Insurance

Administration

Rule R590-85: Accident and Health Insurance and Medicare Supplement Rates

Effective Date: 03/04/2022

Admin. Code Reference: R590-85

Rule Type: Current Rule

R590. Insurance, Administration.

R590-85. Accident and Health Insurance and Medicare Supplement Rates.

R590-85-1. Authority.

This rule is promulgated by the commissioner pursuant to Sections 31A-2-201, 31A-2-201.1, 31A-22-605, and 31A-22-620.

R590-85-2. Purpose and Scope.

(1) The purpose of this rule is to implement Subsections 31A-22-602(2), 31A-22-605(4)(e), and 31A-22-620(3)(e) by establishing minimum loss ratios and implementing procedures for the filing of accident and health insurance and Medicare supplement premium rates, including the initial filing of rates and any subsequent rate changes.

(2) This rule applies to:

(a) an individual accident and health insurance policy except as excluded under Subsection (3);

(b) a Medicare supplement policy; and

(3) This rule does not apply to:

(a) a policy subject to Title 31A, Chapter 30, Individual, Small Employer, and Group Health Insurance Act, and Chapter 45, Managed Care Organizations, that complies with Rules R590-167 and R590-277;

(b) a long-term care policy subject to Rule R590-148; and

R590-85-3. Definitions.

Terms used in this rule are defined in Section 31A-1-301. Additional terms are defined as follows:

(1) "Average annual premium per policy" means the average computed by the insurer based on an anticipated distribution of business by all applicable criteria having a price difference, such as age, sex, amount, dependent status, rider frequency, etc., except assuming an annual mode for all policies, for example, the fractional premium loading may not affect the average annual premium or anticipated loss ratio calculation.

(2) "Conditionally renewable" means renewal can be declined by class, geographic area, or for stated reasons other than deterioration of health.

(3) "Guaranteed renewable" means renewal cannot be declined by the insurance company for any reason, but the insurance company can revise rates on a class basis.

(4) "Non-cancelable" means renewal cannot be declined nor can the rates be revised by the insurance company.

(5) "Non-renewable" means renewal is not an option.

(6) "Optionally renewable" means renewal is at the option of the insurance company.

(7) "Qualified actuary" means a member in good standing of the American Academy of Actuaries.

R590-85-4. General Requirements.

(1) When a Rate Filing is Required.

(a) Every filing for a policy, certificate, or endorsement affecting benefits shall be accompanied by a rate filing that complies with this rule.

(b) A rate filing is not required for an endorsement that has no rating effect.

(c) Any subsequent addition to or change in rates applicable to the policy, certificate, or endorsement shall also be filed prior to use.

(2) General Contents of All Rate Filings. Each rate submission shall include:

(a) rate sheets for current and proposed rates, if applicable, that are clearly identified;

(b) an actuarial memorandum describing the basis on which rates were determined, which includes:

(i) description of the policy, benefits, renewability, general marketing methods, and issue age limits;

(ii) description of how rates were determined, including a general description and source of each assumption used;

(iii) estimated average annual premium per policy for Utah;

(iv) anticipated loss ratio, including interest, of the present value of the expected benefits to the present value of the expected premiums over the entire period for which rates are computed to provide coverage;

(v) minimum anticipated loss ratio presumed reasonable in Subsection R590-85-5(1); and

(vi) signed certification by a qualified actuary stating that, to the best of the actuary's knowledge and judgment, the rate filing is in compliance with the applicable laws of Utah and the benefits are reasonable in relation to the premiums charged; and

(c) a statement that the rates have been filed with and approved by the home state, except as provided in Subsection (3).

(3) If the home state does not require approval, then alternative information must be submitted, including:

(a) a list of the states to which the rates were submitted;

(b) the date submitted; and

(4) Previously Filed Form. Filing a rate change for a previously filed rate shall include the following:

(a) a statement of the scope and reason for the change;

(b) a description of how revised rates were determined, including a general description and source of each assumption used;

(d) a comparison of Utah and average nationwide premiums, for representative rating cells based on the Utah distribution of business;

(e) a comparison of revised premiums with current scale;

(f) a statement as to whether the filing applies to new business, in-force business, or both, and the reasons;

(g) a detailed history of national experience, which includes the data in Subsection (5) that shows on a yearly and durational basis:

(i) premiums received;

(ii) earned premiums;

(iii) benefits paid;

(iv) incurred benefits;

(v) increase in active life reserves;

(vi) increase in claim reserves;

(vii) incurred loss ratio;

(viii) cumulative loss ratio; and

(ix) any other available data the insurer may wish to provide;

(h) detailed history of Utah experience, which includes the data in Subsection (5) that shows on a yearly basis:

(i) earned premiums;

(ii) incurred benefits;

(iii) incurred loss ratio; and

(iv) cumulative loss ratio;

(i) anticipated nationwide future loss ratio, which includes:

(i) projected premiums;

(ii) projected claims;

(iii) projected loss ratio; and

(iv) assumptions and calculations that include interest;

(j) anticipated Utah future loss ratio, which includes:

(i) projected premiums;

(ii) projected claims;

(iii) projected loss ratio; and

(iv) description of assumptions and calculations that include interest;

(k) cumulative past and projected future loss ratio and description of the calculation;

(l) the number of policyholders in Utah; and

(m) the date and magnitude of all previous rate changes for Utah and nationwide.

