Pennsylvania Code › Title 31 - INSURANCE › Part IV - Life Insurance › Chapter 84a - MINIMUM RESERVE STANDARDS FOR INDIVIDUAL AND GROUP HEALTH AND ACCIDENT INSURANCE CONTRACTS › Appendix A - SPECIFIC STANDARDS FOR MORBIDITY, INTEREST AND MORTALITY

Current through Register Vol. 54, No. 28, July 13, 2024
I.MORBIDITY.
(a) Minimum morbidity standards for valuation of specified
				  individual contract health and accident insurance benefits are as
				  follows:
(1) Disability income benefits due to accident or
				  sickness.
(i)
Contract reserves
.
(A) Contracts issued on or after January 1, 1965, and prior
				  to January 1, 1986: The 1964 Commissioners Disability Table (64 CDT).
(B) Contracts issued on or after January 1, 1993, and before
				  January 1, 2020: The 1985 Commissioners Individual Disability Tables A (85
				  CIDA) or The 1985 Commissioners Individual Disability Tables B (85
				  CIDB).
(C) Contracts issued on or after January 1, 1986, and prior
				  to January 1, 1993: Optional use of either the 1964 Table or the 1985
				  Tables.
(D) Each insurer shall elect, with respect to all individual
				  contracts issued in any one statement year, whether it will use Tables A or
				  Tables B as the minimum standard. The insurer may elect to use the other tables
				  with respect to a subsequent statement year.
(E) Contracts issued on or after January 1, 2020: The 2013
				  IDI Valuation Table with modifiers as described in Actuarial Guideline
				  L.
(F) An insurer may begin to use the 2013 IDI Valuation Table
				  with modifiers at a date earlier than January 1, 2020, but not prior to January
				  1, 2017.
(G) Within 3 years of 2020 or the earlier date an insurer
				  begins to use the 2013 IDI Valuation Table, the insurer may elect to apply that
				  morbidity standard for all policies issued subject to other valuation tables if
				  the following conditions are met:
(I)The insurer applies the morbidity standard to all inforce
				  policies and incurred claims.
(II)The insurer elects or has elected to apply the 2013 IDI
				  Valuation Table to all claims incurred regardless of incurral date.
(III)The insurer maintains adequate policy records on
				  policies issued prior to 2020 that allow the insurer to apply the 2013 IDI
				  Valuation Table appropriately.
(IV) Once an insurer elects to calculate reserves for all
				  inforce policies based on the current morbidity standard, all future valuations
				  must be on that basis.
(ii)
Claim reserves
.
(A) Claims incurred on or after January 1, 2007, and prior to
				  January 1, 2020: The 1985 Commissioners Individual Disability Table A (85CIDA)
				  with claim termination rates multiplied by the following adjustment factors:
Duration
Adjustment
							 Factor
Week 1
0.366
2
0.366
3
0.366
4
0.366
5
0.365
6
0.365
7
0.365
8
0.365
9
0.370
10
0.370
11
0.370
12
0.370
13
0.370
Month 4
0.391
5
0.371
6
0.435
7
0.500
8
0.564
9
0.613
10
0.663
11
0.712
12
0.756
13
0.800
14
0.844
15
0.888
16
0.932
17
0.976
18
1.020
19
1.049
20
1.078
21
1.107
22
1.136
23
1.165
24
1.195
Year 3
1.369
4
1.204
5
1.199
6 and later
1.000
The 85 CIDA so adjusted for the computation of claim reserves
				  shall be known as The 1985 Commissioners Individual Disability Table C (85
				  CIDC).
(B) For claims incurred on or after January 1, 2020, the 2013
				  IDI Valuation Table with modifiers and adjustments for company experience as
				  prescribed in the Actuarial Guideline L, except for worksite disability
				  policies with benefit periods of 24 months or less.
(C) For worksite disability policies, claim reserves may be
				  calculated using claim run-out analysis or claim triangles or other methods
				  that place a sound value on the reserves that are appropriate for the business
				  and risks involved.
(D) For claims incurred prior to January 1, 2020, each
				  insurer may elect any of the following standards to use as the minimum standard
				  for claims incurred:
(I)The minimum morbidity standard in effect for contract
				  reserves on currently issued contracts, as of the date the claim is
				  incurred.
