69O-157.113. Premium Rate Schedule Increases

(1) An insurer shall file with the Office for approval any premium rate schedule increase, including an exceptional increase, pursuant to Section 627.410, F.S. The filing shall include:

(a) A filing made pursuant to Rule Chapter 69O-149, F.A.C., with the actuarial information identified below in lieu of the actuarial memorandum required by subparagraph 69O-149.003(2)(b)4., F.A.C.

(b) Information required by Rule 69O-157.107, F.A.C.;

(c) Certification by a qualified actuary that:

1. No further premium rate schedule increases are anticipated. If the requested premium rate schedule increase is implemented and the underlying assumptions are realized;

2. The premium rate filing is in compliance with the provisions of Rule 69O-157.113, F.A.C.;

(d) An actuarial memorandum justifying the rate schedule change request that includes:

1. Lifetime projections of earned premiums and incurred claims based on both the current rate schedule and the filed premium rate schedule increase; and the method and assumptions used in determining the projected values, including a summary and the reason for any assumptions that deviate from those used for pricing other forms currently available for sale;

a. Pursuant to Section 627.410(6)(e)3., F.S., and as is provided in Rule Chapter 69O-149, F.A.C., the experience of all similar policy forms as defined in subsection 69O-157.103(17), F.A.C., shall be combined for all rating purposes. However, forms providing only non-institutional benefits may utilize different experience pools based upon similar benefits consistent with Rule Chapter 69O-149, F.A.C.

b. The projections shall include the development of the lifetime loss ratio, including calendar year values for the complete history of the experience of the business and projections of the remaining future lifetime of the business, unless the rate increase is an exceptional increase;

c. The projections shall demonstrate compliance with subsection 69O-157.113(2), F.A.C., if the form is subject to Part II of these rules, or compliance with Rule Chapter 69O-149, F.A.C., if the form is subject to Part I of these rules; and

d. For exceptional increases,

(I) The projected experience shall be limited to the increases in claims payments attributable to the approved reasons for the exceptional increase; and

(II) In the event the Office determines as provided in paragraph 69O-157.103(4)(d), F.A.C., that offsets may exist, the insurer shall use appropriate net projected experience;

2. Disclosure of how reserves have been incorporated in this rate increase whenever the rate increase will trigger contingent benefit upon lapse;

3. Disclosure of the analysis performed to determine why a rate adjustment is necessary, which pricing assumptions were not realized and why, and what other actions taken by the insurer have been relied on by the actuary;

4. A statement that policy design, underwriting and claims adjudication practices have been taken into consideration; and

5. In the event that it is necessary to maintain consistent premium rates for new certificates and certificates issued under a group long-term care insurance policy as defined in Section 627.9405(1)(a), F.S., receiving a rate increase, the insurer will need to file composite rates reflecting projections of new certificates;

(e) A statement that renewal premium rate schedules are not greater than new business premium rate schedules except for differences attributable to benefits; and

(f) Sufficient information for review and approval of the premium rate schedule increase by the Office.

(2) All premium rate schedule increases shall be determined in accordance with the following requirements:

(a) Exceptional increases shall provide that 70 percent of the present value of projected additional premiums from the exceptional increase will be returned to policyholders in benefits;

(b) Premium rate schedule increases shall be calculated such that the sum of the accumulated value of incurred claims, without the inclusion of active life reserves, and the present value of future projected incurred claims, without the inclusion of active life reserves, will not be less than the sum of the following:

1. The accumulated value of the initial earned premium times 58 percent;

2. 85 percent of the accumulated value of prior premium rate schedule increases on an earned basis;

3. The present value of future projected initial earned premiums times 58 percent; and

4. 85 percent of the present value of future projected premiums not in subparagraph 69O-157.113(2)(b)3., F.A.C., on an earned basis;

(c) In the event that a policy form has both exceptional and other increases, the values in subparagraphs 69O-157.113(2)(b)2. and 4., F.A.C., will also include 70 percent for exceptional rate increase amounts; and

(d) All present and accumulated values used to determine rate increases shall use a discount rate no less than the maximum valuation interest rate for contract reserves as specified in paragraph 69O-154.204(2)(a), F.A.C. The actuary shall disclose as part of the actuarial memorandum the use of any appropriate averages.

(3)(a) For each rate increase that is implemented, the insurer shall include within each annual rate certification filing made pursuant to Rule 69O-149.007, F.A.C., updated projections, as defined in paragraph 69O-157.113(1)(d), F.A.C., annually for the next 3 years and include a comparison of actual results to projected values.

(b) The Office shall extend the period to greater than 3 years if actual results are not consistent with projected values from prior projections.

(c) For group insurance policies that meet the conditions in subsection 69O-157.113(10), F.A.C., the projections required by this rule shall be provided to the policyholder in lieu of filing with the Office.

(4)(a) If any premium rate in the revised premium rate schedule is greater than 200 percent of the comparable rate in the initial premium schedule, lifetime projections, as defined in paragraph 69O-157.113(1)(d), F.A.C., shall be included in each annual rate certification filing made pursuant to Rule 69O-149.007, F.A.C., every 5 years following the end of the required period in subsection 69O-157.113(3), F.A.C.

(b) For group insurance policies that meet the conditions in subsection 69O-157.113(10), F.A.C., the projections required by this subsection shall be provided to the policyholder in lieu of filing with the Office.

(5)(a) If the Office has determined that the actual experience following a rate increase does not adequately match the projected experience and that the current projections under moderately adverse conditions demonstrate that incurred claims will not exceed proportions of premiums specified in subsection 69O-157.113(2), F.A.C., the Office shall require the insurer to implement any of the following:

1. Premium rate schedule adjustments; or

2. Other measures to reduce the difference between the projected and actual experience.

(b) In determining whether the actual experience adequately matches the projected experience, consideration shall be given to subparagraph 69O-157.113(1)(d)5., F.A.C., if applicable.

