House Bill 0397

CODING: Words stricken are deletions; words underlined are additions.







    Florida House of Representatives - 2000                 HB 397

        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:

14

15         Section 1.  Subsections (1), (3), (6), (7), and (8) of

16  section 627.410, Florida Statutes, are amended to read:

17         627.410  Filing, approval of forms.--

18         (1)  No basic insurance policy or annuity contract

19  form, or application form where written application is

20  required and is to be made a part of the policy or contract,

21  or group certificates issued under a master contract delivered

22  in this state, or printed rider or endorsement form or form of

23  renewal certificate, shall be delivered or issued for delivery

24  in this state, unless the form has been filed with the

25  department at its offices in Tallahassee by or in behalf of

26  the insurer which proposes to use such form and has been

27  approved by the department. This provision does not apply to

28  surety bonds or to policies, riders, endorsements, or forms of

29  unique character which are designed for and used with relation

30  to insurance upon a particular subject (other than as to

31  individual or small group health insurance), or which relate

                                  1

CODING: Words stricken are deletions; words underlined are additions.






    Florida House of Representatives - 2000                 HB 397

    719-100D-00






  1  to the manner of distribution of benefits or to the

  2  reservation of rights and benefits under life or health

  3  insurance policies and are used at the request of the

  4  individual policyholder, contract holder, or

  5  certificateholder.  As to group insurance policies effectuated

  6  and delivered outside this state but covering persons resident

  7  in this state, the group certificates to be delivered or

  8  issued for delivery in this state shall be filed with the

  9  department for information purposes only.

10         (3)  The department may, as specified in s. 627.411(1)

11  for cause, withdraw a previous approval. No insurer shall

12  issue or use any form disapproved by the department, or as to

13  which the department has withdrawn approval, after the

14  effective date of the order of the department.

15         (6)(a)  An insurer shall not deliver or issue for

16  delivery or renew in this state any health insurance policy

17  form until it has filed with the department a copy of every

18  applicable rating manual, rating schedule, change in rating

19  manual, and change in rating schedule; if rating manuals and

20  rating schedules are not applicable, the insurer must file

21  with the department applicable premium rates and any change in

22  applicable premium rates. This provision does not apply to

23  rating manuals, rating schedules, changes in rating manuals or

24  schedules, or if rating manuals or schedules are not

25  applicable, to premium rates or changes in such rates,

26  relating to policies, riders, endorsements, or forms of unique

27  character which are designed for and used with relation to

28  insurance upon a particular subject or to benefits under group

29  health insurance policies insuring 51 or more persons and are

30  used at the request of the individual policyholder, contract

31  holder, or certificateholder.

                                  2

CODING: Words stricken are deletions; words underlined are additions.






    Florida House of Representatives - 2000                 HB 397

    719-100D-00






  1         (b)  The department may establish by rule, for each

  2  type of health insurance form, procedures to be used in

  3  ascertaining that a form meets the standards in s. 627.411(2)

  4  for new rate filings and rate revisions in accordance with

  5  generally accepted standards of actuarial practice the

  6  reasonableness of benefits in relation to premium rates and

  7  may, by rule, exempt from any requirement of paragraph (a) any

  8  health insurance policy form or type thereof (as specified in

  9  such rule) to which form or type such requirements may not be

10  practically applied or to which form or type the application

11  of such requirements is not desirable or necessary for the

12  protection of the public. With respect to any health insurance

13  policy form or type thereof which is exempted by rule from any

14  requirement of paragraph (a), premium rates filed pursuant to

15  ss. 627.640 and 627.662 shall be for informational purposes.

16         (c)  Every filing made pursuant to this subsection

17  shall be made within the same time period provided in, and

18  shall be deemed to be approved under the same conditions as

19  those provided in, subsection (2).

20         (d)  Every filing made pursuant to this subsection,

21  except disability income policies and accidental death

22  policies, shall be prohibited from applying the following

23  rating practices:

24         1.  Select and ultimate premium schedules.

25         2.  Premium class definitions which classify insured

26  based on year of issue or duration since issue.

27         3.  Attained age premium structures on policy forms,

28  except long-term care policy forms, under which more than 50

29  percent of the policies are issued to persons age 65 or over.

30         (e)  Except as provided in subparagraph 1., an insurer

31  shall continue to make available for purchase any individual

                                  3

CODING: Words stricken are deletions; words underlined are additions.






