Alabama Administrative Code › Title 482 - ALABAMA DEPARTMENT OF INSURANCE › Chapter 482-1-134 - HEALTH INSURANCE RESERVES › Appendix A - SPECIFIC STANDARDS FOR MORBIDITY, INTEREST AND MORTALITY

Current through Register Vol. 42, No. 9, June 28, 2024
1. MORBIDITY
A. Minimum morbidity standards for valuation of specified
				individual contract health insurance benefits are as follows:
(1) Disability Income Benefits Due to Accident or
Sickness.
(a) Contract Reserves:
(i) Contracts issued on or after January 1, 1965 and prior to
				January 1, 1986: The 1964 Commissioners Disability Table (64 CDT).
(ii) Contracts issued on or after January 1, 1987, either of
				the following:
(I) The 1985 Commissioners Individual Disability Tables A
				(85CIDA).
(II) The 1985 Commissioners Individual Disability Tables B
				(85CIDB).
(iii) Contracts issued during 1986:
(I) Optional use of either the 1964 Table or the 1985
				Tables.
(II) Each insurer shall elect, with respect to all individual
				contracts issued in any one statement year, whether it will use Tables A or
				Tables B as the minimum standard. The insurer may, however, elect to use the
				other tables with respect to any subsequent statement year.
(iv) Contracts issued on or after January 1, 2020:
(I) The 2013 IDI Valuation Table with modifiers as described in
				Actuarial Guidelines L.
(II) An insurer may begin to use the 2013 IDI Valuation Table
				with modifiers at a date earlier than January 1, 2020, but not prior to January
				1, 2017.
(III) Within three years of 2020, or the earlier date an
				insurer begins to use the 2013 IDI Valuation Table, the insurer may elect to
				apply that morbidity standard for all policies issued subject to other
				valuation tables. This may be done if the following conditions are met:
(A) The insurer must apply the morbidity standard to all
				inforce policies and incurred claims.
(B) The insurer elects or has elected to apply the 2013 IDI
				Valuation Table to all claims incurred regardless of incurred date.
(C) The insurer maintains adequate policy records on policies
				issued prior to 2020, that allow the insurer to apply the 2013 IDI Valuation
				Table appropriately.
(D) Once an insurer elects to calculate reserves for all
				inforce policies based on the current morbidity standard, all future valuations
				must be on that basis.
(b) Claim Reserves:
(i) For claims incurred on or after July 28, 2005, and prior to
				2020: The 1985 Commissioners Individual Disability Table A (85CIDA) with claim
				termination rates multiplied by the following adjustment factors:
Duration
Adjustment
Adjusted
Factor
Termination
Rates*
Week 1
0.366
0.04831
2
0.366
0.04172
3
0.366
0.04063
4
0.366
0.04355
5
0.365
0.04088
6
0.365
0.04271
7
0.365
0.04380
8
0.365
0.04344
9
0.370
0.04292
10
0.370
0.04107
11
0.370
0.03848
12
0.370
0.03478
13
0.370
0.03034
Month 4
0.391
0.08758
5
0.371
0.07346
6
0.435
0.07531
7
0.500
0.07245
8
0.564
0.06655
9
0.613
0.05520
10
0.663
0.04705
11
0.712
0.04486
12
0.756
0.04309
13
0.800
0.04080
14
0.844
0.03882
15
0.888
0.03730
16
0.932
0.03448
17
0.976
0.03026
18
1.020
0.02856
19
1.049
0.02518
20
1.078
0.02264
21
1.107
0.02104
22
1.136
0.01932
23
1.165
0.01865
24
1.195
0.01792
Year 3
1.369
0.16839
4
1.204
0.10114
5
1.199
0.07434
6 and later
1.000
**
*The adjusted termination rates derived from the application of
				the adjustment factors to the DTS Valuation Table termination rates shown in
				exhibits 3a, 3b, 3c, 4, and 5 (Transactions of the Society of Actuaries (TSA)
				XXXVII, pp. 457-463) is displayed. The adjustment factors for age, elimination
				period, class, sex, and cause displayed in exhibits 3a, 3b, 3c, and 4 should be
				applied to the adjusted termination rates shown in this table.
**Applicable DTS Valuation Table duration rate from exhibits 3c
				and 4 (TSA XXXVII, pp. 462-463).
