House Bill 1753
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Florida House of Representatives - 1999 HB 1753
By Representative Patterson
1 A bill to be entitled
2 An act relating to health insurance; amending
3 s. 627.410, F.S.; modifying rate filing
4 requirements for approval of health insurance
5 policy forms by the Department of Insurance;
6 amending s. 627.411, F.S.; providing guidelines
7 for determining when benefits are considered
8 reasonable in relation to the premium charged
9 for purposes of disapproval of health insurance
10 policy forms by the department; providing an
11 effective date.
12
13 Be It Enacted by the Legislature of the State of Florida:
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15 Section 1. Subsections (6), (7), and (8) of section
16 627.410, Florida Statutes, 1998 Supplement, are amended to
17 read:
18 627.410 Filing, approval of forms.--
19 (6)(a) An insurer shall not deliver or issue for
20 delivery or renew in this state any health insurance policy
21 form until it has filed with the department a copy of every
22 applicable rating manual, rating schedule, change in rating
23 manual, and change in rating schedule; if rating manuals and
24 rating schedules are not applicable, the insurer must file
25 with the department applicable premium rates and any change in
26 applicable premium rates.
27 (b) The department may establish by rule, for each
28 type of health insurance form, procedures to be used in
29 ascertaining the reasonableness of benefits in relation to
30 premium rates and may, by rule, exempt from any requirement of
31 paragraph (a) any health insurance policy form or type thereof
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1 (as specified in such rule) to which form or type such
2 requirements may not be practically applied or to which form
3 or type the application of such requirements is not desirable
4 or necessary for the protection of the public. With respect to
5 any health insurance policy form or type thereof which is
6 exempted by rule from any requirement of paragraph (a),
7 premium rates filed pursuant to ss. 627.640 and 627.662 shall
8 be for informational purposes.
9 (c) Every filing made pursuant to this subsection
10 shall be made within the same time period provided in, and
11 shall be deemed to be approved under the same conditions as
12 those provided in, subsection (2).
13 (d) Every filing made pursuant to this subsection,
14 except disability income policies and accidental death
15 policies, shall be prohibited from applying the following
16 rating practices:
17 1. Select and ultimate premium schedules.
18 2. Premium class definitions which classify insured
19 based on year of issue or duration since issue.
20 2.3. Attained age premium structures on policy forms
21 under which more than 50 percent of the policies are issued to
22 persons age 65 or over.
23 (e) Except as provided in subparagraph 1., an insurer
24 shall continue to make available for purchase any individual
25 policy form issued on or after October 1, 1993. A policy form
26 shall not be considered to be available for purchase unless
27 the insurer has actively offered it for sale in the previous
28 12 months.
29 1. An insurer may discontinue the availability of a
30 policy form if the insurer provides to the department in
31 writing its decision at least 30 days prior to discontinuing
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1 the availability of the form of the policy or certificate.
2 After receipt of the notice by the department, the insurer
3 shall no longer offer for sale the policy form or certificate
4 form in this state.
5 2. An insurer that discontinues the availability of a
6 policy form pursuant to subparagraph 1. shall not file for
7 approval a new policy form providing similar benefits as the
8 discontinued form for a period of 5 years after the insurer
9 provides notice to the department of the discontinuance. The
10 period of discontinuance may be reduced if the department
11 determines that a shorter period is appropriate.
12 2.3. The experience of an individual accident and
13 health insurance all policy form that is no longer being
14 marketed in this state, except for policies rated pursuant to
15 a loss ratio guarantee under subsection (8), shall be combined
16 with the experience of at least one other individual accident
17 and health insurance policy form forms providing similar
18 benefits, as determined by the insurer, which is still being
19 marketed in the state by the same insurer, unless the insurer
20 has no other policy form providing similar benefits, as
21 determined by the insurer, which is still being marketed in
22 the state shall be combined for all rating purposes.
23 (7)(a) Each insurer subject to the requirements of
24 subsection (6) shall make an annual filing with the department
25 no later than 12 months after its previous filing,
26 establishing demonstrating the reasonableness of benefits in
27 relation to premium rates. The department, after receiving a
28 request to be exempted from the provisions of this section,
29 may, for good cause due to insignificant numbers of policies
30 in force or insignificant premium volume, exempt a company, by
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1 line of coverage, from filing rates or rate certification as
2 required by this section.
