N.M. Admin. Code § 13.10.34.17

Current through Register Vol. 35, No. 23, December 10, 2024

Section 13.10.34.17 - FORM AND RATE FILING AND APPROVAL REQUIRED

A.Prior approval of forms required A carrier shall not issue, deliver or use a form associated with a plan, unless and until such form has been filed with and approved by the superintendent.

B.Prior approval of rates required A carrier shall not use rates or modified rates for an individual or group plan unless and until such rates are filed with and approved by the superintendent, except for rates for a plan issued to eligible members of an out-of-state group policyholder defined by Paragraph (1) of Subsection A of Section 59A-23-3 NMSA 1978. A carrier shall not offer a group coverage plan to New Mexico residents that are members of a group not defined in Paragraph (1) of Subsection A of Section 59A-23-3 NMSA 1978 under a plan issued to an out-of-state group policyholder unless the plan complies with Subsections D and G of this Section. Projected loss ratios for new plans or products shall be filed prior to sales and be based on credible data.

C.Rate filing requirements The superintendent shall post on its website requirements for filing actuarial memorandums and rates for rate filing requests.

D.Minimum loss ratios for group plans A group product subject to this rule shall be subject to the following actual minimum loss ratios, adjusted for low or high average premium forms:

(1)Definitions of renewal clause. The following definitions shall be applied to the table:

Type of Coverage:	OR	CR	GR	NC
Medical Expense	65%	60%	60%	55%
Loss of Income and Other	65%	60%	55%	50%

(a)OR- Optionally Renewable renewal is at the option of the insurance company;

(b)CR- Conditionally Renewable renewal can be declined by class; by geographic area or for stated reasons other than deterioration of health;

(c)GR- Guaranteed Renewable renewal cannot be declined by the insurance company for any reason, but the insurance company can revise rates on a class basis;

(d)NC- Non-Cancelable renewal cannot be declined nor can rates be revised by the insurance company.

(2)Low average premium forms For a plan form, including riders and endorsements, under which the actual average annual premium per certificate is low (as defined below), the appropriate ratio from the table above should be adjusted downward by the following formula:

RN = R x (I x 500) + X / (I x 750)

where: R is the table ratio;

RN is the resulting guideline ratio;

I is the consumer price index factor; and

X is the average annual premium, up to a maximum of I x 250.

The factor I is determined as follows:

I = CPI-U, Year (N-1) / U, (1982) = CPI-U, Year (N-1) / CPI- 97.9

(a) (N-1) is the calendar year immediately preceding the calendar year (N) in which the rate filing is submitted in the state;

(b) 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 based on the 1982=100 basis;

(c) the CPI-U for any year (N-1) is taken as the value of September. For 1982, this value was 97.9;

(d) hence, for rate filings submitted during calendar year 1983, the value of I is 1.00.

(e) Low average annual premium is defined as average annual premium less than or equal to I x 250.

(f) High average annual premium is defined as average annual premium more than or equal to I x 1500.

where:

(3)High average premium forms For a plan form, including riders and endorsements, under which the actual average annual premium per certificate is high (as defined above), the appropriate ratio from the table above should be adjusted upward by the following formula:

RN = R x (I x 4000) + X / (I x 5500)

where: R is the table ratio

RN is the resulting guideline ratio

I is the consumer price index factor (as defined in Paragraph (2) above)

X is the average annual premium, not less than I x 1500.

In no event, however, shall RN exceed the lesser of:

(a) R + 5 percentage points, or

(b) 68%.

(4)Determination of average premium. A carrier shall determine the average annual premium per form based on the distribution of business by all significant criteria having a price difference, such as age, sex, amount, dependent status, rider frequency, etc., except assuming an annual mode for all certificates (i.e., the fractional premium loading shall not affect the average annual premium or anticipated loss ratio calculation).

E.Individual plan minimum loss ratio An individual plan subject to this rule shall be subject to the following actual minimum loss ratios, adjusted for low or high average premium forms:

Type of Coverage:	OR	CR	GR	NC
Medical Expense	60%	55%	55%	50%
Loss of Income and Other	60%	55%	50%	45%

(1) Definitions of renewal clause. The following definitions shall be applied to the table:

(a)OR- Optionally Renewable renewal is at the option of the insurance company;

(b)CR- Conditionally Renewable renewal can be declined by class, by geographic area or for stated reasons other than deterioration of health;

(c)GR- Guaranteed Renewable renewal cannot be declined by the insurance company for any reason, but the insurance company can revise rates on a class basis;

(d)NC- Non-cancelable renewal cannot be declined nor can rates be revised by the insurance company.

(2)Low average premium forms For a plan form, including riders and endorsements, under which the actual average annual premium per certificate is low (as defined below), the appropriate ratio for the table above should be adjusted downward by the following formula:

RN = R x (I x 500) + X / (I x 750)

where: R is the table ratio;

RN is the resulting guideline ratio;

I is the consumer price index factor; and

X is the average annual premium, up to a maximum of I x 250.

The factor I is determined as follows:

I = CPI-U, Year (N-1) / U, (1982) = CPI-U, Year (N-1) / CPI- 97.9

where:

(a) (N-1) is the calendar year immediately preceding the calendar year (N) in which the rate filing is submitted in the state;

(c) the CPI-U for any year (N-1) is taken as the value of September. For 1982, this value was 97.9;

(d) hence, for rate filings submitted during calendar year 1983, the value of I is 1.00.

