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, the anticipated loss ratio is not less than the indicated adjusted entry in the loss ratio tables, in subsection (4), below.

(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 target 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 also applicable to paid family leave policies. 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 $1,000
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 627.6562(3)(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) A premium schedule is unfairly discriminatory if it incorporates any of the following:

(a) For all long term care policy forms and other policy forms under which more than 50 percent of the policies/certificates are issued to persons age 65 or older, attained age premium structures, are prohibited. Only premium structures which prefund the aging component of future claim costs are allowed.

(b) Select and Ultimate Premium Schedules are prohibited.

(c) Attained age premium schedules where the slope by age is substantially different from the slope of the ultimate claim cost curve are prohibited.

(11) Attained age rated individual medical expense health insurance coverage may incorporate into the rate schedule a rating factor that provides for a reapplication of the factor subsequent to the original issuance of the coverage, subject to the following:

(a) The factor shall be limited to those categories where an insured is able to qualify for the factor based solely on the insured’s right to apply for the option at the time, such as continued discount for non-tobacco use;

(b) The determination for qualification of the factor shall be based on well-defined objective criteria;

(c) Health or claim status of the insured does not limit the ability of an individual to qualify for the factor;

(d) The factor shall be applied uniformly to all insureds;

(e) The timing of the redetermination of the factor shall be predetermined and disclosed in the policy. The application of the factor shall be in a nondiscriminatory manner; i.e., at every anniversary, at each third year anniversary, etc.;

(f) The availability, initial determination, redetermination, or value of the factor is not based on any health-status-related factors, as described in Section 627.65625(1), F.S., in relation to the individual or a covered dependant of the individual.

(12) Upon request of the Office, the company shall provide an actuarial demonstration that benefit and premium relativities provided on a form currently available for sale are reasonable in relation to benefit and premium relativities provided in other forms currently available for sale in the same rating pool, given actuarial considerations generally used in pricing a product.

(13)(a) Whenever a company makes a non-contractual offering to existing insureds, without underwriting, to replace or exchange their policy with alternate coverage where the original policy is priced on an issue age rate schedule, the rate charged to the insured for the new policy shall recognize the policy reserve buildup, due to the prefunding inherent in the use of an issue at rate basis, to the benefit of the insured. The method proposed by the company must be filed for approval. The rate for the conversion shall be at the most similar rating class as was the original coverage. A statutorily required conversion provision would be considered contractual.

(b) Not withstanding the above, a company may always convert at the original issue age and duration of the insured without providing justification to the Office.

(14) An insurer may issue multiple year rate guarantee or rating cap provisions subject to the following:

(a) The coverage is for annually rated group health insurance policies for which filing of rates is exempted by Section 627.410(6), F.S.

(b) The provision may not apply for greater than 24 months unless otherwise exempted by the Office;

(c) The rate for the entire rating period reflects the increased risk of a rate guarantee with an increased premium or other consideration is actuarially sound, includes claim costs projected at trend levels at least as high as those applicable to other groups with similar benefit structures in the rating area covered under the form(s) and is reasonably anticipated to meet the target loss ratio for the group;

(d) The provision is available to groups on a nondiscriminatory basis as determined by the insurer’s underwriting standards; and,

(e) The insurer uses experience rating in determining the group’s rate consistently based on its rating and underwriting practices without regard to whether the rate is issued with or without a rate guarantee.

(15) Accident only, accidental death and dismemberment, dental, disability income, hearing, hospital indemnity, hospital/surgical medical expense, intensive care, and vision policies issued by an insurer are exempt from the requirement of paragraph (14)(b). This provision may not apply for greater than 60 months for accident only, accidental death and dismemberment, dental, disability income, hearing, hospital indemnity, hospital/surgical medical expense, intensive care, and vision policies issued by an insurer.

Rulemaking Authority 624.308(1), 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, 10-1-08, 8-15-19, 1-17-24.