(6) If the majority of the policies or certificates to which the increase is applicable are eligible for the contingent benefit upon lapse, the insurer shall file:

(a) A plan for improved administration or claims processing designed to eliminate the potential for further deterioration of the policy form requiring further premium rate schedule increases, or both, or to demonstrate that appropriate administration and claims processing have been implemented or are in effect. Such plan shall be approved by the Office, unless the Office finds that the plan does not meet the above conditions. If the plan is not approved, the Office shall impose the condition in subsection 69O-157.113(7), F.A.C.; and

(b) The original anticipated lifetime loss ratio, and the premium rate schedule increase that would have been calculated according to subsection 69O-157.113(2), F.A.C., had the greater of the original anticipated lifetime loss ratio or 58 percent been used in the calculations described in subparagraphs 69O-157.113(2)(b)1. and 3., F.A.C.

(7)(a) For a rate increase filing that meets the following criteria, the Office shall review, for all policies included in the filing, the projected lapse rates and past lapse rates during the 12 months following each increase to determine if significant adverse lapsation has occurred or is anticipated:

1. The rate increase is not the first rate increase requested for the specific policy form or forms;

2. The rate increase is not an exceptional increase; and

3. The majority of the policies or certificates to which the increase is applicable are eligible for the contingent benefit upon lapse.

(b)1. In the event significant adverse lapsation has occurred, is anticipated in the filing, or is evidenced in the actual results as presented in the updated projections provided by the insurer following the requested rate increase, the Office shall determine that a rate spiral exists.

2. Following the determination that a rate spiral exists, the Office shall require the insurer to offer, without underwriting and at the underwriting class that is most comparable to the original underwriting class of each insured, to all in force insureds subject to the rate increase the option to replace existing coverage with one or more reasonably comparable products being offered by the insurer or its affiliates. The offer shall:

a. Be subject to the approval of the Office;

b. Be based on actuarially sound principles, but not be based on attained age; and

c. Provide that maximum benefits under any new policy accepted by an insured shall be reduced by comparable benefits already paid under the existing policy.

3. The insurer shall maintain the experience of all the replacement insureds separate from the experience of insureds originally issued the policy forms. In the event of a request for a rate increase on the policy form, the rate increase shall be limited to the lesser of:

a. The maximum rate increase determined based on the combined experience; and

b. The maximum rate increase determined based only on the experience of the insureds originally issued the form plus 10 percent.

(8) If the Office determines that the insurer has exhibited a persistent practice of filing inadequate initial premium rates for long-term care insurance, the Office shall, in addition to the provisions of subsection 69O-157.113(7), F.A.C., prohibit the insurer from:

(a) Filing and marketing comparable coverage for a period of up to 5 years; and

(b) Offering all other similar coverages and limiting marketing of new applications to the products subject to recent premium rate schedule increases.

(9) Subsections 69O-157.113(1) through (8), F.A.C., shall not apply to policies for which the long-term care benefits provided by the policy are incidental, as defined in subsection 69O-157.103(7), F.A.C., if the policy complies with all of the following provisions:

(a) The interest credited internally to determine cash value accumulations, including long-term care, if any, are guaranteed not to be less than the minimum guaranteed interest rate for cash value accumulations without long-term care set forth in the policy;

(b) The portion of the policy that provides life insurance benefits meets the nonforfeiture requirements of Section 627.476, F.S. or Rule Chapter 69O-164, F.A.C., as applicable; and

(c) An actuarial memorandum is filed with the Office that includes:

1. A description of the basis on which the long-term care rates were determined;

2. A description of the basis for the reserves;

3. A summary of the type of policy, benefits, renewability, general marketing method, and limits on ages of issuance;

4. A description and a table of each actuarial assumption used. For expenses, an insurer must include percentage of premium dollars per policy and dollars per unit of benefits, if any;

5. A description and a table of the anticipated policy reserves and additional reserves to be held in each future year for active lives;

6. The estimated average annual premium per policy and the average issue age;

7. A statement as to whether underwriting is performed at the time of application:

a. The statement shall indicate whether underwriting is used and, if used, the statement shall include a description of the type or types of underwriting used, such as medical underwriting or functional assessment underwriting;

b. Concerning a group policy, the statement shall indicate whether the enrollee or any dependent will be underwritten and when underwriting occurs; and

8. A description of the effect of the long-term care policy provision on the required premiums, nonforfeiture values and reserves on the underlying life insurance policy, both for active lives and those in long-term care claim status.

(10) Subsections 69O-157.113(5) and (7), F.A.C., shall not apply to group insurance policies as defined in Section 627.9405(1)(a), F.S., where:

(a) The policies insure 250 or more persons and the policyholder has 5,000 or more eligible employees of a single employer; or

(b) The policyholder, and not the certificateholders, pay a material portion of the premium, which shall not be less than 20 percent of the total premium for the group in the calendar year prior to the year a rate increase is filed.

(11)(a) An insurer may choose to continue to make a current policy form available for sale after the effective date in subsection 69O-157.102(4), F.A.C.

(b) All policyholders of any form sold after the effective date of subsection 69O-157.102(4), F.A.C., shall be provided equal treatment and protection of the provisions of Rules 69O-157.113 and 69O-157.118, F.A.C.

Specific Authority 624.308(1), 626.9611, 627.9407(1), 627.9408 FS. Law Implemented 624.307(1), 626.9541(1)(a), (g), 627.410(6), 627.9402, 627.9407, 627.9408 FS. History–New 1-13-03, Formerly 4-157.113.