HOUSE AMENDMENT Bill No. HB 63B
1	CHAMBER ACTION
2	Senate House
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12	Representative Ryan offered the following:
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14	Amendment (with title amendment)
15	Between line(s) 1490 and 1491, insert:
16	Section 32. Section 627.41497, Florida Statutes, is
17	created to read:
18	627.41497 Medical malpractice rate standards; prior
19	approval of rates.--
20	(1) In addition to any other requirements imposed by law,
21	the rates for each self-insurance policy as authorized under s.
22	627.357 or insurance policy providing coverage for claims
23	arising out of the rendering of, or the failure to render,
24	medical care or services shall be set by the director of the
25	Office of Insurance Regulation and shall not be excessive,
26	inadequate, or unfairly discriminatory.
27	(2) As to all rate filings subject to approval in
28	accordance with this section:
29	(a) Insurers or rating organizations shall apply for
30	rates, rating schedules, or rating manuals to allow the insurer
31	a reasonable rate of return on such classes of insurance written
32	in this state. A copy of rates, rating schedules, rating
33	manuals, premium credits, or discount schedules and surcharge
34	schedules, and changes to such rates, schedules, manuals, and
35	credits, shall be filed with the Office of Insurance Regulation.
36	The filing shall be made at least 180 days before the proposed
37	effective date and shall not be implemented during the review of
38	the filing by the Office of Insurance Regulation, any
39	proceeding, or judicial review.
40	(b) Upon receiving a rate filing and within a reasonable
41	time after such receipt, the Office of Insurance Regulation
42	shall review the rate filing and set a rate or rate schedule
43	that is not excessive, inadequate, or unfairly discriminatory.
44	In making such determination, the office shall, in accordance
45	with generally accepted and reasonable actuarial techniques, use
46	the following factors:
47	1. Past and prospective loss experience within and without
48	this state and the insurer's or self-insurer’s past and
49	prospective loss experience within this state, if applicable. A
50	medical malpractice insurer shall consider past and prospective
51	loss experience and catastrophic hazards, if any, solely within
52	this state. However, if there is insufficient experience within
53	this state upon which a rate can be based, the insurer may
54	consider experiences within any other state or states that have
55	a similar cost of claim and frequency of claim experience as
56	this state and, if insufficient experience is available, the
57	insurer may use nationwide experience. The insurer, in its rate
58	filing or in its records, shall expressly show the rate
59	experience it is using. In considering experience outside this
60	state, as much weight as possible shall be given to state
61	experience.
62	2. Past and prospective expenses.
63	3. Investment income reasonably expected by the insurer,
64	consistent with the insurer's investment practices, from
65	investable premiums anticipated in the filing, plus any other
66	expected income from currently invested assets representing the
67	amount expected on unearned premium reserves, loss reserves, and
68	surplus. The Office of Insurance Regulation may adopt rules
69	using reasonable techniques of actuarial science and economics
70	to specify the manner in which insurers shall calculate
71	investment income attributable to such classes of insurance
72	written in this state and the manner in which such investment
73	income shall be used in the calculation of insurance rates. The
74	profit and contingency factor as specified in the filing shall
75	be used in computing excess profits in conjunction with s.
76	627.215.
77	4. The reasonableness of the judgment reflected in the
78	filing.
79	5. Dividends, savings, or unabsorbed premium deposits
80	allowed or returned to policyholders, members, or subscribers in
81	this state.
82	6. The adequacy of loss reserves.
83	7. The cost of reinsurance.
84	8. Trend factors, including trends in actual losses per
85	insured unit for the insurer making the filing.
86	9. A reasonable margin for underwriting profit and
87	contingencies.
88	10. The cost of medical services.
89	11. Other relevant factors that impact upon the frequency
90	or severity of claims or upon expenses.
91	(c) After consideration of the rate factors provided in
92	paragraph (b), the Office of Insurance Regulation shall
93	determine and set the appropriate rate, so long as the rate is
94	not excessive, inadequate, or unfairly discriminatory based upon
95	the following standards:
96	1. Rates shall be deemed excessive if they are likely to
97	produce a profit from business in this state that is
98	unreasonably high in relation to the risk involved in the class
99	of business or if expenses are unreasonably high in relation to
100	services rendered.
