The purpose of the rule is to establish standards for ascertaining the reasonableness of benefits in relation to premium rates.

 

DEPARTMENT OF FINANCIAL SERVICES
OIR – Insurance Regulation

RULE NO: RULE TITLE
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: The purpose of the rule is to establish standards for ascertaining the reasonableness of benefits in relation to premium rates.
SUMMARY: The rule establishes standards that are to be used by insurers in filing health insurance policy forms.
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, 626.9611 FS.
LAW IMPLEMENTED: 624.318, 627.410, 626.9611 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:
DATE AND TIME: October 18, 2007, 9:30 a.m.
PLACE: Room 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: Linda Ziegler, Chief of Staff Office, Office of Insurance Regulation, E-mail [e-mail]. 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: Linda Ziegler, Chief of Staff Office, Office of Insurance Regulation, E-mail Belynda [e-mail]

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 expected 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.

(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.

2a. 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 .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 any form or pooled group of Medicare supplement, 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 not exceeding 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) No change.

(2) A premium schedule is not excessive if the following are true:

(a) For a new policy form, group or individual,

1. the 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.

(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-cancelable	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 Expense	Medical Indemnity or any policy with an average annual premium per certificate less 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) 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) through (13) No change.

(14) 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 periods of time prior to the current experience period, the office shall make its determination based on the information used and relied upon by the actuary, as well as information that was available and pertinent to the determination, 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 explicitly approved by the office.

(c) If the office determines that such violation has occurred, then, in lieu of the office pursuing administrative action and remedies, including the penalties provided by Section 624.418, F.S.,

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.

2. The office will approve such lesser period requested by the insurer if the insurer demonstrates that:

(i) The larger rate increase due to the shorter period of time is consistent with the level of increases of other insurers currently marketing similar benefit plans,

(ii) The increase will not adversely affect policyholder persistency. Adverse persistency shall be determined if the lapse rate anticipated exceeds the lapse rate of the insurer for the prior year or if the lapse rate would exceed the lapse rate of insurers currently marketing similar benefit plans, and

(iii) The resulting rates are not in excess of the rates of other insurers currently marketing similar benefit plans.

3. Benefit enhancements, rate reductions, rate credits or refunds shall be determined to return the rates to a level that meet the standards of these rules.

Specific Authority 624.308(1), 626.9611, 627.410(6)(d), (e) FS. Law Implemented 624.307, 624.3161, 624.318, 624.418, 626.9541(1), 626.9561, 626,9641, 627.410(6)(d), (e), 627.410(7), 627.411(1)(a), (e), 627.9175, 627.4238 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,________.

 

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 shall be exempt from the filing requirements of this rule.

(5) A filing shall consists 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, in accordance with subparagraph 69O-149.006(3)(b)28., F.A.C. and that based on current experience and projection assumptions, rates are not anticipated to increase over the next rating period.

(6)(a) A filing shall include only forms that are pooled together for rating purposes. Separate filings shall be made for separate rating pools.

(b) Forms that are pooled together for rating purposes should be submitted under a single ARC filing. The company may request that an ARC filing may be made for a form separate from the other forms within the rating pool. Making separate ARC filings for forms that would otherwise be considered combined for rating purposes does not constitute a change in the forms to be pooled for rating purposes. At the time any of the forms would be filed for a rate change, all forms shall be pooled as required by subsection 69O-149.003(1), F.A.C., regardless of how the forms were filed for ARC compliance.

(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 reduce rates, enhance benefits, or a combination of both to satisfy the standards.

(a) A company may make a certification in compliance with this rule without such change to benefits 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.

(b) In determining the necessary adjustment, the company may assume up to a 15 percent margin in future projected claim costs and may target a future and lifetime actual to expected ratio of .85.

(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 624.318, 627.410 FS. History–New 5-14-92, Amended 11-20-02, Formerly 4-149.007, Amended 5-18-04,________.

NAME OF PERSON ORIGINATING PROPOSED RULE: Angela Lockwood, Office of the Chief of Staff, Office of Insurance Regulation
NAME OF SUPERVISOR OR PERSON WHO APPROVED THE PROPOSED RULE: Monica Rutkowski, Director, Life and Health Product Review, Office of Insurance Regulation
DATE PROPOSED RULE APPROVED BY AGENCY HEAD: May 01, 2007
DATE NOTICE OF PROPOSED RULE DEVELOPMENT PUBLISHED IN FAW: May 18, 2007.