3 (b) The filing required by this subsection shall be
4 satisfied by one of the following methods:
5 1. A rate filing prepared by an actuary which contains
6 documentation establishing demonstrating the reasonableness of
7 benefits in relation to premiums charged in accordance with
8 the applicable rating laws and rules promulgated by the
9 department. For premium rate changes, benefits shall be deemed
10 reasonable in relation to premium charged if both of the
11 following loss ratios meet or exceed the standards established
12 in s. 627.411(2).
13 a. The anticipated loss ratio over the entire future
14 period for which the revised rates are computed to provide
15 coverage; and
16 b. The lifetime anticipated loss ratio derived by
17 dividing the amount determined under sub-sub-subparagraph (I)
18 by the amount determined under sub-sub-subparagraph (II):
19 (I) The sum of the accumulated benefits from the
20 original effective date of the form to the effective date of
21 the revision, and the present value of future benefits.
22 (II) The sum of the accumulated premiums from the
23 original effective date of the form to the effective date of
24 the revision, and the present value of future premiums, which
25 present values shall be taken over the entire period for which
26 the revised rates are computed to provide coverage and which
27 accumulated benefits and premiums shall include an explicit
28 estimate of actual benefits and premiums from the last date an
29 accounting has been made to the effective date of the
30 revision.
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1 Interest shall be used in the calculation of these accumulated
2 benefits and premiums and present values only if it is a
3 significant factor, as determined by the insurer, in the
4 calculation of the loss ratio. For purposes of
5 sub-sub-subparagraph (I), the present value of benefits may,
6 at the insurer's option, include recognition of the policy
7 reserve as a benefit (addition), or the present value of
8 premiums may, at the insurer's option, include recognition of
9 the policy reserve as a deduction. Anticipated loss ratios
10 lower than those indicated in sub-sub-subparagraphs (I) and
11 (II) will require justification based on special circumstances
12 that may be applicable. Examples of coverages that may require
13 special consideration are accident only, short-term
14 nonrenewable, specified peril, and other special risks.
15 Examples of other factors that may require special
16 consideration are marketing methods; giving due consideration
17 to acquistion and administration costs and premium mode;
18 extraordinary expenses; high risk of claims fluctuation
19 because of low loss frequency or the catastrophic or
20 experimental nature of the coverage; product features such as
21 long elimination periods, high deductibles, and high maximum
22 limits; and the industrial or debit method of distribution.
23 2. If no rate change is proposed, a filing which
24 consists of a certification by an actuary that benefits are
25 reasonable in relation to premiums currently charged in
26 accordance with the loss ratio standards established in this
27 section and s. 627.411(2) applicable laws and rules
28 promulgated by the department.
29 (c) As used in this section, the term "actuary" means
30 an individual who is a member of the Society of Actuaries or
31 the American Academy of Actuaries. If an insurer does not
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1 employ or otherwise retain the services of an actuary, the
2 insurer's certification shall be prepared by insurer personnel
3 or consultants with a minimum of 5 years' experience in
4 insurance ratemaking. The chief executive officer of the
5 insurer shall review and sign the certification indicating his
6 or her agreement with its conclusions.
7 (d) If at the time a filing is required under this
8 section an insurer is in the process of completing a rate
9 review, the insurer may apply to the department for an
10 extension of up to an additional 30 days in which to make the
11 filing. The request for extension must be received by the
12 department in its offices in Tallahassee no later than the
13 date the filing is due.
14 (e) If an insurer fails to meet the filing
15 requirements of this subsection and does not submit the filing
16 within 60 days following the date the filing is due, the
17 department may, in addition to any other penalty authorized by
18 law, order the insurer to discontinue the issuance of policies
19 for which the required filing was not made, until such time as
20 the department determines that the required filing is properly
21 submitted.
22 (8)(a) For the purposes of subsections (6) and (7) and
23 s. 627.411, benefits of an individual accident and health
24 insurance policy form, including Medicare supplement policies
25 as defined in s. 627.672, when authorized by rules adopted by
26 the department, and excluding long-term care insurance
27 policies as defined in s. 627.9404, and other policy forms
28 under which more than 50 percent of the policies are issued to
29 individuals age 65 and over, are deemed to comply with the
30 provisions cited in this section to be reasonable in relation
31 to premium rates if the rates are filed pursuant to a loss
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1 ratio guarantee and both the initial rates and the durational
2 and lifetime loss ratios have been approved by the department,
3 and such benefits shall continue to be deemed reasonable for
4 renewal rates while the insurer complies with such guarantee,
5 provided the currently expected lifetime loss ratio is not
6 more than 5 percent less than the filed lifetime loss ratio as
7 certified to by an actuary. The department shall have the
8 right to bring an administrative action should it deem that
9 the lifetime loss ratio will not be met. For Medicare
10 supplement filings, the department may withdraw a previously
11 approved filing which was made pursuant to a loss ratio
12 guarantee if it determines that the filing is not in
13 compliance with ss. 627.671-627.675 or the currently expected
14 lifetime loss ratio is less than the filed lifetime loss ratio
15 as certified by an actuary in the initial guaranteed loss
16 ratio filing. If this section conflicts with ss.