(II)The standard as defined in clause (A) or (B) applied to
				  all open non-worksite claims, if the insurer maintains adequate claim records
				  to allow the insurer to apply the standard defined in clause (A) or (B)
				  appropriately. Once an insurer elects to calculate reserves for all open claims
				  on the standard defined in clause (A) or (B), all future valuations must be on
				  that basis. This option, with respect to clause (B), may be selected only if
				  the insurer maintains adequate claims records for all claims incurred to use
				  the 2013 IDI Valuation Table appropriately.
(2) Hospital benefits, surgical benefits and maternity
				  benefits (scheduled benefits or fixed time period benefits only).
(i)
Contract reserves
.
(A) Contracts issued on or after January 1, 1955, and before
				  January 1, 1982: The 1956 Intercompany Hospital-Surgical Tables.
(B) Contracts issued on or after January 1, 1982: The 1974
				  Medical Expense Tables, Table A, Transaction of the Society of Actuaries,
				  Volume XXX, pg. 63. Refer to the paper (in the same volume, pg. 9) to which
				  this 1974 table is appended, including its discussions, for methods of
				  adjustment for benefits not directly valued in Table A: "Development of the
				  1974 Medical Expense Benefits," Houghton and Wolf.
(ii)
Claim reserves
. Claim reserves are to
				  be determined as provided in §
									84a.4(d)
				  (relating to claim reserves).
(3) Cancer expense benefits (scheduled benefits or fixed time
				  period benefits only).
(i)
Contract reserves
. Contracts issued on
				  or after January 1, 1986: The 1985 NAIC Cancer Claim Cost Tables.
(ii)
Claim reserves
. Claim reserves are to
				  be determined as provided in §
									84a.4(d).
(4) Accidental death benefits.
(i)
Contract reserves
. Contracts issued on
				  or after January 1, 1965: The 1959 Accidental Death Benefits Table.
(ii)
Claim reserves
. Actual amount
				  incurred.
(5) Single Premium Credit Health and Accident Insurance.
(i) Contract reserves:
(A) Contracts issued on or after January 1, 2007:
(I) Plans having less than a 30-day elimination period: The
				  85 CIDA with claim incidence rates increased by 12%.
(II) Plans having a 30-day and greater elimination period:
				  The 85 CIDA for a 14 day elimination period with claim incidence rates
				  increased by 12%.
(B) Contracts issued prior to January 1, 2007:
(I) Optional use of either:
(a)The mean of the amounts of unearned premium calculated
				  from gross premiums in force on the pro rata basis and the Rule of 78
				  basis.
(b)The standard as defined in I(a)(5)(i)(A) applied to all
				  contracts.
(II) If reserves are calculated on the standard defined in
				  I(a)(5)(i)(A), future calculations must be on that basis.
(ii) Claim Reserves: Claim reserves are to be determined as
				  defined in §
									84a.4(d).
(6) Other individual contract benefits.
(i)
Contract reserves
. For other individual
				  contract benefits, morbidity assumptions are to be determined as provided in
				  §
									84a.6(b)(1)(ii)
				  (relating to contract reserves).
(ii)
Claim reserves
. For benefits other than
				  disability, claim reserves are to be determined as provided in §
				  84a.4(d).
(b) Minimum morbidity standards for valuation of specified
				  group contract health and accident insurance benefits are as follows:
(1) Disability income benefits due to accident or
				  sickness.
(i) Where the regulation references this Appendix.
(A)
Contract reserves
.
(I) Certificates issued prior to January 1, 1993: The same
				  basis, if any, as that employed by the insurer as of January 1, 1993.
(II) Certificates issued on or after January 1, 1993: The
				  1987 Commissioners Group Disability Income Table (87CGDT).
(B)
Claim reserves
.
(I) For claims incurred on or after January 1, 1993: The 1987
				  Commissioners Group Disability Income Table (87CGDT).
(II) For claims incurred prior to January 1, 1993: Claim
				  reserves are to be determined as provided in §
									84a.4(d)
				  (relating to claim reserves).
(ii) Where the regulation does not reference this Appendix,
				  the minimum morbidity standards are set forth in Actuarial Guideline
				  XLVII.
(2) Single Premium Credit Health and Accident Insurance.
(i)
Contract reserves.
