Loss ratio standards and refund or credit of premium

1. Loss ratio standards. a. (1) A Medicare supplement policy form or certificate form may not be delivered or issued for delivery unless the policy form or certificate form can be expected, as estimated for the entire period for which rates are computed to provide coverage, to return to policyholders and certificate holders in the form of aggregate benefits (not including anticipated refunds or credits) provided under the policy form or certificate form: (a) At least seventy-five percent of the aggregate amount of premiums earned in the case of group policies; or (b) At least sixty-five percent of the aggregate amount of premiums earned in the case of individual policies; (2) Calculated on the basis of incurred claims experience or incurred health care expenses where coverage is provided by a health maintenance organization on a service rather than reimbursement basis and earned premiums for such period and in accordance with accepted actuarial principles and practices. Incurred health care expenses when coverage is provided by a health maintenance organization shall not include: (a) Home office and overhead costs; (b) Advertising costs; (c) Commissions and other acquisition costs; (d) Taxes; (e) Capital costs; (f) Administrative costs; and (g) Claims processing costs. b. All filings of rates and rating schedules must demonstrate that expected claims in relation to premiums comply with the requirements of this section when combined with actual experience to date. Filings of rate revisions must also demonstrate that the anticipated loss ratio over the entire future period for which the revised rates are computed to provide coverage can be expected to meet the appropriate loss ratio standards. c. For purposes of applying subdivision a of subsection 1 of this section and subdivision c of subsection 4 of section 45-06-01.1-12 only, policies issued as a result of solicitations of individuals through the mails or by mass media advertising (including both print and broadcast advertising) are deemed to be group policies. d. For policies issued prior to January 1, 1992, expected claims in relation to premiums must meet: (1) The originally filed anticipated loss ratios when combined with the actual experience since inception; (2) The appropriate loss ratio requirements from subparagraphs a and b of paragraph 1 of subdivision a when combined with actual experience beginning with July 1, 1997, to date; and (3) The appropriate loss ratio requirement from subparagraphs a and b of paragraph 1 of subdivision a over the entire future period for which the rates are computed to provide coverage. 2. Refund or credit calculation. a. An issuer must collect and file with the commissioner by May thirty-first of each year the data contained in the applicable reporting form contained in appendix A for each type in a standard Medicare supplement benefit plan. b. If on the basis of the experience as reported the benchmark ratio since inception (ratio 1) exceeds the adjusted experience ratio since inception (ratio 3), then a refund or credit calculation is required. The refund calculation must be done on a statewide basis for each type in a standard Medicare supplement benefit plan. For purposes of the refund or credit calculation, experience on policies issued within the reporting year must be excluded. c. For the purposes of this section, policies or certificates issued prior to January 1, 1992, the issuer shall make the refund or credit calculation separately for all individual policies (including all group policies subject to an individual loss ratio standard when issued) combined and all other group policies combined for experience after July 1, 1997. The first report is due by May 31, 1998. d. A refund or credit may be made only when the benchmark loss ratio exceeds the adjusted experience loss ratio and the amount to be refunded or credited exceeds a de minimis level. The refund must include interest from the end of the calendar year to the date of the refund or credit at a rate specified by the secretary of health and human services, but in no event may it be less than the average rate of interest for thirteen-week treasury notes. A refund or credit against premiums due must be made by September thirtieth following the experience year upon which the refund or credit is based. 3. Annual filing of premium rates. An issuer of Medicare supplement policies and certificates issued before or after the effective date of this chapter must file annually its rates, rating schedule, and supporting documentation including ratios of incurred losses to earned premiums by policy duration for approval by the commissioner in accordance with the filing requirements and procedures prescribed by the commissioner. The supporting documentation must also demonstrate in accordance with actuarial standards of practice using reasonable assumptions that the appropriate loss ratio standards can be expected to be met over the entire period for which rates are computed. The demonstration must exclude active life reserves. An expected third-year loss ratio which is greater than or equal to the applicable percentage must be demonstrated for policies or certificates in force less than three years. As soon as practicable, but prior to the effective date of enhancements in Medicare benefits, every issuer of Medicare supplement policies or certificates in this state must file with the commissioner, in accordance with the applicable filing procedures of this state: a. (1) Appropriate premium adjustments necessary to produce loss ratios as anticipated for the current premium for the applicable policies or certificates. The supporting documents as necessary to justify the adjustment must accompany the filing. (2) An issuer must make premium adjustments necessary to produce an expected loss ratio under the policy or certificate to conform to minimum loss ratio standards for Medicare supplement policies and which are expected to result in a loss ratio at least as great as that originally anticipated in the rates used to produce current premiums by the issuer for the Medicare supplement policies or certificates. No premium adjustment which would modify the loss ratio experience under the policy other than the adjustments described herein may be made with respect to a policy at any time other than upon its renewal date or anniversary date. (3) If an issuer fails to make premium adjustments acceptable to the commissioner, the commissioner may order premium adjustments, refunds, or premium credits deemed necessary to achieve the loss ratio required by this section. b. Any appropriate riders, endorsements, or policy forms needed to accomplish the Medicare supplement policy or certificate modifications necessary to eliminate benefit duplications with Medicare. The riders, endorsements, or policy forms must provide a clear description of the Medicare supplement benefits provided by the policy or certificate. 4. Public hearings. The commissioner may conduct a public hearing to gather information concerning a request by an issuer for an increase in a rate for a policy form or certificate form issued before or after the effective date of this chapter if the experience of the form for the previous reporting period is not in compliance with the applicable loss ratio standard. The determination of compliance is made without consideration of any refund or credit for such reporting period. Public notice of the hearing may be furnished in a manner deemed appropriate by the commissioner.