17 627.671-627.675, ss. 627.671-627.675 shall control.
18 (b) The renewal premium rates shall be deemed to be
19 approved upon filing with the department if the filing is
20 accompanied by the most current approved loss ratio guarantee.
21 The loss ratio guarantee shall be in writing, shall be signed
22 by an officer of the insurer, and shall contain at least:
23 1. A recitation of the anticipated lifetime and
24 durational target loss ratios contained in the actuarial
25 memorandum filed with the policy form when it was originally
26 approved. The durational target loss ratios shall be
27 calculated for 1-year experience periods. If statutory
28 changes have rendered any portion of such actuarial memorandum
29 obsolete, the loss ratio guarantee shall also include an
30 amendment to the actuarial memorandum reflecting current law
31 and containing new lifetime and durational loss ratio targets.
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1 2. A guarantee that the applicable loss ratios for the
2 experience period in which the new rates will take effect, and
3 for each experience period thereafter until new rates are
4 filed, will meet the loss ratios referred to in subparagraph
5 1.
6 3. A guarantee that the applicable loss ratio results
7 for the experience period will be independently audited at the
8 insurer's expense. The audit shall be performed in the second
9 calendar quarter of the year following the end of the
10 experience period, and the audited results shall be reported
11 to the department no later than the end of such quarter. The
12 department shall establish by rule the minimum information
13 reasonably necessary to be included in the report. The audit
14 shall be done in accordance with accepted accounting and
15 actuarial principles.
16 4. A guarantee that affected policyholders in this
17 state shall be issued a proportional refund, based on the
18 premium earned, of the amount necessary to bring the
19 applicable experience period loss ratio up to the durational
20 target loss ratio referred to in subparagraph 1. The refund
21 shall be made to all policyholders in this state who are
22 insured under the applicable policy form as of the last day of
23 the experience period, except that no refund need be made to a
24 policyholder in an amount less than $10. Refunds less than $10
25 shall be aggregated and paid pro rata to the policyholders
26 receiving refunds. The refund shall include interest at the
27 then-current variable loan interest rate for life insurance
28 policies established by the National Association of Insurance
29 Commissioners, from the end of the experience period until the
30 date of payment. Payments shall be made during the third
31 calendar quarter of the year following the experience period
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1 for which a refund is determined to be due. However, no
2 refunds shall be made until 60 days after the filing of the
3 audit report in order that the department has adequate time to
4 review the report.
5 5. A guarantee that if the applicable loss ratio
6 exceeds the durational target loss ratio for that experience
7 period by more than 20 percent, provided there are at least
8 2,000 policyholders on the form nationwide or, if not, then
9 accumulated each calendar year until 2,000 policyholder years
10 is reached, the insurer, if directed by the department, shall
11 withdraw the policy form for the purposes of issuing new
12 policies.
13 (c) As used in this subsection:
14 1. "Loss ratio" means the ratio of incurred claims to
15 earned premium.
16 2. "Applicable loss ratio" means the loss ratio
17 attributable solely to this state if there are 2,000 or more
18 policyholders in the state. If there are 500 or more
19 policyholders in this state but less than 2,000, it is the
20 linear interpolation of the nationwide loss ratio and the loss
21 ratio for this state. If there are less than 500
22 policyholders in this state, it is the nationwide loss ratio;
23 however, if there are less than 2,000 policyholder years
24 nationwide, the experience must be accumulated until the end
25 of the calendar year in which 2,000 policyholder years are
26 obtained.
27 3. "Experience period" means the period, ordinarily a
28 calendar year, for which a loss ratio guarantee is calculated.
29 (d) The department shall not disapprove or withdraw
30 any previous approval of any individual accident and health
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1 insurance form pursuant to s. 627.411(1)(e) if rates have been
2 filed as provided in this subsection.