The 85CIDA table so adjusted for the computation of claim
				reserves shall be known as 85CIDC (The 1985 Commissioners Individual Disability
				Table C).
For claims incurred on or after 2020, the 2013 IDI Valuation
				Table with modifiers and adjustments for company experience as prescribed in
				the Actuarial Guideline L, except for worksite disability policies with benefit
				periods of 24 months or less.
(ii) For worksite disability policies, claim reserves may be
				calculated using claim run-out analysis or claim triangles, or other methods
				that place a sound value on the reserves that are appropriate for the business
				and risks involved.
(iii) For claims incurred prior to July 28, 2005: Each insurer
				may elect which of the following to use as the minimum standard for claims
				incurred prior to July 28, 2005:
(I) The minimum morbidity standard in effect for contract
				reserves on currently issued contracts, as of the date the claim is incurred,
				or
(II) The standard as defined in Item (i) or (ii), applied to
				all open non-worksite claims, provided the insurer maintains adequate claim
				records to allow the insurer to apply the standard defined in Item (i) or (ii)
				appropriately. Once an insurer elects to calculate reserves for all open claims
				on the standard defined in Item (i) or (ii), all future valuations must be on
				that basis. This option, with respect to Item (ii), may be selected only if the
				insurer maintains adequate claim records for all claims incurred to use the
				2013 IDI Valuation Table appropriately.
(2) Hospital Benefits, Surgical Benefits and Maternity Benefits
				(Scheduled benefits or fixed time period benefits only).
(a) Contract Reserves:
(i) Contracts issued on or after January 1, 1955, and before
				January 1, 1982: The 1956 Intercompany Hospital-Surgical Tables.
(ii) Contracts issued on or after January 1, 1982: The 1974
				Medical Expense Tables, Table A, Transactions of the Society of Actuaries,
				Volume XXX, pg. 63. Refer to the paper (in the same volume, pg. 9) to which
				this table is appended, including its discussions, for methods of adjustment
				for benefits not directly valued in Table A: "Development of the 1974 Medical
				Expense Benefits", Houghton and Wolf.
(b) Claim Reserves: No specific standard. See subdivision
				(6).
(3) Cancer Expense Benefits (Scheduled benefits or fixed time
				period benefits only).
(a) Contract Reserves:
(i) Contracts issued on or after January 1, 1986, and before
				January 1, 2019: The 1985 NAIC Cancer Claim Cost Tables.
(ii) Contracts issued on or after January 1, 2019:
(I) For first occurrence and hospitalization benefits: The 2016
				Cancer Claim Cost Valuation Tables (2016 CCCVT);
http://www.naic.org/documents/01 _ naic_2017_cancer_claim_cost_valuation
				table.xlsx
(II) For all other benefits: Assumptions based on company
				experience, relevant industry experience, and actuarial judgement. Such
				assumptions should be appropriate for valuation which considers margin for
				adverse experience.
(iii) For contracts issued on or after January 1, 2018, and
				before January 1, 2019, a company may elect to use morbidity basis described in
				Item (ii) above. Once a company begins use of the 2016 CCCVT for new issues, it
				may not revert to the 1985 CCCT.
(b) Claim Reserves: No specific standard. See subdivision
				(6).
(4) Accidental Death Benefits:
(a) Contract Reserves. Contracts issued on or after January 1,
				1965: The 1959 Accidental Death Benefits Table.
(b) Claim Reserves: Actual amount incurred.
(5) Single Premium Credit Disability.
(a) Contract Reserves:
(i) For contracts issued on or after July 28, 2005:
(I) For plans having less than a thirty-day elimination period,
				the 1985 Commissioners Individual Disability Table A (85CIDA) with claim
				incidence rates increased by twelve percent (12%).
(II) For plans having a thirty-day and greater elimination
				period, the 85CIDA for a fourteen-day elimination period with the adjustment in
				Item (I).
(ii) For contracts issued prior to July 28, 2005, each insurer
				may elect either Item (I) or (II) to use as the minimum standard. Once an
				insurer elects to calculate reserves for all contracts on the standard defined
				in Item (i), all future valuations must be on that basis.
(I) The minimum morbidity standard in effect for contract
				reserves on currently issued contracts, as of the date the contract was issued,
				or
(II) The standard as defined in Item (i), applied to all
				contracts.
