Title 18 Insurance
1300 Health Insurance General Provisions
1305 Loss Ratio Filing Procedures for Health Insurers and Health Service Corporations for Medical and Hospital Expense-incurred Insurance Policies and Group Plans [Formerly Regulation 52]
1.0 Authority
This regulation is promulgated and adopted pursuant to 18 Del.C. §314, 18 Del.C. Ch. 25 and 29 Del.C. Ch. 101.
2.0 Purpose
The purpose of this regulation is to establish a format for all filings made pursuant to 18 Del.C. §2506(c), including therein the specific manner of calculating and certifying the loss ratio. Insurers Are Reminded That There Is at Present (1991) a $25 per Filing Fee Imposed.
3.0 Scope
This regulation applies to insurers and health service corporations that deliver or issue for delivery medical and hospital expense-incurred insurance policies and plans for which rates submitted affect 20 or more residents of this State. The regulation applies to individual policies and plans, and group policies and plans that cover 24 or fewer persons. Any insurer or health service corporation having more than one group policy or plan that affects 24 or fewer persons must make a separate filing for each group policy or plan. A single filing by an insurer or health service corporation that purports to be an aggregate representation of loss ratio information for two or more group policies or plans is precluded by this regulation.
4.0 Definitions
4.1 For purposes of this regulation:
“Collected Premium” means the amount of premium that is unadjusted to reflect any changes in the rate level (e.g. reported or actual premium).
“Earned Premium” means the amount of premium for each year in the experience period on a collected basis.
“Experience Period” means the number of years over which the adequacy of the rates presently in effect are tested.
“Incurred Losses” means losses that are (1) paid losses, and (2) losses that are incurred but not yet reported to the insurance claimants.
“On-Level Factors” means factors that are used to correct collected premiums for each year in the experience period to the current level.
“Protected and Reserve Incurred Losses” means losses on claims that are still open.
“Rate Level History” means the accumulation of changes in the rate level showing the overall adjustment required to bring premiums to the current level.
5.0 Contents of Rate Revision Filing
5.1 Each rate revision filing shall include:
5.1.1 General Information
5.1.1.1 Name of insurer and domiciliary state;
5.1.1.2 Policy form name and number;
5.1.1.3 Name of insured individual or insured group and number in group;
5.1.1.4 Name of insurer's officer who is in charge of the filing;
5.1.1.5 Amount of rate increase/decrease requested;
5.1.1.6 Date filing was made;
5.1.1.7 Other state(s) that have approved or disapproved the filing; and
5.1.1.8 A written, notarized certification of insurer's officer that the filing is made pursuant to applicable laws, regulations and subject to all penalties and that the statements made in the filing are true and correct.
5.1.2 Experienced Loss Ratio
5.1.2.1 Earned premium reported on an actual basis;
5.1.2.2 Rate level history over the applicable period of time;
5.1.2.3 On-level factors;
5.1.2.4 Incurred losses on an actual basis;
5.1.2.5 Projected and reserved incurred losses (1) projection data underlying incurred losses, and (2) reserve data underlying incurred losses; and
5.1.2.6 Projected experience loss ratio.
5.1.3 Expected Loss Ratio Underlying Proposed Rates
5.1.3.1 Underwriting expenses (1) incurred commissions as a percentage of written premium, (2) general administrative expense incurred as a percentage of earned at present level premium (3) claims administration expense incurred as a percentage of actual incurred losses, (4) Delaware premium taxes, licenses and fees as a percentage of written premium, (5) underwriting profit provision expressed as a percentage of earned premium; and
5.1.3.2 Expected loss ratio.
5.1.4 Investment Income
5.1.4.1 Estimated investment earnings on unearned premium reserves and on loss reserves calculated as follows:
5.1.4.1.1 Unearned premium reserve
5.1.4.1.1.1 Direct earned premium for calendar year ended _______
5.1.4.1.1.2 Mean unearned premium reserve_______
5.1.4.1.1.3 Deduction for prepaid expenses
5.1.4.1.1.3.1 Commission and brokerage expense _______
5.1.4.1.1.3.2 Licenses and fees_______
5.1.4.1.1.3.3 50% of other acquisition expense _______
5.1.4.1.1.3.4 50% of company operating expense _______
5.1.4.1.1.3.5 Total _______
5.1.4.1.1.4 (2) x (3)= _______
5.1.4.1.1.5 Net subject to investment (2) - (4) _______
5.1.4.1.2 Delayed remission of premium (agents' balances)
5.1.4.1.2.1 Direct earned premium (A - 1)_______
5.1.4.1.2.2 Average agents' balance_______
5.1.4.1.2.3 Delayed remission (1) x (2)_______
5.1.4.1.3 Loss Reserve
5.1.4.1.3.1 Direct earned premium_______
5.1.4.1.3.2 Expected incurred losses excluding underwriting profit provision _______
5.1.4.1.3.3 Expected loss reserves_______
5.1.4.1.4 Net subject to investment
(A-5) - (B-3) + (C-3) = _______
5.1.4.1.5 Average rate of return _______
5.1.4.1.6 Investment earnings on net subject to investment (D) x (E) = _______
5.1.4.1.7 Average rate of return as a percent of direct earned premium (F) divided by (A -1) _______
5.1.4.1.8 Average rate of return as a percent of direct earned premium after federal income taxes _______
5.1.5 Indicated rate level change reflecting investment income as a credit against underwriting profit provision.
6.0 New Policy or Plan
6.1 With respect to a new form, benefits shall be deemed reasonable in relation to premiums provided the anticipated loss ratio or the end of the third year is at least as great as shown in the following table:
Renewal Clause* |
||||
Type of Coverage |
OR |
CR |
GR |
NC |
Medical Expense |
60% |
55% |
55% |
50% |
Loss of Income and Other |
60% |
55% |
50% |
45% |
For individual Medicare supplement policies, the anticipated loss ratio must equal at least 65%. For group Medicare supplement policies, the anticipated loss ratio must equal at least 75%. | ||||
7.0 Effective Date of Regulation
This regulation shall become effective on May 30, 1991.
