Filings Made Easy for Life, Health and Licensing

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Filings Made Easy for Life, Health and Licensing
Whats Wrong With My Rate Filing?
Dewayne Matthews
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Presentation Topics
Whats Wrong with my Rate Filing?

• Products
• Medicare Supplement
• Long Term Care
• Individual Accident and Health
• Small Employer Group Health
• Large Employer Group Health

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Presentation Topics Contd
Whats Wrong with my Rate Filing?

• Products (Continued)
• Health Maintenance Organizations
• Credit Life and Credit Accident and Health
• Cost of Insurance Rates
• Consumer Choice Health Benefit Plans

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Presentation Topics Contd
Whats Wrong with my Rate Filing?

• Rate Authority
• Common Problems Associated with Rate Filings

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Medicare Supplement
Whats Wrong with my Rate Filing?

• Rate Authority
• Rates are filed for approval
• Loss ratio requirements must be met
• Sections 1652.102-1652.105, Texas Insurance Code
  (TIC), 28 Texas Administrative Code (TAC)
  3.3307, 3.3322, 3.3323

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Medicare Supplement
Whats Wrong with my Rate Filing?

• Common Problems
• Effective date of rate increase 28 TAC 3.3323
• High increases on non-credible blocks 28 TAC
  3.3307(d)
• Consistency of area factors
• Actuarial equivalency between rating
  methodologies
• High increase requests on plan A disableds

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Long Term Care
Whats Wrong with my Rate Filing?

• Rate Authority
• All rates must be filed and are reviewed by the
  Actuarial Team.
• Loss ratio requirements must be met on pre-rate
  stabilized policies (issued prior to July 1,
  2002). Benefits provided under a long term care
  policy are deemed reasonable in relation to
  premium charged if the expected loss ratio is at
  least 60.
• Rate stabilized policies (issued after July 1,
  2002) must be priced to produce premium rates
  that are adequate over the life of the policy
  under moderately adverse conditions. For
  example, more pessimistic morbidity, mortality,
  and/or lapse rates are assumed when pricing the
  product. The goal of these moderately adverse
  assumptions in the pricing is that the company
  may be able avoid rate increases in the future.
• Section 1651.053, TIC, 28 TAC 3.3831

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Long Term Care
Whats Wrong with my Rate Filing?

• Common Problems
• Combining experience on pre and post
  rate-stabilized policies
• Incomplete list of forms which the rate
  adjustment will apply
• Increases proposed on forms or riders not
  approved in Texas
• Rate increase filed without disclosure form. The
  disclosure form shows a rate increase history for
  the company and must be shown to the prospective
  buyer of the policy.
• Not addressing any changes in assumptions from
  original pricing
• Basing the proposed rate increase on nationwide
  experience but not filing the increase in all
  states
• Not providing the actuarial certifications
  required by 28 TAC 3.3831(b)(1)(B)

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Individual Accident and Health
Whats Wrong with my Rate Filing?

• Rate Authority
• Rates must be filed
• Actuarial justification required for an increase
  in premium rate greater than or equal to 50 in
  any 12-month period
• Section 1701.057, TIC 28 TAC 3.4(q)

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Individual Accident and Health
Whats Wrong with my Rate Filing?

• Common Problems (for increases less than 50)
• Rate schedules not included
• Proposed increases for forms not approved in
  Texas
• 28 TAC 3.4 (p)(5)

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Individual Accident and Health
Whats Wrong with my Rate Filing?

• Common Problems (for increases greater than or
  equal to 50)
• Rate schedules not included
• Proposed increases for forms not approved in
  Texas
• Incomplete experience demonstrations
• Large increases on non-credible blocks
• Basing the increase on nationwide experience but
  not requesting the same increase in other states
• Article 1.02(c)(3)(A), TIC

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Small Employer Group Health
Whats Wrong with my Rate Filing?

• Rate Authority
• Actuarial certification required to be filed
  annually. Certification that the rates comply
  with accepted actuarial practices, are uniformly
  applied to each small employer health benefit
  plan, and comply with Texas small employer
  regulations
• Rates are not required to be filed
• Changes in rating methodology are filed for
  approval
• Sections 1501.201 1501.215, 1501.354, TIC 28
  TAC 26.11

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Small Employer Group Health
Whats Wrong with my Rate Filing?

• Rating Requirements
• Case Characteristics, Section 1501.201, TIC.
• Objective characteristics that serve as good
  predictors of a groups expected claims
  experience. Texas law allows carriers to use the
  following five characteristics in determining a
  groups rate
• Age of employees In general, an individual
  is more likely to use health care services as he
  or she ages. The older employees, the more the
  employer can be expected to pay for health
  insurance

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Small Employer Group Health
Whats Wrong with my Rate Filing?

• Case Characteristics Contd
• Gender of employees Females generally incur
  greater medical costs than males at younger ages,
  particularly during childbearing years. The
  variance in costs diminish with age until medical
  costs for males begin to exceed those or females
  in their late fifties or early sixties.
• Size of small employer group As the group size
  increases, the pre-insured expenses required to
  issue and service the business decreases. This
  allows for a lower rate. The highest group size
  factor may not exceed the lowest group size
  factor by more than 20. Section 1501.209, TIC

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Small Employer Group Health
Whats Wrong with my Rate Filing?

• Case Characteristics Contd
• Industry classification Individuals working
  in some industries exhibit higher medical claim
  costs than in other industries. This is due in
  part to working conditions and the prevalence of
  accidents in some industries. Also, higher
  employee turnover in some industries may result
  in higher administrative costs for the insurer.
  The highest factor associated with an industry
  classification may not exceed the lowest factor
  associated with an industry classification by
  more than 15. Section 1501.208, TIC

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Small Employer Group Health
Whats Wrong with my Rate Filing?

