benefits if the benefit configuration under the forms is of the same type. Dental, hospital and accidental death are examples of different benefit configurations. Policy forms providing expense coverage are not considered similar to policy forms providing indemnity coverage.

(b) Covered services, benefit triggers, copay amounts, copay options, deductible sizes, daily limits, inside and outside limits may vary and shall be considered as having similar benefits.

(23) Stop-Loss Insurance: Coverage purchased by an entity, generally an employer, for the purpose of covering the entity’s obligation for the excess cost of medical care provided under a self-insured health benefit plan. Stop-loss coverage issued to a small employer shall not be subject to the requirements of Section 627.6699, F.S. The coverage shall be considered as a health insurance policy, rather than as a stop-loss insurance policy if the policy:

(a) Has an attachment point for claims incurred per individual which is lower than $20,000; or

(b)1. For insured employer groups with fifty (50) or fewer covered employees, has an aggregate attachment point which is lower than the greater of:

a. $4,000 times the number of employees;

b. 120 percent of expected claims; or

c. $20,000; or

2. For insured employer groups with fifty-one (51) or more covered employees, has an aggregate attachment point which is lower than 110 percent of expected claims.

3. Insurers shall determine the number of covered employees of an employer on a consistent basis (such as annually and at a uniform time).

(24) Target Loss Ratio: The lifetime loss ratio and the present value of the durational loss ratios developed in initial pricing projections as may be subsequently amended and approved pursuant to this rule chapter. For annually rated groups, the anticipated loss ratio over the rating period.

Specific Authority 624.308(1), 627.410(6)(b), (e) FS. Law Implemented 627.410(1), (2), (6), 627.411(1)(e) FS. History–New 6-19-03, Formerly 4-149.0025, Amended 5-18-04, 12-22-05, 10-1-08.