69O-149.0025: Definitions
69O-149.005: Reasonableness of Benefits in Relation to Premiums
69O-149.006: Actuarial Memorandum
PURPOSE AND EFFECT: To answer questions on health rate filings.
SUMMARY: Section 627.410(6)(b), F.S., states that the Commission may establish by rule procedures to be used in ascertaining the reasonableness of benefits in relation to premium rates. These rules establish such procedures. The rule is being amended to clarify the standards for credibility in using company experience as support for rate filings. Though these standards are in the present rules, the standards have not been stated clearly enough to guarantee that the intent of the existing rule is being met. Consequently, these amendments will tighten up the language.
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: 624.308 FS.
LAW IMPLEMENTED: 627.410 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 25, 2008, 9:30 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-149.0025 Definitions.
(1) through (5) No change.
(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 years, starting with the most recent experience year and looking back year by year as necessary, to accumulate such as accident and long term care at least 1,000 claims, over a period not to exceed the most recent 5-year period, 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 Policies Act, s. 627.9401 et. al., 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) No change.
(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) through (23) No change.
(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. HistoryNew 6-19-03, Formerly 4-149.0025, Amended 5-18-04, 12-22-05,_________.
69O-149.005 Reasonableness of Benefits in Relation to Premiums.
(1) No change.
(2) A premium schedule is not excessive if the following are true:
(a) No change.
(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. No change.
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) through (d) No change.
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. HistoryNew 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-149.006 Actuarial Memorandum.
(1) through (2) No change.
(3) Descriptions.
(a) No change.
(b) The descriptions, by item number, of the terms listed above in subsection (2) follow:
1. through 19. No change.
20. Anticipated Loss Ratio: This section shall provide the anticipated loss ratio and the interest rate(s) used in the determination of the value. The target loss ratio for an annually rated group policy form may be reduced upon demonstration and justification of an increase in administrative costs, but not less than the minimum required standard for the policy form.
a. No change.
b. This section shall also include the current approved durational loss ratio table for the form.
(I) through (III) No change.
(IV) A new table shall produce a lifetime loss ratio at least as great as the lifetime loss ratio developed from the current approved loss ratio table and shall become the lifetime standard or target loss ratio for the form.
(V) No change.
21. through 22. No change.
23. Experience on the Form (Past and Future Anticipated): This section shall display the actual experience on the form and that expected for the future.
a. No change.
b. Future periods where the projected values are based on inforce experience:
(I) The experience period used as the basis for determining projected values shall be clearly indicated.
(II) The experience period shall reflect the most current data available. For forms subject to the credibility standards of paragraph 69O-149.0025(6)(b), F.A.C., the experience period shall be generally the most recent 12 months for coverage subject to medical inflation or, the period of time used to determine credible data pursuant to paragraph subsection 69O-149.0025(6)(b), F.A.C. For other forms, the experience period shall be the period consisting of the most recently completed four (4) calendar quarters, where such period must end at least 45 days before the date of the filing. (For example, the experience period for a filing submitted on August 1 would be April 1 of the prior year through March 31 of the current year. The experience period for a filing submitted on September 1 would be July 1 of the prior year through June 30 of the current present year). Use of other data shall be justified to the office as to why the requisite data is not available or appropriate to use.
(III) through (VIII) No change.
c. through d. No change.
24. through 28. No change.
Specific Authority 624.308(1), 627.410(6)(b), (e) FS. Law Implemented 627.410(1), (2), (6), 627.411(1)(e) FS. HistoryNew 7-1-85, Formerly 4-58.06, 4-58.006, Amended 4-18-94, 4-9-95, 11-20-02, 6-19-03, Formerly 4-149.006, Amended 5-18-04, 11-2-06,_________.
