HB 589

1
A bill to be entitled
2An act relating to health insurance; amending s. 627.410,
3F.S.; establishing a minimum loss ratio for health
4insurance forms; amending s. 627.411, F.S.; revising the
5loss ratio for certain health insurance coverage; amending
6s. 627.6745, F.S.; revising the loss ratio for Medicare
7supplement policies issued on or after a certain date;
8amending s. 627.9407, F.S.; establishing a minimum loss
9ratio for long-term care insurance policies; providing an
10effective date.
11
12Be It Enacted by the Legislature of the State of Florida:
13
14     Section 1.  Paragraph (b) of subsection (6) and subsections
15(7) and (8) of section 627.410, Florida Statutes, are amended to
16read:
17     627.410  Filing, approval of forms.-
18     (6)
19     (b)  The commission may establish by rule:, for each type
20of health insurance form,
21     1.  Establish procedures for to be used in ascertaining the
22relationship between reasonableness of benefits in relation to
23premium rates for each type of health insurance form, including
24Medicare supplement policies as defined in s. 627.672, long-term
25care policies as defined in s. 627.9404, and other policy forms
26where more than 50 percent of the policies are issued to
27individuals age 65 and older. and may, by rule,
28     2.  Exempt from any requirement of paragraph (a) any health
29insurance policy form or type thereof (as specified in such
30rule) to which form or type such requirements may not be
31practically applied or to which form or type the application of
32such requirements is not desirable or necessary for the
33protection of the public. For With respect to any health
34insurance policy form or type that thereof which is exempted by
35rule from any requirement of paragraph (a), premium rates filed
36pursuant to ss. 627.640 and 627.662 shall be for informational
37purposes.
38     (7)(a)  Each insurer subject to the requirements of
39subsection (6) shall make an annual filing with the office
40within no later than 12 months after its previous filing
41supporting the, demonstrating the reasonableness of benefits in
42relation to premium rates charged in relation to benefits for
43each insurance form. Upon The office, after receiving a request
44to be exempted from the provisions of this section, the office
45may, for good cause due to insignificant numbers of policies in
46force or insignificant premium volume, exempt a company, by line
47of coverage, from filing rates or rate certification as required
48by this section.
49     (a)(b)  The filing is required by this subsection shall be
50satisfied by one of the following methods:
51     1.  A rate filing prepared by an actuary which contains
52documentation supporting premium rates charged in relation to
53benefits demonstrating the reasonableness of benefits in
54relation to premiums charged in accordance with the applicable
55rating laws and rules adopted promulgated by the commission.
56     2.  If no rate change is proposed, a filing that which
57consists of a certification by an actuary supporting premium
58rates charged in relation to benefits that benefits are
59reasonable in relation to premiums currently charged in
60accordance with applicable laws and rules adopted promulgated by
61the commission.
62     (b)(c)  As used in this section, "actuary" means an
63individual who is a member of the Society of Actuaries or the
64American Academy of Actuaries. If an insurer does not employ or
65otherwise retain the services of an actuary, the insurer's
66certification must shall be prepared by insurer personnel or
67consultants who have with a minimum of 5 years' experience in
68insurance ratemaking. The chief executive officer of the insurer
69must shall review and sign the certification indicating his or
70her agreement with its conclusions.
71     (c)(d)  If at the time a filing is due required under this
72section an insurer is in the process of completing a rate
73review, the insurer may apply to the office for an extension of
74up to an additional 30 days in which to make the filing. The
75request for an extension must be received by the office by no
76later than the date the filing is due.
77     (d)(e)  If an insurer fails to meet the filing requirements
78of this subsection and does not submit the filing within 60 days
79following the date the filing is due, the office may, in
80addition to any other penalty authorized by law, order the
81insurer to discontinue issuing the issuance of policies subject
82to the filing for which the required filing was not made, until
83such time as the office determines that the required filing is
84properly submitted.
