INSURANCE COMMISSIONER'S OFFICE
[Insurance Commissioner Matter No. R 98-8--Filed March 18, 1998, 11:14 a.m.]
Title of Rule: Washington actuaries regulation
Purpose: Update and clarify various sections of chapter 284-05 WAC, the Washington actuaries regulation, and to change any affected references to chapter 284-05 WAC
Statutory Authority for Adoption: RCW 48.02.060, 48.74.025, 48.92.140
Statute Being Implemented: RCW 48.74.050, 48.74.060, 48.36A.200, 48.92.020
Summary: This will update various sections in chapter 284-05 WAC that have been identified as outdated, inefficient, unclear, or duplicative
Reasons Supporting Proposal: The update of these sections should make the code more efficient and improve clarity
Name of Agency Personnel Responsible for Drafting: Jon Hedegard, Lacey, Washington, (360) 407-0728; Implementation and Enforcement: Lee Barclay, Olympia, Washington, (360) 586-3685
Name of Proponent: Deborah Senn, Insurance Commissioner, governmental.
Rule is not necessitated by federal law, federal or state court decision.
Explanation of Rule, its Purpose, and Anticipated Effects: This rule will update or repeal various sections of Title 284 WAC. The affected sections include:
WAC 284-05-060(2) will be repealed, the remaining subsections of WAC 284-05-060 will be renumbered. Subsection (2) is not necessary, persons who would qualify under this section could also qualify under the existing WAC 284-05-060 (1)(b) which allows a person to demonstrate that they have actuarial competence to the satisfaction of the commissioner.
WAC 284-05-070 will be repealed. It is an effective date that is over twenty-five years old.
WAC 284-43-930 has a reference to WAC 284-05-060 that will be changed to keep it in accordance with the renumbering of WAC 284-05-060.
The result of the updating or removal of these sections should aid in making the code clearer and more useful to the consumers, carriers, and the Office of the Insurance Commissioner
Proposal Changes the Following Existing Rules: WAC 284-05-060 will be updated. Subsection (2) will be deleted and the section will be renumbered.
WAC 284-05-070 will be repealed.
WAC 284-43-930 will have the reference to WAC 284-05-060(1) changed to reflect the renumbering of WAC 284-05-060
THIS RULE IS BEING PROPOSED TO BE ADOPTED USING AN EXPEDITED RULE-MAKING PROCESS THAT WILL ELIMINATE THE NEED FOR THE AGENCY TO HOLD PUBLIC HEARINGS, PREPARE A SMALL BUSINESS ECONOMIC IMPACT STATEMENT, OR PROVIDE RESPONSES TO THE CRITERIA FOR A SIGNIFICANT LEGISLATIVE RULE. IF YOU OBJECT TO THIS RULE BEING ADOPTED USING THE EXPEDITED RULE-MAKING PROCESS, YOU MUST EXPRESS YOUR OBJECTIONS IN WRITING AND THEY MUST BE SENT TO Kacy Brandeberry, Office of the Insurance Commissioner, P.O. Box 40256, Olympia, WA 98504-0256, e-mail KacyB@oic.wa.gov, AND RECEIVED BY May 16, 1998
March 18, 1998
Deputy Insurance Commissioner
AMENDATORY SECTION (Amending Order R-72-1, filed 2/8/72, effective 7/1/72)
WAC 284-05-040 Restriction on signing as actuary. No
report, statement, or document shall be filed with the insurance
commissioner or issued to the public in relation to the business
of insurance if it is signed by a person who ((
himself)) is represented in (( such)) the instrument to be an
actuary unless (( such)) the person signing as an actuary is a
[Order R-72-1, § 284-05-040, filed 2/8/72, effective 7/1/72.]
AMENDATORY SECTION (Amending Order R-76-1, filed 2/25/76)
WAC 284-05-060 Qualified actuary defined. ((
(1))) For the
purpose of this regulation, a "qualified actuary" is an
individual who in each particular case or assignment is acting
within the scope of his or her training, experience and
qualifications(( ,)) and:
(a))) (1) Is a member of the American Academy of
Actuaries(( ,)); or
(b))) (2) Has otherwise demonstrated his or her actuarial
competence to the satisfaction of the insurance commissioner, or
to the satisfaction of the insurance regulatory official of the
domiciliary state of an insurer in the case of any actuarial
certification required in connection with an annual statement
filed by such insurer.
(2) Insofar as activities or conduct under the Employee
Retirement Income Security Act of 1974 (P.L. 93-406) may be
considered to relate to the business of insurance, an "enrolled
actuary" pursuant to federal regulations issued under that act
shall be deemed a "qualified actuary" with respect to such
activities or conduct.))
[Order R-76-1, § 284-05-060, filed 2/25/76; Order R-72-1, § 284-05-060, filed 2/8/72, effective 7/1/72.]
