Pennsylvania Code › Title 31 - INSURANCE › Part IV - Life Insurance › Chapter 84a - MINIMUM RESERVE STANDARDS FOR INDIVIDUAL AND GROUP HEALTH AND ACCIDENT INSURANCE CONTRACTS › Section 84a.3 - Definitions

Current through Register Vol. 54, No. 28, July 13, 2024
The following words and terms, when used in this chapter,
				  have the following meanings, unless the context clearly indicates
				  otherwise:
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 1 year, with an elimination period of 1 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.
Claims accrued
-The 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,
				  shall be established.
Claims reported
-A claim that has been
				  incurred on or prior to the valuation date is considered as a reported claim
				  for annual statement purposes if the date the claim is reported to the insurer
				  is on or prior to the valuation date.
Claims unaccrued
-The 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,
				  shall be established.
Claims unreported
-A claim incurred on or
				  prior to the valuation date is considered as an unreported claim for annual
				  statement purposes if the insurer has not been informed of the claim on or
				  before the valuation date.
Commissioner
-The Insurance Commissioner of
				  the Commonwealth.
Credit insurance
-Insurance which falls
				  within the regulatory scope of the Model Act for the Regulation of Credit Life
				  Insurance and Credit Accident and Health Insurance (40 P.S. §§
										1007.1-1007.15).
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 an elimination period.
Department
-The Insurance Department of the
				  Commonwealth.
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.
Gross premium
-The amount of premium charged
				  by the insurer, which includes the net premium based on claim-cost for the
				  risk, together with loading for expenses, profit or contingencies.
Group insurance
-The term includes blanket
				  insurance and other forms of group insurance.
Group long-term care insurance
-A long-term
				  care insurance policy that is delivered or issued for delivery in this
				  Commonwealth and issued to one or more employers or labor organizations, or to
				  a trust or to the trustees of a fund established by one or more employers or
				  labor organizations, or a combination thereof, for employees or former
				  employees or a combination thereof or for members or former members or a
				  combination thereof, of the labor organizations.
Group long-term disability income contract
-A
				  group contract providing group disability income coverage with a maximum
				  benefit duration longer than 2 years that is based on a group pricing
				  structure. The term does not include any of the following:
(i) Group short-term disability (coverage
				with benefit periods of 2 years or less in maximum duration).
(ii) Voluntary group disability income
				coverage that is priced on an individual risk structure and generally sold in
				the workplace.
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. 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.
Long-term care insurance
-An insurance
				  contract advertised, marketed, offered or designed to provide coverage for at
				  least 12 consecutive months for each covered person on an expense incurred,
				  indemnity, prepaid or other basis; for functionally 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:
(i) The term includes a
				policy or rider that provides for payment of benefits based upon cognitive
				impairment or the loss of functional capacity.
(ii) The term does not include an insurance
				contract 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 coverage, accident only coverage, specified disease
				coverage or specified accident coverage.
Modal premium
-The premium paid on a contract
				  based on a premium term that could be annual, semiannual, quarterly, monthly or
				  weekly. For example, if the annual premium is $100 and if, instead, monthly
				  premiums of $9 are paid the modal premium is $9.
Negative reserve
-A terminal reserve which is
				  a negative value.
Operative date
-The effective date of the
				  approval by the Commissioner for an insurer to use the 1980 CSO Mortality Table
				  to calculate nonforfeiture values and reserves for life insurance
				  contracts.
Preliminary term reserve method
-A reserve
				  method 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 so that the present value of the net premiums is equal to the
				  present value of the claims expected to be incurred following the end of the
				  preliminary term period.
Present value of amounts not yet due on
				  claims
-The reserve for claims unaccrued, which may be discounted at
				  interest.
Rating block
-A grouping of contracts based
				  on common characteristics, such as a policy form or forms having similar
				  benefit designs.
Reserve
-The term 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 contract
				  promises benefits which result in claims which have been incurred, that is, for
				  which the insurer has become obligated to make payment, on or prior to the
				  valuation date and in claims which are expected to be incurred after the
				  valuation date. For the incurred 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. For the
				  expected claims, present liability of the insurer for these future claims
				  should be provided for by the establishment of contract reserves and unearned
				  premium reserves.
Terminal reserve
-The reserve at the end of a
				  contract year. It is the present value of benefits expected to be incurred
				  after that contract year minus the present value of future valuation net
				  premiums.
Unearned premium reserve
-The reserve that
				  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.
Valuation net modal premium
-The modal
				  fraction of the valuation net annual premium that corresponds to the gross
				  modal premium in effect on a contract to which contract reserves apply. For
				  example, if the mode of payment in effect is quarterly, the valuation net modal
				  premium is the quarterly equivalent of the valuation net annual premium.
Worksite disability policies
-Individual
				  short-term disability policies that are sold at the worksite through
				  employer-sponsored enrollment, that cover normal pregnancy, and that have
				  benefit periods up to 24 months. The term does not include any of the
				  following:
(i) Personal disability
				policies sold to an individual and not associated with employer-sponsored
				enrollment.
(ii) Business overhead
				expense, disability buyout, or key person policies, in whatever manner those
				policies are sold.
The provisions of this §
											84a.3 amended under sections 206,
					 506, 1501 and 1502 of The Administrative Code of 1929 (71 P.S.
					 §§
												66,
					 186,
					 411 and
					 412); sections
					 301.1 and
					 311.1 of The Insurance Department
					 Act of 1921 (40 P.S. §§
												71.1 and
					 93); and
					 40 Pa.C.S. §
												7124(c)(1) and
					 (2).