85     (8)(a)  For the purposes of subsections (6) and (7),
86benefits of an individual accident and health insurance policy
87form, including Medicare supplement policies as defined in s.
88627.672, when authorized by rules adopted by the commission, and
89excluding long-term care insurance policies as defined in s.
90627.9404, and other policy forms under which more than 50
91percent of the policies are issued to individuals age 65 and
92over, are deemed to be reasonable in relation to premium rates
93if the rates are filed pursuant to a loss ratio guarantee of at
94least 85 percent and both the initial rates and the durational
95and lifetime loss ratios have been approved by the office., and
96Such benefits shall also continue to be deemed reasonable for
97renewal rates if while the insurer complies with the loss ratio
98such guarantee and, provided the currently expected lifetime
99loss ratio is not more than 5 percent less than the filed
100lifetime loss ratio as certified to by an actuary.
101     (a)  The office may shall have the right to bring an
102administrative action if it determines should it deem that the
103lifetime loss ratio will not be met. For Medicare supplement
104filings, the office may withdraw a previously approved filing
105which was made pursuant to a loss ratio guarantee if it
106determines that the filing is not in compliance with ss.
107627.671-627.675 or the currently expected lifetime loss ratio is
108less than the filed lifetime loss ratio as certified by an
109actuary in the initial guaranteed loss ratio filing. If this
110section conflicts with ss. 627.671-627.675, ss. 627.671-627.675
111shall control.
112     (b)  The renewal premium rates shall be deemed to be
113approved upon filing with the office if the filing is
114accompanied by a the most current approved loss ratio guarantee
115of at least 85 percent. The loss ratio guarantee must shall be
116in writing, shall be signed by an officer of the insurer, and
117shall contain at least:
118     1.  A recitation of the anticipated lifetime and durational
119target loss ratios contained in the actuarial memorandum filed
120with the policy form when it was originally approved. The
121durational target loss ratios shall be calculated for 1-year
122experience periods. If statutory changes have rendered any
123portion of the such actuarial memorandum obsolete, the loss
124ratio guarantee shall also include an amendment to the actuarial
125memorandum reflecting current law and containing new lifetime
126and durational loss ratio targets.
127     2.  A guarantee that the applicable loss ratios for the
128experience period in which the new rates will take effect, and
129for each experience period thereafter until new rates are filed,
130will meet the loss ratios referred to in subparagraph 1.
131     3.  A guarantee that the applicable loss ratio results for
132the experience period will be independently audited at the
133insurer's expense. The audit must shall be performed in the
134second calendar quarter of the year following the end of the
135experience period, and the audited results must shall be
136reported to the office by no later than the end of such quarter.
137The commission shall establish by rule the minimum information
138reasonably necessary to be included in the report. The audit
139must shall be done in accordance with accepted accounting and
140actuarial principles.
141     4.  A guarantee that affected policyholders in this state
142shall be issued a proportional refund, based on the premium
143earned, of the amount necessary to bring the applicable
144experience period loss ratio up to the durational target loss
145ratio referred to in subparagraph 1. The refund shall be made to
146all policyholders in this state who are insured under the
147applicable policy form as of the last day of the experience
148period, except that no refund need be made to a policyholder in
149an amount less than $10. Refunds less than $10 shall be
150aggregated and paid pro rata to the policyholders receiving
151refunds. The refund shall include interest at the then-current
152variable loan interest rate for life insurance policies
153established by the National Association of Insurance
154Commissioners, calculated from the end of the experience period
155until the date of payment. Payments must shall be made during
156the third calendar quarter of the year following the experience
157period for which a refund is determined to be due. However, no
158refunds shall be made until 60 days after the filing of the
159audit report in order for that the office to have has adequate
160time to review the report.
161     5.  A guarantee that if the applicable loss ratio exceeds
162the durational target loss ratio for that experience period by
163more than 20 percent and, provided there are at least 2,000
164policyholders on the form nationwide or, if not, then
165accumulated each calendar year until 2,000 policyholder years is
166reached, the insurer, if directed by the office, shall withdraw
167the policy form for the purposes of issuing new policies.