RN = R x (I x 4000) + X

where: R is the table ratio

RN is the resulting guideline ratio

I is the consumer price index factor (as defined in Paragraph (2) above)

X is the average annual premium, not less than I x 1500.

In no event, however, shall RN exceed the lesser of:

(a) R + 5 percentage points, or

(b) 63%.

(4)Determination of average premium A carrier shall determine the annual premium per form based on an anticipated distribution of business by all significant criteria having a price difference, such as age, sex, amount, dependent status, rider frequency, etc., except assuming 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 should be determined on the basis of rates being filed. Thus, where this adjustment is applicable to a rate revision under Paragraph G, rather than to a new form, X should be determined on the basis of anticipated average size premium immediately after the revised rates have fully taken effect.

F.Rate revisions The following requirements shall apply to rate revision requests:

(1) With respect to filing rate revisions for a previously approved form, or a group of previously approved forms combined for experience, benefits shall be deemed reasonable in relation to premiums provided the revised rates meet the most current standards applicable to rate filings; and

(2) Carriers are urged to review their experience periodically and to file rate revisions, as appropriate, in a timely manner to avoid non-compliance with this rule.

G. Annual rate certification filing procedures Carriers not filing new or updated premium rates in any given plan year shall file an actuarial memorandum demonstrating that minimum loss ratios have been met for all products.

(1)General requirement Carriers shall meet the minimum loss ratio ("MLR") established, and in the manner calculated, under this section of the rule.

(2)Aggregation Loss ratios shall be calculated on a consolidated level across policies with the same product type and benefit design.

(3)Measurement period Compliance with the minimum loss ratio shall be measured over all years of issue combined and for each calendar year of experience utilized in the rate determination process (but never less than the last three years). A filing for a new pool shall be based on credible data from generally recognized industry sources. Separate filings shall be made for separate rating pools.

(4)Frequency Actual loss ratios shall be calculated annually by carriers that issue excepted benefits products specified in this rule, beginning in 2023.

(5)Timeline The evidence of compliance with the minimum loss ratio requirements shall be filed with the superintendent on the anniversary date when the product or the product's most recent rate filing was approved.

(6)Methodology Actual loss ratios shall be calculated using company claim data including an estimate for claims incurred but not reported. The claims will be reported for all years of issue combined and for each calendar year of experience utilized in the rate determination process (but never less than the last three years after the third year of experience is available). The actual accumulated loss ratio over the measurement period (A) will be compared to original pricing accumulated loss ratios over the measurement period (E) as a method of justifying the minimum loss ratio is being met or showing the need for remedial action if (A)/(E) is below the threshold specified in Paragraph (8) of this subsection.

(7)Waiver 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 must be accompanied by a letter indicating the nature of the filing, the type of product, and the reason for the request.

(8)Compliance with minimum loss ratios Each carrier shall submit to the superintendent an exhibit showing the calculation of the applicable loss ratios and:

(a) a statement signed by a qualified actuary that the minimum loss ratio requirements have been met; or

(b) a rate filing to justify the rates, revise rates, modify benefits through a benefit endorsement or to return excess premium, if the actual accumulated loss ratio divided by the expected accumulated loss ratio (A/E) over the measurement period is below eighty-five percent.

(9) The superintendent may require a plan to return excess premiums or increase benefits proportionately if the ratio of the actual accumulated experience to the expected accumulated experience (A/E) is below eighty percent.

(10) A carrier shall not return excess premiums per the above guidelines, until the carrier files a refund plan and calculation with and obtains approval of the plan by the superintendent.

H.Disapproval of forms and rates The superintendent shall disapprove a form:

(1) if the benefit provided therein is unreasonable in relation to the premium charged; or

(2) that misrepresents the benefits, advantages, conditions or terms of any plan or that unfairly characterizes the plan as more favorable to the covered person than the actual terms of the plan, such as naming coverage for specific diseases whose primary forms of treatment are then listed as exclusions;

(3) that uses any false or misleading statements;

(4) that uses any name or title of any plan or class of plans misrepresenting the true nature thereof, including misrepresenting the plan as major medical coverage; or

(5) that is contrary to law, discriminatory, deceptive, unfair, impractical, unnecessary or unreasonable.

I.Variable MLR A carrier shall not offer a plan subject to this rule to any person unless each possible plan design selectable by that person meets the MLR requirements as reflected in an approved rate filing. For variable forms, a carrier cannot satisfy MLR requirements with average premiums for the form as a whole. The carrier must base MLR calculations on the average premium for each possible combination of benefits and levels offered by demographics used for underwriting. The superintendent reserves the right to reject a plan that has no meaningful difference from another plan offered by the same carrier. The requirements of this rule do not apply to a non-contributory plan.

J.Premium increases A carrier shall not increase a covered person's premium under any plan, other than a disability income plan, during the first two years that the covered person's coverage is in force except in cases where one or more persons are added to the policy as covered persons during this two year period. The new premium resulting from the addition of a covered person(s) shall not change for the first two years the policy with the added lives is in force.

N.M. Admin. Code § 13.10.34.17

Adopted by New Mexico Register, Volume XXXI, Issue 18, September 29, 2020, eff. 10/1/2020, Amended by New Mexico Register, Volume XXXIII, Issue 15, August 9, 2022, eff. 7/1/2023