MINIMUM LOSS RATIO REQUIREMENTS

STATE OF NEW MEXICO OFFICE OF SUPERINTENDENT OF INSURANCE SUPERINTENDENT OF INSURANCE Russell Toal OSI NEW MEXICO OFFICE OF SUPERINTENDENT OF INSURANCE 2020 JAN 28 PM 3:31 DEPUTY SUPERINTENDENT Robert E. Doucette, Jr. FILED # BULLETIN 2020-001 January 28, 2020 # TO: EVERY INSURER THAT OFFERS A GROUP PLAN PROVIDING COVERAGE ONLY FOR: - accident; - accidental death and dismemberment; - blanket accident and sickness; - credit disability; - critical illness; - dental; - disability income; - home health care; - hospital indemnity; - medical expense; - prescription drug; - sickness; - specified disease; - vision; or - any similar coverage as determined by the Superintendent. # RE: MINIMUM LOSS RATIO REQUIREMENTS THIS BULLETIN is issued pursuant to NMSA 1978, Sections 59A-2-8 and 59A-2-10. This Bulletin is in response to questions regarding minimum loss ratio requirements for the group products identified above, which underlie rates required to be filed pursuant to NMSA 1978 Section 59A-18-13.2. The purpose of this Bulletin is to ensure that carriers that offer any such group product provide benefits that are reasonable in relation to premiums. The following anticipated minimum loss ratios, along with the accompanying procedure for adjusting them for low average premium forms and high average premium forms, are rebuttably presumed to be reasonable, and follow NAIC Model Regulation 134, Guidelines for Filing of Rates for Individual Health Insurance Forms: | Type of Coverage: | Renewal Clause | | | | | --- | --- | --- | --- | --- | | | OR | CR | GR | NC | | Medical Expense | 65% | 60% | 60% | 55% | | Loss of Income and Other | 65% | 60% | 55% | 50% | Main Office: 1120 Paseo de Peralta, Room 428, Santa Fe, NM 87501 Satellite Office: 6200 Uptown Blvd NE, Suite 100, Albuquerque, NM 87110 Main Phone: (505) 827-4601 | Satellite Phone: (505) 322-2186 | Toll Free: (855) 4 - ASK - OSI www.osi.state.nm.us BULLETIN 2020-001 Page | 2 (1) Definitions of Renewal Clause OR - Optionally Renewable: renewal is at the option of the insurance company. CR - Conditionally Renewable: renewal can be declined by class, by geographic area or for stated reasons other than deterioration of health. GR - Guaranteed Renewable: renewal cannot be declined by the insurance company for any reason, but the insurance company can revise rates on a class basis. NC - Non-Cancelable: renewal cannot be declined nor can rates be revised by the insurance company. (2) Low Average Premium Forms For a policy form, including riders and endorsements, under which the expected average annual premium per certificate is low (as defined below), the appropriate ratio from the table above should be adjusted downward by the following formula: $$\mathrm{RN} = \mathrm{R} \times \frac{(\mathrm{I} \times 500) + \mathrm{X}}{(\mathrm{I} \times 750)}$$ Where: R is the table ratio RN is the resulting guideline ratio I is the consumer price index factor X is the average annual premium, up to a maximum of I x 250. The factor I is determined as follows: $$\mathrm{I} = \frac{\text{CPI-U, Year (N-1)}}{\text{CPI-U, (1982)}} = \frac{\text{CPI-U, Year (N-1)}}{97.9}$$ where: (a) (N-1) is the calendar year immediately preceding the calendar year (N) in which the rate filing is submitted in the state; (b) CPI-U is the consumer price index for all urban consumers, for all items, and for all regions of the U.S. combined, as determined by the U.S. Department of Labor, Bureau of Labor Statistics; (c) The CPI-U for any year (N-1) is taken as the value of September. For 1982, this value was 97.9;