168     (c)  As used in this subsection:
169     1.  "Loss ratio" means the ratio of incurred claims to
170earned premium.
171     2.  "Applicable loss ratio" means the loss ratio
172attributable solely to this state if there are 2,000 or more
173policyholders in the state. If there are 500 or more
174policyholders in this state but fewer less than 2,000, it is the
175linear interpolation of the nationwide loss ratio and the loss
176ratio for this state. If there are fewer less than 500
177policyholders in this state, it is the nationwide loss ratio.
178     3.  "Experience period" means the period, ordinarily a
179calendar year, for which a loss ratio guarantee is calculated.
180     Section 2.  Subsection (3) of section 627.411, Florida
181Statutes, is amended to read:
182     627.411  Grounds for disapproval.-
183     (3)(a)  For health insurance coverage as described in s.
184627.6561(5)(a)2., the minimum loss ratio standard of incurred
185claims to earned premium for the form shall be 85 65 percent.
186     (b)  Incurred claims are claims occurring within a fixed
187period, whether or not paid during the same period, under the
188terms of the policy period.
189     (a)1.  Claims include scheduled benefit payments or
190services provided by a provider or through a provider network
191for dental, vision, disability, and similar health benefits.
192     (b)2.  Claims do not include state assessments, taxes,
193company expenses, or any expense incurred by the company for the
194cost of adjusting and settling a claim, including the review,
195qualification, oversight, management, or monitoring of a claim
196or incentives or compensation to providers for other than the
197provisions of health care services.
198     (c)3.  A company may at its discretion include costs that
199are demonstrated to reduce claims, such as fraud intervention
200programs or case management costs, which are identified in each
201filing, are demonstrated to reduce claims costs, and do not
202result in increasing the experience period loss ratio by more
203than 5 percent.
204     (d)4.  For scheduled claim payments, such as disability
205income or long-term care, the incurred claims shall be the
206present value of the benefit payments discounted for continuance
207and interest.
208     Section 3.  Subsection (1) of section 627.6745, Florida
209Statutes, is amended to read:
210     627.6745  Loss ratio standards; public rate hearings.-
211     (1)  Medicare supplement policies shall return the
212following to policyholders in the form of aggregate benefits
213under the policy, with respect to the lifetime of the policy, on
214the basis of earned premiums and on the basis of incurred claims
215experience or, if coverage is provided by a health maintenance
216organization based on service rather than reimbursement,
217incurred health care expenses, and in accordance with accepted
218actuarial principles and practices:
219     (a)  At least 85 75 percent of the aggregate amount of
220premiums earned in the case of group policies.
221     (b)  For individual policies issued or renewed before prior
222to July 1, 1989, at least 60 percent of the aggregate amount of
223premiums earned; and for individual policies issued or renewed
224on or after July 1, 1989, but before October 1, 2010, at least
22565 percent of the aggregate amount of premiums earned; and for
226policies issued on or after October 1, 2010, at least 85 percent
227of the aggregate amount of premiums earned. For the purposes of
228this section, policies issued as a result of soliciting
229solicitations of individuals through the mail or by mass media
230advertising are shall be deemed to be individual policies.
231     Section 4.  Subsection (6) of section 627.9407, Florida
232Statutes, is amended to read:
233     627.9407  Disclosure, advertising, and performance
234standards for long-term care insurance.-
235     (6)  LOSS RATIO AND RESERVE STANDARDS.-The commission shall
236adopt rules establishing loss ratio and reserve standards for
237long-term care insurance policies. Such loss ratios may not be
238less than 85 percent. The rules must contain a specific
239reference to long-term care insurance policies. Such loss ratio
240and reserve standards shall be established at levels at which
241benefits are reasonable in relation to premiums and which that
242provide for adequate reserving of the long-term care insurance
243risk.
244     Section 5.  This act shall take effect July 1, 2010.


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