    Florida House of Representatives - 2000                 HB 397

    719-100D-00






  1  policy form issued on or after October 1, 1993.  A policy form

  2  shall not be considered to be available for purchase unless

  3  the insurer has actively offered it for sale in the previous

  4  12 months.

  5         1.  An insurer may discontinue the availability of an

  6  individual a policy form if the insurer provides to the

  7  department in writing its decision at least 30 days prior to

  8  discontinuing the availability of the form of the policy or

  9  certificate.  After receipt of the notice by the department,

10  the insurer shall no longer offer for sale the policy form or

11  certificate form in this state.

12         2.  An insurer that discontinues the availability of a

13  policy form pursuant to subparagraph 1. shall not file for

14  approval a new policy form providing similar benefits as the

15  discontinued form for a period of 5 years after the insurer

16  provides notice to the department of the discontinuance. The

17  period of discontinuance may be reduced if the department

18  determines that a shorter period is appropriate.

19         2.3.  The experience of an individual accident and

20  health insurance all policy form that is no longer being

21  marketed in this state, except for policies rated pursuant to

22  a loss ratio guarantee under subsection (8), shall be combined

23  with the experience of at least one other individual accident

24  and health insurance policy form providing similar benefits,

25  as determined by the insurer, which is still being marketed in

26  the state by the same insurer, unless the insurer has no other

27  policy form forms providing similar benefits shall be combined

28  for all rating purposes. For purposes of this section, a form

29  is considered active if the form has been marketed in this

30  state in the past 6 months.

31

                                  4

CODING: Words stricken are deletions; words underlined are additions.






    Florida House of Representatives - 2000                 HB 397

    719-100D-00






  1         (7)(a)  Each insurer subject to the requirements of

  2  subsection (6) shall make an annual filing with the department

  3  no later than 12 months after its previous filing,

  4  establishing compliance with the standards in s. 627.411(2)

  5  for each insurance policy form, excluding noncancelable policy

  6  forms. For guaranteed renewable, medical indemnity, loss of

  7  income, and disability income policy forms, the filing shall

  8  be biennial and made no later than 24 months after its

  9  previous filing demonstrating the reasonableness of benefits

10  in relation to premium rates.  The department, after receiving

11  a request to be exempted from the provisions of this section,

12  may, for good cause due to insignificant numbers of policies

13  in force or insignificant premium volume, exempt a company, by

14  line of coverage, from filing rates or rate certification as

15  required by this section.

16         (b)  The filing required by this subsection shall be

17  satisfied by one of the following methods:

18         1.  A rate filing prepared by an actuary which contains

19  documentation establishing demonstrating the reasonableness of

20  benefits in relation to premiums charged in accordance with

21  the applicable rating laws and rules promulgated by the

22  department. For premium rate changes, benefits shall be deemed

23  reasonable in relation to premium charged if both of the

24  following loss ratios meet or exceed the standards established

25  in s. 627.411(2).

26         a.  The anticipated loss ratio over the entire future

27  period for which the revised rates are computed to provide

28  coverage.

29         b.  The lifetime anticipated loss ratio derived by

30  dividing the amount determined under sub-sub-subparagraph (I)

31  by the amount determined under sub-sub-subparagraph (II):

                                  5

CODING: Words stricken are deletions; words underlined are additions.






    Florida House of Representatives - 2000                 HB 397

    719-100D-00






  1         (I)  The sum of the accumulated benefits from the

  2  original effective date of the form to the effective date of

  3  the revision, and the present value of future benefits.

  4         (II)  The sum of the accumulated premiums from the

  5  original effective date of the form to the effective date of

  6  the revision, and the present value of future premiums, which

  7  present values shall be taken over the entire period for which

  8  the revised rates are computed to provide coverage and which

  9  accumulated benefits and premiums shall include an explicit

10  estimate of actual benefits and premiums from the last date an

11  accounting has been made to the effective date of the

12  revision.

