Section 031-275-14 - Loss Ratio Standards and Refund or Credit of PremiumA. Loss Ratio Standards. (1)a. A Medicare supplement policy form or certificate form shall not be delivered or issued for delivery unless the policy form or certificate form can be expected, as estimated for the entire period for which rates are computed to provide coverage, to return to policyholders and certificate holders in the form of aggregate benefits (not including anticipated refunds or credits) provided under the policy form or certificate form: i. At least seventy-five percent (75%) of the aggregate amount of premiums earned in the case of group policies, orii. At least sixty-five percent (65%) of the aggregate amount of premiums earned in the case of individual policies.b. These ratios shall be 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. Incurred health care expenses where coverage is provided by a health maintenance organization shall not include: i. Home office and overhead costs;iii. Commissions and other acquisition costs;vi. Administrative costs; andvii. Claims processing costs.(2) All filings of rates and rating schedules shall demonstrate, as specified in Section 15(G)(13), that the anticipated loss ratio can be expected to meet the appropriate loss ratio standards.(3) For policies issued prior to January 1, 1992, expected claims in relation to premiums shall meet: a. The originally filed anticipated loss ratio when combined with the actual experience since inception;b. The appropriate loss ratio requirement from Subsection A(1)(a)(i) and (ii) when combined with actual experience beginning with April 1, 1996 to date; andc. The appropriate loss ratio requirement from Subsection A(1)(a)(i) and (ii) over the entire future period for which the rates are computed to provide coverage.B. Refund or Credit Calculation. (1) An issuer shall collect and file with the Superintendent by May 31 of each year the data contained in the applicable reporting form contained in Appendix A for each type in a standard Medicare supplement benefit plan.(2) 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. For purposes of the refund or credit calculation, experience on policies issued within the reporting year shall be excluded.(3) For the purposes of this section, policies issued prior to January 1, 1992, the issuer shall make the refund or credit calculation separately for all individual policies combined and all other group policies combined for experience after April 1, 1996.(4) 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. The 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.C. Annual Filing of Premium Rates. An issuer of Medicare supplement policies and certificates (including those issued before the effective date of this Rule) in this State shall file annually its rates, rating schedule, and supporting documentation for approval by the Superintendent in accordance with the filing requirements and procedures prescribed by Section 15(G).
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 Superintendent, in accordance with the applicable filing procedures of this State:
(1)a. Appropriate premium adjustments necessary to produce minimum loss ratios as anticipated for the current premium for the applicable policies or certificates. The supporting documents as necessary to justify the adjustment shall accompany the filing.b. An issuer shall make premium adjustments necessary to produce an expected loss ratio under the policy or certificate to conform to minimum loss ratio standards for Medicare supplement policies and which are expected to result in a loss ratio at least as great as the minimum ratio originally anticipated in the rates used to produce current premiums by the issuer for the 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.c. If an issuer fails to make premium adjustments acceptable to the Superintendent, the Superintendent may order premium adjustments, refunds or premium credits deemed necessary to achieve the loss ratio required by this section.(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. The riders, endorsements, or policy forms shall provide a clear description of the Medicare supplement benefits provided by the policy or certificate.D. Public Hearings. The Superintendent 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 (including those issued before the effective date of this Rule) 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 the reporting period. Public notice of the hearing shall be furnished in a manner deemed appropriate by the Superintendent.
02-031 C.M.R. ch. 275, § 14