101	2. Rates shall be deemed excessive if, among other things,
102	the rate structure established by a stock insurance company
103	provides for replenishment of reserves or surpluses from
104	premiums when the replenishment is attributable to investment
105	losses, the rate is unreasonably high for the insurance
106	provided, or expenses are unreasonably high in relation to
107	services rendered.
108	3. Rates shall be deemed inadequate if they are clearly
109	insufficient, together with the investment income attributable
110	to such rates, to sustain projected losses and expenses in the
111	class of business to which they apply and the continued use of
112	such rate endangers the solvency of the insurer using the rate.
113	4. A rating plan, including discounts, credits, or
114	surcharges, shall be deemed unfairly discriminatory if the plan
115	fails to clearly and equitably reflect consideration of the
116	policyholder's participation in a risk management program
117	adopted pursuant to s. 627.0625 or the policyholder’s individual
118	claims history or unless price differentials fail to reflect
119	equitably the differences in expected losses and experiences.
120	5. A rate shall be deemed inadequate as to the premium
121	charged to a risk or group of risks if discounts or credits are
122	allowed which exceed a reasonable reflection of expense savings
123	and reasonably expected loss experience from the risk or group
124	of risks.
125	6. A rate shall be deemed unfairly discriminatory as to a
126	risk or group of risks if the application of premium discounts,
127	credits, or surcharges among such risks does not bear a
128	reasonable relationship to the expected loss and expense
129	experience among the various risks.
130	(d) In reviewing a rate filing, the Office of Insurance
131	Regulation may require the insurer to provide at the insurer's
132	expense all information necessary to evaluate the condition of
133	the company and the reasonableness of the filing according to
134	the criteria enumerated in this section.
135	1. The Office of Insurance Regulation shall adopt rules
136	that shall require each medical malpractice insurer to record
137	and report its loss and expense experience and such other data,
138	including reserves, as may be necessary to determine whether
139	rates comply with the standards set forth in this section. Every
140	medical malpractice insurer shall provide such information in
141	such form as the director of the office may require.
142	2. The director shall require that the annual report and
143	any such supplemental report that contains information of a
144	company’s loss and loss adjustment reserves be accompanied by an
145	opinion signed and sworn to by a qualified and independent
146	actuary verifying that, within the 9 months prior to the
147	submission of the report, the actuary has conducted a review and
148	analysis of the insurance company’s loss and loss adjustment
149	reserves and the reserves are computed in accordance with
150	accepted loss reserving standards and are fairly stated in
151	accordance with sound loss reserving principles.
152	3. The director shall maintain for at least 10 years, by
153	carrier, all reports submitted by insurers pursuant to rules
154	adopted by the office under this section. The director shall
155	consider such reports in determining the appropriateness of
156	premium rates for medical malpractice insurance.
157	4. The director may examine and review the assignment and
158	assessment of risk for difference classifications for different
159	specialties or practices of medicine. The director may hold a
160	public hearing on any filing containing a risk assignment for
161	medical malpractice insurance to determine whether such risk
162	assignment is reasonable and may issue orders concerning such
163	risk assignment.
164	(3) With respect to the filing of rate information:
165	(a) Every medical malpractice insurer shall file with the
166	Office of Insurance Regulation every manual of classifications,
167	rules, and rates, every rating plan, and every modification of
168	any of the foregoing that the insurer proposes to use in this
169	state.
170	(b) The expense provisions included in the rates to be
171	used by a medical malpractice insurer shall reflect the
172	operating methods of the insurer and, so far as it is credible
173	and reasonable, the insurer’s own actual and anticipated expense
174	experience.
175	(c) The rates to be used by a medical malpractice insurer
176	shall contain provisions for contingencies and an allowance
177	permitting a reasonable rate of return. In determining a
178	reasonable rate of return, consideration shall be given to all
179	investment income reasonably attributable to medical malpractice
180	insurance.
181	(d) Every filing shall state the proposed effective date
182	of the filing, shall indicate the character and extent of the
183	coverage contemplated, and shall contain supporting information.