3 Section 2. Section 627.411, Florida Statutes, is
4 amended to read:
5 627.411 Grounds for Disapproval of forms.--
6 (1) The department shall disapprove any insurance
7 policy form that must be filed under s. 627.410, or withdraw
8 any previous approval thereof, only if the form:
9 (a) Is in any respect in violation of, or does not
10 comply with, this code.
11 (b) Contains or incorporates by reference, where such
12 incorporation is otherwise permissible, any inconsistent,
13 ambiguous, or misleading clauses, or exceptions and conditions
14 which deceptively affect the risk purported to be assumed in
15 the general coverage of the contract.
16 (c) Has any title, heading, or other indication of its
17 provisions which is misleading.
18 (d) Is printed or otherwise reproduced in such manner
19 as to render any material provision of the form substantially
20 illegible.
21 (e)1. Is for health insurance, and provides benefits
22 which are unreasonable in relation to the premium charged; or,
23 2. Contains provisions that which are unfair or
24 inequitable or contrary to the public policy of this state or
25 which encourage misrepresentation, or which apply rating
26 practices which result in premium escalations that are not
27 viable for the policyholder market or result in unfair
28 discrimination in sales practices.
29 (f) Excludes coverage for human immunodeficiency virus
30 infection or acquired immune deficiency syndrome or contains
31 limitations in the benefits payable, or in the terms or
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1 conditions of such contract, for human immunodeficiency virus
2 infection or acquired immune deficiency syndrome which are
3 different than those which apply to any other sickness or
4 medical condition.
5 (2) In determining whether the Benefits are deemed
6 reasonable in relation to the premium charged if premium rates
7 are neither excessive nor inadequate., the department, in
8 accordance with reasonable actuarial techniques, shall
9 consider:
10 (a) Past loss experience and prospective loss
11 experience within and without this state.
12 (b) Allocation of expenses.
13 (c) Risk and contingency margins, along with
14 justification of such margins.
15 (d) Acquisition costs.
16 (a) Premium rates are not excessive if the insurer
17 demonstrates, in accordance with generally accepted standards
18 of actuarial practice, satisfaction of the following minimum
19 anticipated loss ratios.
20 1. Loss Ratio Table, Individual Policies for the Line
21 of Business Indicated.--
22 a. Medical Expenses.--
23 Renewal Clause Loss Ratio
24 Noncancelable 55 percent
25 Nonrenewable 60 percent
26 Guaranteed Renewable 65 percent
27 All others 70 percent
28 b. Medical Indemnity, Loss of Income.--
29 Renewal Clause Loss Ratio
30 Noncancelable 50 percent
31 Nonrenewable 55 percent
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1 Guaranteed Renewable 60 percent
2 All others 65 percent
3 2. Loss Ratio Table, Group Policies.--
4 a. Group Medical Expense.--
5 Group Size Loss Ratio
6 Fewer than 51 certificates 65 percent
7 51 through 500 certificates 70 percent
8 All others 75 percent
9 b. Group Medical Indemnity or Any Group Policy with
10 and Average Annual Premium per Certificate of Less Than
11 $1,000.--
12 Group Size Loss Ratio
13 Fewer than 51 certificates 57.5 percent
14 51 through 500 certificates 62.5 percent
15 All others 67.5 percent
16 3. Group conversion insurance, other than
17 long-term-care insurance and Medicare supplement insurance,
18 issued on either a group or an individual basis, shall have a
19 loss ratio of not less than 120 percent, subject to the limits
20 described in s. 627.6675.
21 4. Blanket insurance is exempt from the loss ratios
22 described in subparagraphs 1.-3. The minimum loss ratio for
23 blanket insurance is 65 percent.
24 5. Medicare supplement and long-term-care insurance
25 are exempt from the loss ratios described in subparagraphs
26 1.-3. The minimum loss ratios for Medicare supplement
27 insurance must be established in accordance with s. 627.674.
28 The minimum loss ratios for long-term-care insurance shall be
29 established in accordance with s. 627.9407.
30 (b) Premium rates are not inadequate if the insurer
31 demonstrates, in accordance with generally accepted standards
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1 of actuarial practice, that the sum of premium income and
2 investment income, minus the sum of benefit payments,
3 expenses, taxes, and contingency margins is greater than zero.
4 Section 3. This act shall take effect July 1, 1999.
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7 LEGISLATIVE SUMMARY
8 Modifies the rate filing requirements for a health
insurer to have its policy forms approved by the
9 Department of Insurance. Provides guidelines for the
department in determining when benefits are considered
10 reasonable in relation to the premium charged.
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