Code of Massachusetts Regulations › 211 CMR - DIVISION OF INSURANCE › Title 211 CMR 42.00 - The Form And Contents Of Individual Accident And Sickness Insurance › Section 42.07 - Loss Ratio Guarantee Filings and Review

Current through Register 1525, July 5, 2024
Pursuant to the provisions of M.G.L. c. 175 §108, only
				nongroup major medical policies are allowed to file for loss ratio guarantees.
				Medicare Supplement policies subject to
				211 CMR 71.00, specified
				disease or specified accident insurance subject to
				211 CMR
				42.05(2)(e), accident only
				health insurance subject to
				211 CMR
				42.05(2)(f), disability
				income policies subject to
				211 CMR
				42.05(2)(g), long-term care
				insurance policies subject to
				211 CMR 42.05(2)(h)
				 or any other policy forms under which more
				than 50% of the policies are issued to individuals age 65 or over, are excluded
				from the provisions of 211 CMR 42.07 related to loss ratio guarantees.
(1) Definitions pertinent to 211 CMR 42.07:
Actual Loss Ratio
means the loss ratio
				attributable solely to Massachusetts if there are 2,000 or more policyholders
				in the state on the policy form. If there are 500 or more policyholders on the
				policy form in this state but less than 2,000, it is the linear interpolation
				of the nationwide loss ratio and the loss ratio for this state. If there are
				less than 500 policyholders in this state, it is the nationwide loss ratio for
				the policy form. For example, if there are 1,200 policyholders in the state,
				the actual loss ratio is:
(1,200 - 500) /(2,000 - 500) state loss ratio + (2,000 -
				1,200)/(2,000 - 500) U.S. loss ratio.
If there are fewer than 2,000 policyholders nationwide, the
				applicable loss ratio will be calculated using combined experience of current
				calendar year and each subsequent year until the sum of policyholders in all
				such calendar years adds up to 2,000.
Anticipated Durational Loss Ratio
means the ratio of incurred claims to earned premium for a given policy
				duration (
i.e
., first year, second year,
etc
.)
Anticipated Lifetime Loss Ratio
means
				the ratio of the present value of all past and future incurred claims to the
				present value of all past and future earned premiums where the present values
				are calculated at a rate of interest at least equal to the health valuation
				rate of interest at the time the policy is approved and as prescribed in
				Massachusetts law or regulation, or if no such rate is prescribed, at the rate
				prescribed by the National Association of Insurance Commissioners.
Experience Period
means the period,
				ordinarily a calendar year, for which a loss ratio guarantee is
				calculated.
Loss Ratio
means ratio of incurred
				claims to earned premium for any individual policy form.
(2)
Initial Filing of Loss Ratio
			 Guarantee.
(a) In addition to
			 the provisions of 211 CMR 42.07(2)(b), all benefits of individual major medical
			 policies issued subject to M.G.L. c. 175, § 108 shall be deemed to be
			 reasonable in relation to premium rates if the rates are filed pursuant to a
			 loss ratio guarantee and both the initial rates and the anticipated durational
			 and lifetime loss ratios in the original filing of the form have been approved
			 by the Commissioner.
(b) All
			 filings submitted under 211 CMR 42.07(2) shall have renewability provisions no
			 less favorable to the policyholder than conditional renewability.
(c) The initial filing of a loss ratio
			 guarantee shall include a specific written statement as to the detail of the
			 loss ratio guarantee, which shall contain at least the following:
1. the policy form number;
2. a recitation of the anticipated lifetime
			 and durational loss ratios contained in the actuarial memorandum filed with the
			 policy form when it was originally approved, and a copy of the original
			 actuarial memorandum. If the original actuarial memorandum did not include
			 anticipated durational loss ratios, these ratios shall be included in the
			 initial filing of the loss ratio guarantee;
3. the first calendar year in which the loss
			 ratio guarantee is to be effective;
4. a guarantee that the actual loss ratios
			 for each experience period shall meet or exceed the anticipated lifetime and
			 durational target loss ratios approved by the Commissioner pursuant to 211 CMR
			 42.07(2)(a);
5. a guarantee that
			 the actual loss ratio results for the experience period will be independently
			 audited in the form prescribed by 211 CMR 42.07(4) at the carrier's expense by
			 an auditor who is a certified public accountant or Member of the American
			 Academy of Actuaries;
6. a
			 guarantee that the audit shall be performed in the second calendar quarter of
			 the year following the end of the experience period and the audited results
			 shall be reported to the Commissioner no later than the end of such
			 quarter;
7. a guarantee that the
			 audit shall be done in accordance with generally accepted auditing or actuarial
			 standards;
8. a guarantee that
			 affected policyholders in Massachusetts shall be issued a proportional refund,
			 based on the premium earned, of the amount necessary to bring the actual
			 experience period loss ratio up to the anticipated durational loss ratio
			 approved by the Commissioner pursuant to 211 CMR 42.07(2)(a);
9. a sample calculation and illustration of
			 the refund methodology; and
10. the
			 signature of an officer of the carrier.