13

14  Interest shall be used in the calculation of these accumulated

15  benefits and premiums and present values in the calculation of

16  the loss ratio. For purposes of sub-sub-subparagraph (I), the

17  present value of benefits may, at the insurer's option,

18  include recognition of the policy reserve as a benefit

19  (addition), or the present value of premiums may, at the

20  insurer's option, include recognition of the policy reserve as

21  a deduction. Anticipated loss ratios lower than those

22  indicated in sub-sub-subparagraphs (I) and (II) shall require

23  justification based on special circumstances that may be

24  applicable, including, but not limited to: accident only,

25  short-term nonrenewable, specified peril, and other special

26  risks; marketing methods; giving due consideration to

27  acquistion and administration costs and premium mode;

28  extraordinary expenses; high risk of claims fluctuation

29  because of low loss frequency or the catastrophic or

30  experimental nature of the coverage; product features, such as

31

                                  6

CODING: Words stricken are deletions; words underlined are additions.






    Florida House of Representatives - 2000                 HB 397

    719-100D-00






  1  long elimination periods, high deductibles, and high maximum

  2  limits; and the industrial or debit method of distribution.

  3         2.  If no rate change is proposed, a filing which

  4  consists of a certification by an actuary that benefits are

  5  reasonable in relation to premiums currently charged in

  6  accordance with the loss ratio standards established in this

  7  section and s. 627.411(2) applicable laws and rules

  8  promulgated by the department.

  9         3.  For premium rate changes for group policy forms,

10  benefits shall be deemed reasonable in relation to premium

11  charged if the anticipated loss ratio over the entire future

12  period for which the revised rates are computed to provide

13  coverage meets or exceeds the standards established in s.

14  627.411(2).

15         4.  An insurer may combine the experience of similar

16  policy forms in the required filing.

17         (c)  As used in this section, the term "actuary" means

18  an individual who is a member of the Society of Actuaries or

19  the American Academy of Actuaries.  If an insurer does not

20  employ or otherwise retain the services of an actuary, the

21  insurer's certification shall be prepared by insurer personnel

22  or consultants with a minimum of 5 years' experience in

23  insurance ratemaking and. The chief executive officer of the

24  insurer shall review and sign the certification indicating his

25  or her agreement with its conclusions.

26         (d)  If at the time a filing is required under this

27  section an insurer is in the process of completing a rate

28  review, the insurer may apply to the department for an

29  extension of up to an additional 30 days in which to make the

30  filing.  The request for extension must be received by the

31

                                  7

CODING: Words stricken are deletions; words underlined are additions.






    Florida House of Representatives - 2000                 HB 397

    719-100D-00






  1  department in its offices in Tallahassee no later than the

  2  date the filing is due.

  3         (e)  If an insurer fails to meet the filing

  4  requirements of this subsection and does not submit the filing

  5  within 60 days following the date the filing is due, the

  6  department may, in addition to any other penalty authorized by

  7  law, order the insurer to discontinue the issuance of policies

  8  for which the required filing was not made, until such time as

  9  the department determines that the required filing is properly

10  submitted.

11         (8)(a)  For the purposes of subsections (6) and (7) and

12  s. 627.411, benefits of an individual accident and health

13  insurance policy form, including Medicare supplement policies

14  as defined in s. 627.672, when authorized by rules adopted by

15  the department, and excluding long-term care insurance

16  policies as defined in s. 627.9404, and other policy forms

17  under which more than 50 percent of the policies are issued to

18  individuals age 65 and over, are deemed to comply with the

19  provisions cited in this section to be reasonable in relation

20  to premium rates if the rates are filed pursuant to a loss

21  ratio guarantee and both the initial rates and the durational

22  and lifetime loss ratios have been approved by the department,

23  and such benefits shall continue to be deemed reasonable for

24  renewal rates while the insurer complies with such guarantee,

25  provided the currently expected lifetime loss ratio is not

26  more than 5 percent less than the filed lifetime loss ratio as

27  certified to by an actuary.  The department shall have the

28  right to bring an administrative action should it deem that

29  the lifetime loss ratio will not be met.  For Medicare

30  supplement filings, the department may withdraw a previously

31  approved filing which was made pursuant to a loss ratio

                                  8

CODING: Words stricken are deletions; words underlined are additions.






    Florida House of Representatives - 2000                 HB 397

    719-100D-00






  1  guarantee if it determines that the filing is not in

  2  compliance with ss. 627.671-627.675 or the currently expected

  3  lifetime loss ratio is less than the filed lifetime loss ratio

  4  as certified by an actuary in the initial guaranteed loss

  5  ratio filing.  If this section conflicts with ss.

  6  627.671-627.675, ss. 627.671-627.675 shall control.

