North Carolina Administrative Code › Title 11 - INSURANCE › Chapter 11 - FINANCIAL EVALUATION DIVISION › Subchapter F - ACTUARIAL › Section .0200 - HEALTH INSURANCE MINIMUM RESERVE STANDARDS › Section 11F .0201 - DEFINITIONS

Current through Register Vol. 39, No. 2, July 15, 2024
As used in this section and in the Statement of Actuarial
					 Opinion required by the NAIC Annual Statement Instructions pursuant to
					 G.S.
					 58-2-165:
(1) "Annual claim cost" means the net annual
				  cost per unit of benefit before the addition of expenses, including claim
				  settlement expenses, and a margin for profit or contingencies. For example, the
				  annual claim cost for a one hundred dollar ($100.00) monthly disability
				  benefit, for a maximum disability benefit period of one year, with an
				  elimination period of one week, with respect to a male at age 35, in a certain
				  occupation might be twelve dollars ($12.00), while the gross premium for this
				  benefit might be eighteen dollars ($18.00). The additional six dollars ($6.00)
				  would cover expenses and profit or contingencies.
(2) "Claims accrued" means that portion of
				  claims incurred on or before the valuation date that result in liability of the
				  insurer for the payment of benefits for medical services that have been
				  rendered on or before the valuation date, and for the payment of benefits for
				  days of hospitalization and days of disability that have occurred on or before
				  the valuation date, that the insurer has not paid as of the valuation date, but
				  for which it is liable, and will have to pay after the valuation date. This
				  liability is sometimes referred to as a liability for "accrued" benefits. A
				  claim reserve, which represents an estimate of this accrued claim liability,
				  must be established.
(3) "Claims
				  reported" means when an insurer has been informed that a claim has been
				  incurred, if the date reported is on or before the valuation date, the claim is
				  considered as a reported claim for annual statement purposes.
(4) "Claims unaccrued" means that portion of
				  claims incurred on or before the valuation date that result in liability of the
				  insurer for the payment of benefits for medical services expected to be
				  rendered after the valuation date, and for benefits expected to be payable for
				  days of hospitalization and days of disability occurring after the valuation
				  date. This liability is sometimes referred to as a liability for "unaccrued"
				  benefits. A claim reserve, which represents an estimate of the unaccrued claim
				  payments expected to be made (that may or may not be discounted with interest),
				  must be established.
(5) "Claims
				  unreported" means when an insurer has not been informed, on or before the
				  valuation date, concerning a claim that has been incurred on or before the
				  valuation date, the claim is considered as an unreported claim for annual
				  statement purposes.
(6) "Date of
				  disablement" means the earliest date the insured is considered as being
				  disabled under the definition of disability in the contract, based on a
				  doctor's evaluation or other evidence. Normally this date will coincide with
				  the start of any elimination period.
(7) "Elimination period" means a specified
				  number of days, weeks, or months starting at the beginning of each period of
				  loss, during which no benefits are payable.
(8) "Gross premium" means the amount of
				  premium charged by the insurer. It includes the net premium (based on
				  claim-cost) for the risk, together with any loading for expenses, profit or
				  contingencies.
(9) "Group
				  insurance" means blanket insurance and franchise insurance and any other forms
				  of group insurance.
(10) "Level
				  premium" means a premium calculated to remain unchanged throughout either the
				  lifetime of the policy, or for some shorter projected period of years. The
				  premium need not be guaranteed; in which case, although it is calculated to
				  remain level, it may be changed if any of the assumptions on which it was based
				  are revised at a later time. Generally, the annual claim costs are expected to
				  increase each year and the insurer, instead of charging premiums that
				  correspondingly increase each year, charges a premium calculated to remain
				  level for a period of years or for the lifetime of the contract. In this case
				  the benefit portion of the premium is more than needed to provide for the cost
				  of benefits during the earlier years of the policy and less than the actual
				  cost in the later years. The building of a prospective contract reserve is a
				  natural result of level premiums.
(11) "Long-term care insurance" has the same
				  meaning as in
				  G.S.
				  58-55-20(4); and also means
				  a policy or certificate that provides for payment of benefits based upon
				  cognitive impairment or the loss of functional capacity.
(12) "Modal premium" means the premium paid
				  on a contract based on a premium term that could be annual, semi-annual,
				  quarterly, monthly, or weekly. Thus if the annual premium is one hundred
				  dollars ($100.00) and if, instead, monthly premiums of nine dollars ($9.00) are
				  paid then the modal premium is nine dollars ($9.00).
(13) "Negative reserve" means a terminal
				  reserve that has a value of less than zero resulting from benefits that
				  decrease with advancing age or duration.
(14) "Preliminary term reserve method" means
				  the method of valuation under which the valuation net premium for each year
				  falling within the preliminary term period is exactly sufficient to cover the
				  expected incurred claims of that year, so that the terminal reserves will be
				  zero at the end of the year. As of the end of the preliminary term period, a
				  new constant valuation net premium (or stream of changing valuation premiums)
				  becomes applicable such that the present value of all such premiums is equal to
				  the present value of all claims expected to be incurred following the end of
				  the preliminary term period.
(15)
				  "Qualified Actuary" means an individual who:
(a) is a member in good standing of the
				  American Academy of Actuaries; and
(b) is qualified to sign statements of
				  actuarial opinion for life and health insurance company annual statements in
				  accordance with the American Academy of Actuaries qualification standards for
				  actuaries signing such statements; and
(c) is familiar with the valuation
				  requirements applicable to life and health insurance companies; and
(d) has not been found by the Commissioner
				  (or if so found has subsequently been reinstated as a qualified actuary),
				  following appropriate notice and hearing to have:
(i) violated any provision of, or any
				  obligation imposed by, the insurance law or other law in the course of his or
				  her dealings as a qualified actuary; or
(ii) been found guilty of fraudulent or
				  dishonest practices; or
(iii)
				  demonstrated his or her incompetency, lack of cooperation, or untrustworthiness
				  to act as a qualified actuary; or
(iv) submitted to the Commissioner during the
				  past five years, pursuant to this rule, an actuarial opinion or memorandum that
				  the Commissioner rejected because it did not meet the provisions of this rule
				  including standards set by the Actuarial Standards Board; or
(v) resigned or been removed as an actuary
				  within the past five years as a result of acts or omissions indicated in any
				  adverse report on examination or as a result of failure to adhere to generally
				  acceptable actuarial standards; and
(e) has not failed to notify the Commissioner
				  of any action taken by any commissioner of any other state similar to that
				  under Sub-item (15)(d) of this Paragraph.