(A) Contracts issued on or after January 1, 2007:
(I) Plans having less than a 30-day elimination period: The
				  85 CIDA with claim incidence rates increased by 12%.
(II) Plans having a 30-day and greater elimination period:
				  The 85 CIDA for a 14 day elimination period with claim incidence rates
				  increased by 12%.
(B) Contracts issued prior to January 1, 2007:
(I) Optional use of either:
(a) The mean of the amounts of unearned premium calculated
				  from gross premiums in force on the pro rata basis and the Rule of 78
				  basis.
(b) The standard as defined in I(a)(5)(i)(A) applied to all
				  contracts.
(II) If reserves are calculated on the standard defined in
				  I(a)(5)(i)(A), future calculations must be on that basis.
(ii)
Claim reserves
. Claim reserves are to
				  be determined as defined in § 84a.4(d).
(3) Other group contract benefits.
(i)
Contract reserves
. For other group
				  contract benefits, morbidity assumptions are to be determined as provided in
				  §
									84a.6(b)(1)(ii)
				  (relating to contract reserves).
(ii)
Claim reserves
. For benefits other than
				  disability, claim reserves are to be determined as provided in §
				  84a.4(d).
II. INTEREST
(a) Contract reserves.
(1)The maximum interest rate is the maximum rate permitted by
				  40 Pa.C.S. §§
										7111-7127 (relating to valuation of reserves
				  for contracts and policies) in the valuation of whole life insurance issued on
				  the same date as the health and accident insurance contract and with a
				  guarantee duration of more than 20 years.
(b) Claim reserves.
(1) For claim reserves on policies that require contract
				  reserves, the maximum interest rate is the maximum rate permitted by
				  40 Pa.C.S. §§
										7111-7127 in the valuation of whole life
				  insurance issued on the same date as the claim incurral date and with a
				  guarantee duration equal to the maximum benefit period.
(2) For claim reserves on policies not requiring contract
				  reserves, the maximum interest rate (I) shall be the calendar year statutory
				  valuation interest rates as defined by:
I
= .02 + .8 * (
R
-
				  .03)
Where
R
is the average, over a period of 12
				  months, ending June 30 of the calendar year of the claim incurral date, of the
				  monthly average of the composite yield on seasoned corporate bonds, as
				  published by Moody's Investors Service, Inc. and the results rounded to the
				  nearer 1/4 of 1%.
III. MORTALITY.
(a) For individual contracts and group certificates issued
				  prior to the insurer's operative date, the mortality basis used shall be
				  according to a table permitted by law for the valuation of whole life insurance
				  issued on the same date as the health and accident insurance individual
				  contract or group certificate.
(b) For individual contracts and group certificates issued on
				  or after the insurer's operative date and prior to January 1, 1989, the
				  mortality basis shall be according to either the 1958 CSO Mortality Table or
				  the 1980 CSO Male and Female Mortality Tables, but without use of selection
				  factors.
(c) Unless subsection (d) applies, the mortality basis used
				  for individual contracts and group certificates issued on or after January 1,
				  1989, except long-term care individual contracts and group certificates issued
				  on or after January 1, 1999, shall be according to a table, but without use of
				  selection factors, permitted by law for the valuation of whole life insurance
				  issued on the same date as the health and accident insurance contract. For
				  long-term care individual contracts and group certificates issued on or after
				  January 1, 1999, the mortality basis used shall be the 1983 Group Annuity
				  Mortality Table without projection. For long-term care insurance individual
				  policies and group certificates issued on or after January 1, 2007, the
				  mortality basis used shall be the 1994 Group Annuity Mortality Static
				  Table.
(d) Other mortality tables adopted by the National
				  Association of Insurance Commissioners (NAIC) and promulgated by the
				  Commissioner may be used in the calculation of the minimum reserves if
				  appropriate for the type of benefits and if approved by the Commissioner. The
				  request for approval shall include the proposed mortality table and the reason
				  that the standard specified in subsection (c) is inappropriate.
(e) For single premium credit insurance using the 85CIDA
				  table, no separate mortality shall be assumed.
The provisions of this Appendix A 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).
This appendix cited in 31 Pa. Code §
											84a.4 (relating to claim
					 reserves); and 31 Pa. Code §
											84a.6 (relating to contract
					 services).