  7         (b)  The renewal premium rates shall be deemed to be

  8  approved upon filing with the department if the filing is

  9  accompanied by the most current approved loss ratio guarantee.

10  The loss ratio guarantee shall be in writing, shall be signed

11  by an officer of the insurer, and shall contain at least:

12         1.  A recitation of the anticipated lifetime and

13  durational target loss ratios contained in the actuarial

14  memorandum filed with the policy form when it was originally

15  approved.  The durational target loss ratios shall be

16  calculated for 1-year experience periods.  If statutory

17  changes have rendered any portion of such actuarial memorandum

18  obsolete, the loss ratio guarantee shall also include an

19  amendment to the actuarial memorandum reflecting current law

20  and containing new lifetime and durational loss ratio targets.

21         2.  A guarantee that the applicable loss ratios for the

22  experience period in which the new rates will take effect, and

23  for each experience period thereafter until new rates are

24  filed, will meet the loss ratios referred to in subparagraph

25  1.

26         3.  A guarantee that the applicable loss ratio results

27  for the experience period will be independently audited at the

28  insurer's expense.  The audit shall be performed in the second

29  calendar quarter of the year following the end of the

30  experience period, and the audited results shall be reported

31  to the department no later than the end of such quarter.  The

                                  9

CODING: Words stricken are deletions; words underlined are additions.






    Florida House of Representatives - 2000                 HB 397

    719-100D-00






  1  department shall establish by rule the minimum information

  2  reasonably necessary to be included in the report.  The audit

  3  shall be done in accordance with accepted accounting and

  4  actuarial principles.

  5         4.  A guarantee that affected policyholders in this

  6  state shall be issued a proportional refund, based on the

  7  premium earned, of the amount necessary to bring the

  8  applicable experience period loss ratio up to the durational

  9  target loss ratio referred to in subparagraph 1.  The refund

10  shall be made to all policyholders in this state who are

11  insured under the applicable policy form as of the last day of

12  the experience period, except that no refund need be made to a

13  policyholder in an amount less than $10. Refunds less than $10

14  shall be aggregated and paid pro rata to the policyholders

15  receiving refunds.  The refund shall include interest at the

16  then-current variable loan interest rate for life insurance

17  policies established by the National Association of Insurance

18  Commissioners, from the end of the experience period until the

19  date of payment.  Payments shall be made during the third

20  calendar quarter of the year following the experience period

21  for which a refund is determined to be due. However, no

22  refunds shall be made until 60 days after the filing of the

23  audit report in order that the department has adequate time to

24  review the report.

25         5.  A guarantee that if the applicable loss ratio

26  exceeds the durational target loss ratio for that experience

27  period by more than 20 percent, provided there are at least

28  2,000 policyholders on the form nationwide or, if not, then

29  accumulated each calendar year until 2,000 policyholder years

30  is reached, the insurer, if directed by the department, shall

31

                                  10

CODING: Words stricken are deletions; words underlined are additions.






    Florida House of Representatives - 2000                 HB 397

    719-100D-00






  1  withdraw the policy form for the purposes of issuing new

  2  policies.

  3         (c)  As used in this subsection:

  4         1.  "Loss ratio" means the ratio of incurred claims to

  5  earned premium.

  6         2.  "Applicable loss ratio" means the loss ratio

  7  attributable solely to this state if there are 2,000 or more

  8  policyholders in the state. If there are 500 or more

  9  policyholders in this state but less than 2,000, it is the

10  linear interpolation of the nationwide loss ratio and the loss

11  ratio for this state.  If there are less than 500

12  policyholders in this state, it is the nationwide loss ratio;

13  however, if there are less than 2,000 policyholder years

14  nationwide, the experience must be accumulated until the end

15  of the calendar year in which 2,000 policyholder years are

16  obtained.

17         3.  "Experience period" means the period, ordinarily a

18  calendar year, for which a loss ratio guarantee is calculated.

19         Section 2.  Section 627.411, Florida Statutes, is

20  amended to read:

21         627.411  Grounds for Disapproval of forms.--

22         (1)  The department shall disapprove any insurance

23  policy form that must be filed under s. 627.410, or withdraw

24  any previous approval thereof, only if the form:

25         (a)  Is in any respect in violation of, or does not

26  comply with, this code.