(b) Claim Reserves. Claim reserves are to be determined as
				provided in paragraph (3) of Rule
				482-1-134-.02.
(6) Other Individual Contract Benefits:
(a) Contract Reserves: For all other individual contract
				benefits, morbidity assumptions are to be determined as provided in the reserve
				standards.
(b) Claim Reserves: For all benefits other than disability,
				claim reserves are to be determined as provided in the standards.
B. Minimum morbidity standards for valuation of specified group
				contract health insurance benefits are as follows:
(I) Disability Income Benefits due to an accident or Sickness,
				where the Model references this Appendix; otherwise Actuarial Guideline XLVII,
				as included in the most current version of the NAIC
Accounting
				Practices and Procedures Manual
.
(a) Contract Reserves:
(i) Contracts issued prior to January 1, 2005: The same basis,
				if any, as that employed by the insurer as of January 1, 2005.
(ii) Contracts issued on or after January 1, 2005: The 1987
				Commissioners Group Disability Income Table (87CGDT).
(b) Claim Reserves:
(i) For claims incurred on or after January 1, 2005: The 1987
				Commissioners Group Disability Income Table (87CGDT).
(ii) For claims incurred prior to January 1, 2005: Use of the
				87CGDT is optional.
(2) Single Premium Credit Disability
(a) Contract Reserves:
(i) For contracts issued on or after:
(I) For plans having less than a thirty-day elimination period,
				the 1985 Commissioners Individual Disability Table A (85CIDA) with claim
				incidence rates increased by twelve percent (12%).
(II) For plans having a thirty-day and greater elimination
				period, the 85CIDA for a fourteen-day elimination period with the adjustment in
				Item (I).
(ii) For contracts issued prior to, each insurer may elect
				either Item (I) or (II) to use as the minimum standard. Once an insurer elects
				to calculate reserves for all contracts on the standard defined in Item (i),
				all future valuations must be on that basis.
(I) The minimum morbidity standard in effect for contract
				reserves on currently issued contracts, as of the date the contract was
				issued.
(II) The standard as defined in Item(i), applied to all
				contracts.
(b) Claim Reserves: Claim reserves are to be determined as
				provided in paragraph (3) of Rule
				482-1-134-.02.
(3) Other Group Contract Benefits.
(a) Contract Reserves. For all other group contract benefits,
				morbidity assumptions are to be determined as provided in the reserve
				standards.
(b) Claim Reserves.
For all benefits other than disability, claim reserves are to
				be determined as provided in the standards.
II. Interest.
A. For contract reserves the maximum interest rate is the
				maximum rate permitted by law in the valuation of whole life insurance issued
				on the same date as the health insurance contract.
B. For claim reserves on policies that require contract
				reserves, the maximum interest rate is the maximum rate permitted by law in the
				valuation of whole life insurance issued on the same date as the claim incurral
				date.
C. For claim reserves on policies not requiring contract
				reserves, the maximum interest rate is the maximum rate permitted by law in the
				valuation of single premium immediate annuities issued on the same date as the
				claim incurral date, reduced by one hundred basis points.
III. Mortality.
A. Unless Subsection B or C applies, the mortality basis for
				all policies except long-term care individual policies and group certificates
				and for long-term care individual policies or group certificates issued before
				January 1, 1997, shall be according to a table (but without use of selection
				factors) permitted by law for the valuation of whole life insurance issued on
				the same date as the health insurance contract. For long-term care insurance
				individual policies or group certificates issued on or after January 1, 1997,
				the mortality basis used shall be the 1983 Group Annuity Mortality Table
				without projection. For long-term care insurance individual policies or group
				certificates issued on or after January 1, 2005, the mortality basis used shall
				be the 1994 Group Annuity Mortality Static Table.
B. Other mortality tables adopted by the NAIC and promulgated
				by the commissioner may be used in the calculation of the minimum reserves if
				appropriate for the type of benefits and if approved by the commissioner. The
				request for approval shall include the proposed mortality table and the reason
				that the standard specified in Subsection A is inappropriate.
C. For single premium credit insurance using the 85CIDA table,
				no separate mortality shall be assumed.
Author:
Commissioner of Insurance
Statutory Authority:
Code of Ala. 1975,
				  §§
										27-2-17,
				  27-36-7.