184	Such supporting information may include the experience or
185	judgment of the insurer making the filing, the insurer’s
186	interpretation of any statistical data the insurer relied upon,
187	the experience of other insurers, and any other factors the
188	insurer deems relevant.
189	(4) The Office of Insurance Regulation may at any time
190	review a rate, rating schedule, rating manual, or rate change,
191	the pertinent records of the insurer, and market conditions. If
192	the office finds on a preliminary basis that a rate may be
193	excessive, inadequate, or unfairly discriminatory, the office
194	shall initiate proceedings to set a new rate and shall so notify
195	the insurer. However, the office may not disapprove as excessive
196	any rate the office has set for a period of 1 year after the
197	effective date of the filing unless the office finds that a
198	material misrepresentation or material error was made by the
199	insurer or was contained in the filing. Upon being so notified,
200	the insurer or rating organization shall, within 60 days, file
201	with the office all information which, in the belief of the
202	insurer or organization, proves the reasonableness, adequacy,
203	and fairness of the rate or rate change. The office shall
204	determine and set an appropriate rate within a reasonable time
205	after receipt of the insurer’s initial response, pursuant to the
206	procedures of paragraphs (2)(b)-(d). In such instances and in
207	any administrative proceeding relating to the legality of any
208	rate, the insurer or rating organization shall carry the burden
209	of proof by a preponderance of the evidence to show that the
210	rate is not excessive, inadequate, or unfairly discriminatory.
211	(5) When the Office of Insurance Regulation sets a new
212	rate or rate schedule, the office shall issue an order
213	specifying the new rate or rate schedule and the findings of the
214	office. The order shall constitute agency action for purposes of
215	the Administrative Procedure Act.
216	(6) Except as otherwise specifically provided in this
217	chapter, the Office of Insurance Regulation shall not prohibit
218	any insurer, including any residual market plan or joint
219	underwriting association, from paying acquisition costs based on
220	the full amount of premium, as defined in s. 627.403, applicable
221	to any policy or prohibit any such insurer from including the
222	full amount of acquisition costs in a rate filing.
223	(7) The establishment or variation of any rate, rating
224	classification, rating plan, or rating schedule in violation of
225	part IX of chapter 626 is also a violation of this section.
226	(8) Any portion of a judgment entered as a result of a
227	statutory or common-law bad faith action and any portion of a
228	judgment entered that awards punitive damages against an insurer
229	shall not be included in the insurer's rate base and shall not
230	be used to justify a rate or rate change. Any portion of a
231	settlement entered as a result of a statutory or common-law bad
232	faith action identified as such and any portion of a settlement
233	in which an insurer agrees to pay specific punitive damages
234	shall not be used to justify a rate or rate change. The portion
235	of the taxable costs and attorney's fees that is identified as
236	being related to the bad faith and punitive damages in such
237	judgments and settlements shall not be included in the insurer's
238	rate base and shall not be used to justify a rate or rate
239	change.
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241	================= T I T L E A M E N D M E N T =================
242	Remove line(s) 114, and insert:
243	requiring prior notification of a rate increase; creating s.
244	627.41497, F.S.; requiring certain medical malpractice insurance
245	rates to be set by the director of the Office of Insurance
246	Regulation; providing for approval of rate filings; requiring
247	insurers to apply for certain rates, schedules, and manuals;
248	providing procedures for application and review; providing
249	review criteria; providing approval standards; authorizing the
250	office to require certain additional information for review;
251	requiring adoption of certain rules; providing for reports of
252	certain information; requiring the office to retain such reports
253	for a time certain; requiring medical malpractice insurers to
254	file certain information with the office; authorizing the office
255	to review rates, schedules, manuals, or rate changes at any time
256	for certain purposes; providing procedures; requiring the office
257	to issue orders for setting new rates; prohibiting the office
258	from prohibiting insurers from paying certain acquisition costs
259	for certain purposes; providing application; excluding certain
260	judgment or settlement amounts, taxable costs, and attorney's
261	fees from inclusion in an insurer's rate base; amending