Rhode Island Code of Regulations › Title 230 - Department of Business Regulation › Chapter 20 - Insurance › Subchapter 30 - Health Insurance › Part 3 - Health Insurance Reserves (230-RICR-20-30-3) › Section 230-RICR-20-30-3.9 - Appendix B: Glossary of Technical Terms Used

Current through June 14, 2024
A. As
				  used in this valuation standard, the following terms have the following
				  meaning:
1. 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.
2. 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.
3. 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.
4. 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.
5.
				  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.
6. 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.
7.
				  LIMINATION PERIOD. 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. 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.
				  The term group insurance includes blanket insurance and franchise insurance and
				  any other forms of group insurance.
10. 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.
b. 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. Any insurance
				  policy or rider advertised, marketed, offered or designed to provide coverage
				  for not less than twelve (12) 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.
12. 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.
13. 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.
14. 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.
15.
				  PRESENT VALUE OF AMOUNTS NOT YET DUE ON CLAIMS. The reserve for "claims
				  unaccrued" (see definition), which may be discounted at interest.
16. 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.
a. 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.
17. TERMINAL RESERVE. This is the
				  reserve at the end of a contract year, and is defined as the present value of
				  benefits expected to be incurred after that contract year minus the present
				  value of future valuation net premiums.
18. UNEARNED PREMIUM RESERVE. This reserve
				  values that portion of the premium paid or due to the insurer which is
				  applicable to the period of coverage extending beyond the valuation date. Thus
				  if an annual premium of $120 was paid on November 1, $20 would be earned as of
				  December 31 and the remaining $100 would be unearned. The unearned premium
				  reserve could be on a gross basis as in this example, or on a valuation net
				  premium basis.
19. VALUATION NET
				  MODAL PREMIUM. This is the modal fraction of the valuation net annual premium
				  that corresponds to the gross modal premium in effect on any contract to which
				  contract reserves apply. Thus if the mode of payment in effect is quarterly,
				  the valuation net modal premium is the quarterly equivalent of the valuation
				  net annual premium.