(5) Experience Records.

(a) As required by the Accident and Health Policy Experience Exhibit, an insurer shall maintain records of premiums collected, earned premiums, benefits paid, incurred benefits and reserves for each calendar year for each policy form, and applicable endorsements.

(i) Separate data may be maintained for each endorsement to the extent appropriate.

(ii) Experience under policies that provide substantially similar coverage may be combined.

(iii) The data shall be for all years of issue combined, for each calendar year of experience since the year the form was first issued.

(b) A rate revision must provide the information required in Subsection (5)(a) on both a national and a state basis.

(6) Evaluating Experience Data. In determining the credibility and appropriateness of experience data, all relevant factors shall be considered, including:

(a) statistical credibility of premiums and benefits, for example low exposure or low loss frequency;

(b) experience and projected trends relative to the kind of coverage, for example persistency, inflation in medical expenses, or economic cycles affecting disability income experience;

(c) concentration of experience at early policy durations where select morbidity and preliminary term reserves are applicable and where loss ratios are expected to be substantially lower than at later policy durations; and

(d) the mix of business by risk classification.

(7) Implementation of a filed rate increase must be initiated within 12 months from the filed date, otherwise a company forfeits the right to implement the increase.

(8) A filing may be rejected or prohibited if the company fails to submit all required information.

R590-85-5. Reasonableness of Benefits in Relation to Premium.

(1) With respect to a new form under which the average annual premium per policy is expected to be at least $200, the anticipated loss ratio shall be at least as great as shown in this subsection:

(a) Accident and Health Insurance Coverage. Except as provided in Subsections (1)(d) and (1)(e), the minimum loss ratio for:

(i) a non-renewable form is 65%;

(ii) an optionally renewable form is 60%;

(iii) a conditionally renewable form is 55%;

(iv) a guaranteed renewable form is 55%; and

(v) a non-cancelable form is 50%.

(b) Income Replacement Insurance Coverage. The minimum loss ratio for:

(i) a non-renewable form is 65%;

(ii) an optionally renewable form is 60%;

(iii) a conditionally renewable form is 55%;

(iv) a guaranteed renewable form is 50%; and

(v) a non-cancelable form is 45%.

(i) $100 or more but less than $200, subtract five percentage points; or

(ii) less than $100 subtract 10 percentage points.

(d) For a Medicare supplement policy, benefits shall be considered reasonable in relation to premiums if the anticipated loss ratio meets the requirements of Section R590-146-14.

(e) The minimum loss ratio for a short-term limited duration health insurance form is 70%.

(2) Rate Changes. With respect to the filing of a rate change for a previously filed form, the standards of this subsection shall be met.

(a) Subsections (2)(a)(i) and (2)(a)(ii) shall be at least as great as the standards in Subsection (1) and shall include interest in the calculation of benefits, premiums, and present values:

(i) the anticipated loss ratio over the entire period for which the changed rates are computed to provide coverage; and

(ii) the ratio of Subsections (2)(a)(ii)(A) and (2)(a)(ii)(B); where:

(A) is the sum of the accumulated benefits, from the original effective date of the form to the effective date of the change, and the present value of future benefits; and

(B) is the sum of the accumulated premiums from the original effective date of the form to the effective date of the change and the present value of future premiums, the present values to be taken over the entire period for which the changed rates are computed to provide coverage, and the accumulated benefits and premiums to include an explicit estimate of the actual benefits and premiums from the last date an accounting was made to the effective date of the change.

(b) If an insurer wishes to charge a premium for policies issued on or after the effective date of the change, which is different from the premium charged for the policies issued prior to the change date, then:

(i) with respect to policies issued prior to the effective date of the change, the requirements of Subsection (2)(a) must be satisfied; and

(ii) with respect to policies issued on and after the effective date of the change, the standards are the same as in Subsection (1), except that the average annual premium shall be determined based on an actual rather than an anticipated distribution of business.

(c) A company must review its experience periodically and file rate changes, as appropriate, in a timely manner to avoid the filing of exceptionally large rate increases.

(d) A rate filing requesting an increase may be prohibited if a company has failed to file rate changes in a timely manner.

R590-85-6. Severability.

If any provision of this rule, Rule R590-85, or its application to any person or situation is held invalid, such invalidity does not affect any other provision or application of this rule that can be given effect without the invalid provision or application. The remainder of this rule shall be given effect without the invalid provision or application.

KEY: insurance law

Date of Last Change: March 4, 2022

Notice of Continuation: April 1, 2022

Authorizing, and Implemented or Interpreted Law: 31A-2-201; 31A-22-605; 31A-22-620