New Mexico Administrative Code › Title 13 - INSURANCE › Chapter 10 - HEALTH INSURANCE › Part 14 - MINIMUM RESERVE STANDARDS FOR INDIVIDUAL AND GROUP HEALTH INSURANCE CONTRACTS › Section 13.10.14.7 - DEFINITIONS

Current through Register Vol. 35, No. 13, July 16, 2024
As used in this valuation standard, the following terms have
				  the meanings given here.
A.
"Annual claim cost."
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 $100 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 $12, while the gross premium for this benefit might
				be $18. The additional $6 would cover expenses and profit or
				contingencies.
B.
"Claims
				accrued."
That portion of claims incurred on or prior to the valuation
				date which result in liability of the insurer for the payment of benefits for
				medical services which have been rendered on or prior to the valuation date,
				and for the payment of benefits for days of hospitalization and days of
				disability which have occurred on or prior to the valuation date, which 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.
C.
"Claims reported."
When an
				insurer has been informed that a claim has been incurred, if the date reported
				is on or prior to the valuation date, the claim is considered as a reported
				claim for annual statement purposes.
D.
Claims unaccrued.
That
				portion of claims incurred on or prior to the valuation date which 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 (which may or may not be
				discounted with interest), must be established.
E.
"Claims unreported."
When an
				insurer has not been informed, on or before the valuation date, concerning a
				claim that has been incurred on or prior to the valuation date, the claim is
				considered as an unreported claim for annual statement purposes.
F.
"Date of disablement."
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.
G.
"Elimination
				period."
A specified number of days, weeks, or months starting at the
				beginning of each period of loss, during which no benefits are
				payable.
H.
"Gross
				premium."
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.
I.
"Group insurance."
The term
				group insurance includes blanket insurance and franchise insurance and any
				other forms of group insurance.
J.
"Level premium."
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.
K.
"Long-term care insurance."
Any insurance policy or rider advertised, marketed, offered or designed to
				provide coverage for not less than twelve consecutive months for each covered
				person on an expense incurred, indemnity, prepaid or other basis; for one or
				more necessary or medically necessary diagnostic, preventive, therapeutic,
				rehabilitative, maintenance or personal care services, provided in a setting
				other than an acute care unit of a hospital. Such term also includes a policy
				or rider which provides for payment of benefits based upon cognitive impairment
				or the loss of functional capacity. Long-term care insurance may be issued by
				insurers; fraternal benefit societies; nonprofit health, hospital, and medical
				service corporations; prepaid health plans; health maintenance organizations or
				any similar organization to the extent they are otherwise authorized to issue
				life or health insurance. Long-term care insurance shall not include any
				insurance policy which is offered primarily to provide basic Medicare
				supplement coverage, basic hospital expense coverage, basic medical-surgical
				expense coverage, hospital confinement indemnity coverage, major medical
				expense coverage, disability income or related asset-protection coverage,
				accident only coverage, specified disease or specified accident coverage, or
				limited benefit health coverage.
L.
"Modal premium."
This refers to the premium paid on a contract
				based on a premium term which could be annual, semi-annual, quarterly, monthly,
				or weekly. Thus if the annual premium is $100 and if, instead, monthly premiums
				of $9 are paid then the modal premium is $9.
M.
"Negative reserve."
Normally
				the terminal reserve is a positive value. However, if the values of the
				benefits are decreasing with advancing age or duration it could be a negative
				value, called a negative reserve.
N.
"Preliminary term reserve
				method."
Under this method of valuation 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.
O.
"Present value of amounts not yet
				due on claims."
The reserve for "claims unaccrued" (see definition),
				which may be discounted at interest.
P.
"Reserve."
The term
				"reserve" is used to include all items of benefit liability, whether in the
				nature of incurred claim liability or in the nature of contract liability
				relating to future periods of coverage, and whether the liability is accrued or
				unaccrued. An insurer under its contracts promises benefits which result in:
(1) claims which have been incurred, that is,
				for which the insurer has become obligated to make payment, on or prior to the
				valuation date. On these claims, payments expected to be made after the
				valuation date for accrued and unaccrued benefits are liabilities of the
				insurer which should be provided for by establishing claim reserves;
				or
(2) claims which are expected to
				be incurred after the valuation date. Any present liability of the insurer for
				these future claims should be provided for by the establishment of contract
				reserves and unearned premium reserves.