27         (b)  Contains or incorporates by reference, where such

28  incorporation is otherwise permissible, any inconsistent,

29  ambiguous, or misleading clauses, or exceptions and conditions

30  which deceptively affect the risk purported to be assumed in

31  the general coverage of the contract.

                                  11

CODING: Words stricken are deletions; words underlined are additions.






    Florida House of Representatives - 2000                 HB 397

    719-100D-00






  1         (c)  Has any title, heading, or other indication of its

  2  provisions which is misleading.

  3         (d)  Is printed or otherwise reproduced in such manner

  4  as to render any material provision of the form substantially

  5  illegible.

  6         (e)1.  Is for health insurance, and provides benefits

  7  which are unreasonable in relation to the premium charged as

  8  specified in s. 627.411(2); or,

  9         2.  Contains provisions that constitute unfair

10  discrimination pursuant to s. 626.9541(1)(g), which are unfair

11  or inequitable as contrary to the public policy of this state

12  or which encourages misrepresentation or which apply rating

13  practices which result in premium escalations that are not

14  viable for the policyholder market or result in unfair

15  discrimination in sales practices.

16         (f)  Excludes coverage for human immunodeficiency virus

17  infection or acquired immune deficiency syndrome or contains

18  limitations in the benefits payable, or in the terms or

19  conditions of such contract, for human immunodeficiency virus

20  infection or acquired immune deficiency syndrome which are

21  different than those which apply to any other sickness or

22  medical condition.

23         (2)  In determining whether the Benefits are deemed

24  reasonable in relation to the premium charged if premium rates

25  are neither excessive nor inadequate as specified in this

26  subsection., the department, in accordance with reasonable

27  actuarial techniques, shall consider:

28         (a)  Past loss experience and prospective loss

29  experience within and without this state.

30         (b)  Allocation of expenses.

31

                                  12

CODING: Words stricken are deletions; words underlined are additions.






    Florida House of Representatives - 2000                 HB 397

    719-100D-00






  1         (c)  Risk and contingency margins, along with

  2  justification of such margins.

  3         (d)  Acquisition costs.

  4         (a)  Premium rates are not excessive if the insurer

  5  demonstrates, in accordance with generally accepted standards

  6  of actuarial practice, satisfaction of the following minimum

  7  anticipated loss ratios:

  8         1.  Loss ratio table, individual policies for the line

  9  of business indicated.

10         a.  Medical expenses.

11

12  Renewal clause                                    Loss ratio

13

14  Noncancelable                                     55 percent

15  Nonrenewable                                      60 percent

16  Guaranteed renewable                              65 percent

17  All others                                        70 percent

18

19         b.  Medical indemnity, loss of income.

20

21  Renewal clause                                    Loss ratio

22

23  Noncancelable                                     50 percent

24  Nonrenewable                                      55 percent

25  Guaranteed renewable                              60 percent

26  All others                                        65 percent

27

28         2.  Loss ratio table, group policies.

29         a.  Group medical expense.

30

31

                                  13

CODING: Words stricken are deletions; words underlined are additions.






    Florida House of Representatives - 2000                 HB 397

    719-100D-00






  1  Group size                                        Loss ratio

  2

  3  Fewer than 51 certificates                        65 percent

  4  51 through 500 certificates                       70 percent

  5  All others                                        75 percent

  6

  7         b.  Group medical indemnity or any group policy with an

  8  average annual premium per certificate of less than $1,000.

  9

10  Group size                                        Loss ratio

11

12  Fewer than 51 certificates                        57.5 percent

13  51 through 500 certificates                       62.5 percent

14  All others                                        67.5 percent

15

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.  The lifetime loss ratios in subparagraphs 1. and 2.

22  may be adjusted in accordance with the following formula:

23

24                        R' = (A - 25I) R/A

25

26  Where:

27         R = the loss ratio from subparagraphs 1. and 2.

28         A = the average annualized premium per individual

29  policy or per group certificate.

30         I = (CPI-U, year N-1)/103.9.

31         R' = the adjusted loss ratio.

                                  14

CODING: Words stricken are deletions; words underlined are additions.






    Florida House of Representatives - 2000                 HB 397

    719-100D-00






  1

  2  R' cannot be more than 10 percentage points less than R nor

  3  less than 50 percent, except that R' cannot be less than 45

  4  percent as to accident only non-cancellable policies. The

  5  CPI-U is the consumer price index for all urban consumers, for

  6  all items and for all regions of the United States combined,

  7  as determined by the United States Department of Labor, Bureau

  8  of Labor Statistics as of September of each year.  Year N-1 is

  9  the calendar year immediately preceding the calendar year N in

10  which the rate filing is submitted in this state.

