69O-156.011. Loss Ratio Standards and Refund or Credit of Premium

(1) Loss Ratio Standards.

(a) A Medicare Supplement policy form or certificate form shall not be delivered or issued for delivery unless the policy form, certificate form, or block of pooled forms, can be expected, as estimated for the lifetime of the policy, to return to policyholders and certificateholders in the form of aggregate benefits (not including anticipated refunds or credits) provided under the policy form, certificate form, or block of pooled forms:

1. At least seventy-five percent (75%) of the aggregate amount of premiums earned in the case of group policies, or

2. For individual policies issued or renewed prior to July 1, 1989, at least 60% of the aggregate amount of premiums earned, and for individual policies issued on or after July 1, 1989, at least sixty-five percent (65%) of the aggregate amount of premiums earned, calculated on the basis of incurred claims experience or incurred health care expenses where coverage is provided by a health maintenance organization on a service rather than reimbursement basis and earned premiums for such period and in accordance with accepted actuarial principles and practices. Policies and certificates which were marketed and issued as Medicare Supplement policies and which have been redefined as limited benefit policies shall have the same loss ratio requirements as if they were still defined as Medicare Supplement policies. Incurred health care expenses where coverage is provided by a health maintenance organization shall not include:

a. Home office and overhead costs;

b. Advertising costs;

c. Commissions and other acquisition costs;

d. Taxes;

e. Capital costs;

f. Administrative costs; and

g. Claims processing costs.

(b) All filings of rates and rating schedules shall demonstrate that projected claims in relation to premiums comply with the requirements of this rule when combined with actual experience to date. Filings of rate revisions shall also demonstrate that the anticipated loss ratio over the entire future lifetime can be expected to meet the appropriate loss ratio standards.

(c) For purposes of applying paragraphs 69O-156.011(1)(a) and 69O-156.012(3)(c), F.A.C., only, policies issued as a result of solicitations of individuals through the mails or by mass media advertising (including both print and broadcast advertising) shall be deemed to be individual policies.

(d) For individual policies issued prior to April 25, 1996, all filings of rates, rating schedules or rate revisions shall demonstrate that the future projected claims in relation to premiums shall meet the 65% loss ratio standard:

1. When combined with actual experience beginning with April 25, 1996, and

2. When measured over the entire future lifetime of the policy or block of pooled forms.

(e) For the purposes of this rule, the term “pre-standardized business” shall include:

1. All Medicare Supplement policies and certificates which do not comply with the benefit requirements for standardized policies as defined in Rule 69O-156.008 or 69O-156.0085, F.A.C., and

2. All policies and certificates which were marketed and issued as Medicare Supplement policies, and which have been redefined as limited benefit policies.

(f) Pre-standardized business shall be allocated between the following two types, and combined for all rating purposes within each type: individual business and group business. The minimum lifetime loss ratio for the pooled blocks of business shall be the weighted average of the lifetime minimum loss ratios for each form comprising the block. The weights shall be the amount of earned premium in the last completed calendar year.

(2) Refund or Credit Calculation.

(a)1. An issuer shall collect the data necessary, and file with the Office each year by May 31, the refund or credit calculation information. This filing shall include:

a. 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.;

b. The following forms for each type in a standard Medicare supplement benefit plan, and each type of pre-standardized business:

(I)(A) “Reporting Form for the Calculation of the Benchmark Loss Ratio Since Inception for Individual Policies” Form OIR-B2-MSB-I, for individual business, completed in compliance with the instructions for the form; or

(B) “Reporting Form for the Calculation of the Benchmark Loss Ratio Since Inception for Group Policies” Form OIR-B2-MSB-G, for group business, completed in compliance with the instructions for the form; and

(II) The “Medicare Supplement Refund Calculation Form” Form OIR-B2-MSR, completed in compliance with the instructions for the form.

2. Forms OIR-B2-MSB-I (Rev. 06-09), OIR-B2-MSB-G (Rev. 06-09), and OIR-B2-MSR (Rev. 7/02) are hereby adopted and incorporated by reference. Copies of forms are available and may be printed from the Office’s website: http://www.floir.com/iportal.

3. Filings shall be submitted electronically to http://www.floir.com/iportal.

(b)1. If on the basis of the experience as reported the benchmark ratio since inception (ratio 1) exceeds the adjusted experience ratio since inception (ratio 3), then a refund or credit calculation is required. The refund calculation shall be done on a statewide basis for each type in a standard Medicare supplement benefit plan and each type of pre-standardized business. For purposes of the refund or credit calculation, experience on policies issued within the reporting year shall be excluded.