• Case Characteristics Contd
• Geographic Area The cost of medical care
  varies from one area to another. This is due to
  the general cost level of the area, the
  differences in medical practices by region, the
  degree of specialization of services, and the
  amount of competition in the area.
• Currently, The Texas Department of Insurance has
  not approved any additional case characteristics.

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Small Employer Group Health
Whats Wrong with my Rate Filing?

• The Rating Process
• First, a premium rate is determined based on the
  groups case characteristics and plan design
  factors.
• Second, the rate may be adjusted by a risk load
  to reflect risk characteristics of the group.
  Risk characteristics include health status
  related factors or experience of a small employer
  group or an member of a small employer group.

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Small Employer Group Health
Whats Wrong with my Rate Filing?

• Risk Load
• Initially when an employer is first issued a
  policy, the risk load may be as high as 67. The
  risk load may be increased up to a maximum of 15
  annually and must be uniformly applied to all
  members of the group however the resulting risk
  load may not exceed 67.

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Small Employer Group Health
Whats Wrong with my Rate Filing?

• What constitutes a change in rating methodology?
  28 TAC 26.11
• A change in the number of case characteristics
  used by a small employer carrier to determine
  premium rates
• A change in the manner or procedures by which
  insureds are assigned into categories for the
  purpose of applying a case characteristic to
  determine premium rates
• A change in the method of allocating expenses
• A change in a rating factor with respect to any
  case characteristic if the change would produce a
  change in premium for any small employer that
  exceeds 10

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Small Employer Group Health
Whats Wrong with my Rate Filing?

• Change in rating methodologies (common problems)
• Support and justification is not provided for the
  change in rating methodology
• An explanation of how the change in rating method
  would affect premium rates charged to small
  employers not provided. 28 TAC 26.11(b)(1)(C)
• The actuarial certifications required by 28 TAC
  26.11(b)(1)(D) and (E) not provided

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Large Employer Group Health
Whats Wrong with my Rate Filing?

• Rate Authority
• Rates are not required to be filed.
• Law requires any adjustment to premium rates for
  health related factors be applied uniformly to
  the rates charged to all employees and dependents
  of the large employer.
• Section 1501.610, TIC

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Health Maintenance Organizations
Whats Wrong with my Rate Filing?

• Rate Authority
• Formula or methodology for determining the
  schedule of charges must be filed and must be
  accompanied by an actuarial statement that
  certifies the appropriateness of such formula or
  method
• Sections 1271.101, 1271.251 1271.252, TIC 28
  TAC 11.701 11.707

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Health Maintenance Organizations
Whats Wrong with my Rate Filing?

• Common Problems
• Not identifying change in assumptions or changes
  in the method for calculating the rates
• Not providing the actuarial certification
  required by 28 TAC 11.702

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Credit Life and Credit Accident and Health
Whats Wrong with my Rate Filing?

• Rate Authority
• Commissioner promulgates and adopts presumptive
  rates by rule
• Rate schedules must be filed for approval
• Presumptive Premium Rates (28 TAC 3.5206)
• Automatic Deviation deviation within /- 30 of
  presumptive rates. Section 1153.105, TIC 28 TAC
  3.5601(1)
• Approved Deviation - deviation outside the /-
  30 band which requires support based on actual
  experience. Section 1153.106, TIC 28 TAC
  3.5601(2)

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Credit Life and Credit Accident and Health
Whats Wrong with my Rate Filing?

• Common Problems
• Incomplete description of Class of Business and
  Plan of Benefits to which the rates apply.
  Classes of business are
• Class A Commercial Banks, Savings and Loan
  Assn. Mortgage Companies
• Class B Finance Companies, Small Loan Companies
• Class C Credit Unions
• Class D Production Credit Associations
• Class E Dealers (Auto Dealers, Retail Stores,
  Other Dealers, etc.)
• Class F Other than A through E (specify)

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Credit Life and Credit Accident and Health
Whats Wrong with my Rate Filing?

• Common Problems (Continued)
• Plan of benefits should be specified. Plans of
  benefits are coded between 1 and 26 depending on
  life, disability, length of waiting period for
  benefits to begin, single premium or outstanding
  balance.
• Composite rates are allowed but must be
  demonstrated to be actuarially equivalent to the
  presumptive rates and must be within /- 30 of
  presumptive rates at all loan durations.

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Cost of Insurance Rates
Whats Wrong with my Rate Filing?

• Rate Authority
• Must provide the mortality table used, the
  interest rate, and the method used to compute the
  cash surrender values and the paid-up
  nonforfeiture benefits available under the policy
• Section 1105.004(d), TIC 28 TAC 3.4(q)

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Consumer Choice Health Benefit Plans
Whats Wrong with my Rate Filing?

• Markets
• Employer
• Individual
• Association
• All Consumer Choice Health Benefit Plan rates are
  reviewed by the Actuarial Team
• Cost Savings must be filed for information

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Contact Information
Whats Wrong with my Rate Filing?

• Actuarial Team
• Jan Graeber, ASA, MAAA
• 512-305-7317 Jan.Graeber_at_tdi.state.tx.us
• Carol Lo, ASA, MAAA
• 512-305-7318 Carol.Lo_at_tdi.state.tx.us
• Dewayne Matthews
• 512-305-7280 Dewayne.Matthews_at_tdi.state.tx.us
• Bing Wu
• 512-322-4210 Yuhsiang.Wu_at_tdi.state.tx.us