11         5.  Blanket insurance is exempt from the loss ratios

12  described in subparagraphs 1.-3. The minimum loss ratio for

13  blanket insurance is 65 percent.

14         6.  Medicare supplement and long-term-care insurance

15  are exempt from the loss ratios described in subparagraphs

16  1.-3. The minimum loss ratios for Medicare supplement

17  insurance must be established in accordance with s. 627.674.

18  Benefits under long-term care insurance policies shall be

19  deemed reasonable in relation to premiums provided the

20  expected loss ratio is at least 60 percent, calculated in a

21  manner which provides for adequate reserving of the long-term

22  care insurance risk. In evaluating the expected loss ratio,

23  due consideration shall be given to: statistical credibility

24  of incurred claims experience and earned premiums; the period

25  for which rates are computed to provide coverage; experienced

26  and projected trends; the concentration of experience within

27  early policy duration; expected claim fluctuations; experience

28  refunds, adjustments, or dividends; renewability features; all

29  appropriate expense factors; interest; the experimental nature

30  of the coverage; policy reserves; the mix of business by risk

31  classification; and product features such as long elimination

                                  15

CODING: Words stricken are deletions; words underlined are additions.






    Florida House of Representatives - 2000                 HB 397

    719-100D-00






  1  periods, high deductibles, and high maximum limits.

  2  Additionally, except to the extent of any conflict with this

  3  code, such rules shall include the factors specified in

  4  section 17A of the Long-Term Care Model Regulations, as

  5  approved by the National Association of Insurance

  6  Commissioners in July 1998.

  7         7.  The anticipated future loss ratio shall be

  8  calculated as the present value of anticipated future benefits

  9  divided by the present value of future premiums, calculated

10  over the entire period for which the revised rates are

11  computed to provide coverage.

12         8.  The lifetime loss ratio shall be calculated as the

13  sum of:

14         a.  The accumulated benefits from the original

15  effective date of the form to the effective date of the

16  revision.

17         b.  The present value of anticipated future benefits

18  divided by the sum of the accumulated premiums from the

19  original effective date of the form to the effective date of

20  the revision.

21         c.  The present value of anticipated future premiums,

22  with future values calculated over the entire period for which

23  the revised rates are computed to provide coverage.

24         9.  Interest shall be used in the calculation of

25  accumulated and present values of benefits and premiums.

26         10.  The minimum loss ratio for individual contracts

27  and group certificate forms issued, delivered, or issued for

28  delivery in this state prior to June 1, 1994, that were

29  approved by the department prior to February 1, 1994, shall be

30  the loss ratio and loss ratio adjustment formula that was in

31  effect at the time the form was approved.

                                  16

CODING: Words stricken are deletions; words underlined are additions.






    Florida House of Representatives - 2000                 HB 397

    719-100D-00






  1         11.  Anticipated loss ratios lower than those required

  2  in subparagraph (a)1. or subparagraph (a)2. shall require

  3  justification based upon special circumstances that may be

  4  applicable, including, but not limited to:

  5         a.  Accident only, short-term nonrenewable, specified

  6  peril, and other special risks.

  7         b.  Marketing methods; giving due consideration to

  8  acquisition and administration costs and premium mode;

  9  extraordinary expenses; high risks of claims fluctuation

10  because of low loss frequency or the catastrophic or

11  experimental nature of the coverage; product features, such as

12  long elimination periods, high deductibles, and high maximum

13  limits; and the industrial or debit method of distribution.

14         (b)  Premium rates are not inadequate if the insurer

15  demonstrates, in accordance with generally accepted standards

16  of actuarial practice, that the sum of premium income and

17  investment income, minus the sum of benefit payments,

18  expenses, taxes, and contingency margins is greater than zero.

19         Section 3.  This act shall take effect July 1, 2000.

20

21            *****************************************

22                          HOUSE SUMMARY

23
      Modifies the rate filing requirements for a health
24    insurer to have its policy forms approved by the
      Department of Insurance. Provides guidelines for the
25    department in determining when benefits are considered
      reasonable in relation to the premium charged.
26

27

28

29

30

31

                                  17