2. In particular, for policies and certificates issued as pre-standardized business:

a. In the preparation of the “Reporting Form for the Calculation of the Benchmark Loss Ratio Since Inception for Individual Policies” OIR-B2-MSB-I, and “Reporting Form for the Calculation of the Benchmark Loss Ratio Since Inception for Group Policies” Form OIR-B2-MSB-G, the insurer shall consider January 1, 1992, to be the date of inception for all policies and certificates and first year premium shall be the 1992 earned premium.

b. The insurer shall prepare Form OIR-B2-MSR for the two types of pre-standardized business. Since all policies and certificates are considered to have been issued on January 1, 1992, only experience since that date shall be included in this exhibit.

c. All individual businesses, regardless of issue date, shall use the factors on the “Reporting Form for the Calculation of the Benchmark Loss Ratio Since Inception for Individual Policies” Form OIR-B2-MSB-I.

(c) A refund or credit shall be made only when the benchmark loss ratio exceeds the adjusted experience loss ratio and the amount to be refunded or credited exceeds a de minimis level. Such refund shall include interest from the end of the calendar year to the date of the refund or credit at a rate specified by the Secretary of Health and Human Services, but in no event shall it be less than the average rate of interest for 13-week Treasury notes. A refund or credit against premiums due shall be made by September 30 following the experience year upon which the refund or credit is based.

(3) Annual Filing of Premium Rates.

(a)1. An issuer of Medicare supplement policies and certificates issued before or after January 1, 1992, shall file annually its rates, rating schedule and supporting documentation including ratios of incurred losses to earned premiums by policy duration for approval by the Department in accordance with Sections 627.410, 627.411 and 627.6745, F.S.

2. The supporting documentation shall also demonstrate in accordance with actuarial standards of practice using reasonable assumptions that the appropriate loss ratio standards can be expected to be met over the entire period for which rates are computed. The demonstration shall exclude the change in active life reserves as a component of incurred claims or earned premiums. A projected third-year loss ratio which is greater than or equal to the applicable percentage shall be demonstrated for policies or certificates in force less than three (3) years.

(b) As soon as practicable, but prior to the effective date of enhancements in Medicare benefits, every issuer of Medicare supplement policies or certificates in this State shall file with the Department, in accordance with the applicable filing procedures of this State:

1.a. Appropriate premium adjustments necessary to produce loss ratios as anticipated for the current premium for the applicable policies or certificates. Such supporting documents as necessary to justify the adjustment shall accompany the filing.

b. An issuer shall make such premium adjustments as are necessary to produce a projected loss ratio under such policy or certificate as will conform with minimum loss ratio standards for Medicare supplement policies and which are projected to result in a loss ratio at least as great as that originally anticipated in the rates used to produce current premiums by the issuer for such Medicare supplement policies or certificates. No premium adjustment which would modify the loss ratio experience under the policy other than the adjustments described herein shall be made with respect to a policy at any time other than upon its renewal date or anniversary date.

2. Any appropriate riders, endorsements or policy forms needed to accomplish the Medicare supplement policy or certificate modifications necessary to eliminate benefit duplications with Medicare. Such riders, endorsements or policy forms shall provide a clear description of the Medicare supplement benefits provided by the policy or certificate.

(c) If an issuer fails to make premium adjustments necessary to meet or exceed the loss ratio required by this rule, the Department shall order premium adjustments, refunds or premium credits required to achieve the loss ratio specified in this rule and maintain compliance with Chapter 69O-149, F.A.C., unless the premium adjustment does not exceed a de minimis level of $10 per policy for the average annual premium.

(4) Public Hearings. The Department may conduct a public hearing to gather information concerning a request by an issuer for an increase in a rate for a policy form or certificate form issued before or after January 1, 1992 if the experience of the form for the previous reporting period is not in compliance with the applicable loss ratio standard. The determination of compliance is made without consideration of any refund or credit for such reporting period. Public notice of such hearing shall be furnished pursuant to the requirements of Chapter 120, F.S.

Rulemaking Authority 624.308, 627.674(2) FS. Law Implemented 624.307(1), 627.410, 627.673, 627.674, 627.6745, 627.6746 FS. History–New 1-1-92, Amended 7-14-96, 12-17-96, 7-26-99, 3-4-01, 12-9-02, 6-19-03, Formerly 4-156.011, Amended 9-15-05, 1-4-10.