The following section of the Washington Administrative Code is repealed:
WAC 284-05-070 Effective date.
AMENDATORY SECTION (Amending Order R-97-2, filed 1/23/98, effective 3/1/98)
WAC 284-43-930 Contents of individual and small group filings. Under RCW 48.44.022(3) and 48.46.064(3) the experience of all individual plans shall be pooled; and under RCW 48.44.023 (3)(i) and 48.46.066 (3)(i) the experience of all small group plans shall be pooled. Filings for individual plans shall include base rates for all individual plans and filings for small group plans shall include base rates for all small group plans. Each individual and small group filing shall include all of the following information and documents:
(1) An actuarially sound estimate of incurred claims. Experience data, assumptions, and justifications of the carrier's projected incurred claims shall be provided in a manner consistent with the carrier's rate-making methodology and incorporate the following elements:
(a) A brief description of the carrier's rate-making methodology, including identification of the data used and the kinds of assumptions and projections made.
(b) The number of subscribers by family size, or covered persons for the plans included in the filing. These figures shall be shown for each month or quarter of the experience period and the prior two periods if not included in previous filings. This data shall be presented in aggregate for the plans included in the filing and in aggregate for all of the carrier's plans.
(c) Earned premium for each month or quarter of the experience period and the prior two periods if not included in previous filings, for the plans included in the filing.
(d) An estimate of the adjusted earned premium for each month or quarter of the experience period and prior two periods for the plans included in the filing.
(e) Claims data for each month or quarter of the experience period and the prior two periods. Examples of claims data are, incurred claims, capitation payments, utilization data, unit cost data, and staffing data. The specific data elements included in the filing shall be consistent with the carrier's rate-making methodology.
(f) Documentation and justification of any adjustments made to the experience data.
(g) Documentation and justification of the factors and methods used to forecast incurred claims.
(2) An actuarially sound estimate of prudently incurred expenses. Experience data, assumptions, and justifications shall be provided by the carrier as follows:
(a) A breakdown of the carrier's expenses allocated or assigned to the plans included in the filing for the experience period or for the period corresponding to the most recent "annual statement";
(i) Health care service contractors shall provide an expense breakdown at least as detailed as the annual statement schedule "Underwriting and Investment Exhibit, Part 3, Analysis of Expenses" as revised from time to time;
(ii) Health maintenance organizations shall provide an expense breakdown at least as detailed as the "Annual Statement, Report #2: Statement of Revenues, Expenses and Net Worth," for administrative expenses as revised from time to time;
(iii) The allocation and assignment methodology used in (a)(i) or (ii) of this subsection may be based on readily available data and easily applied calculations;
(b) Identification of any experience period expenses that are extraordinary; and
(c) Documentation and justification of the assignment or allocation of expenses to the plans included in the filing; and
(d) Documentation and justification of forecasted changes in expenses.
(3) An actuarially sound provision for contribution to surplus, contingency charges, or risk charges. Assumptions and justifications shall be provided by a carrier as follows:
(a) The methodology, justification, and calculations used to determine the contribution to surplus, contingency charges, or risk charges included in the proposed base rates; and
(b) The carrier's net worth or reserves and unassigned surplus at the beginning of the experience period and at the end of the experience period.
(4) An actuarially sound estimate of forecasted investment earnings on assets related to claim reserves or other similar liabilities. The carrier shall include documentation and justification of forecasted investment earnings identified in dollars, and as a percentage of total premiums and the amount credited to the plans included in the filing.
(5) Adjustment of the base rate. Experience data, assumptions, justifications, and methodology descriptions shall be provided that include:
(a) Justifications for adjustments to the base rate, supported by data if appropriate, attributable to geographic region, age, family size, use of wellness activities, and tenure discounts;
(b) Justifications, supported by data if appropriate, of any other factors or circumstances used to adjust the base rates; and
(c) Description of the methodology used to adjust the base rate to obtain the premium rate for a specific individual or group, which is detailed enough to allow the commissioner to replicate the calculation of premium rates if given the necessary data.
(6) Actuarial certification. Certification by an actuary,
as defined by WAC 284-05-060((
(1))), that the benefits and
services to be provided are reasonable in relation to the amount
(7) The requirements of subsections (1) through (6) of this section may be waived or modified upon the finding by the commissioner that a plan contains or involves unique provisions or circumstances and that the requirements represent an extraordinary administrative burden on the carrier. An example of such a situation could include a plan offered by a relatively small carrier, where such plan has limited benefits and is designed to generate an unusually small premium.
[Statutory Authority: RCW 48.02.060, 48.44.050, 48.46.200, 48.44.020 (2)(d), 48.44.022, 48.44.023, 48.46.060 (3)(d) and (5), 48.46.064 and 48.46.066. 98-04-011 (Order R-97-2), § 284-43-930, filed 1/23/98, effective 3/1/98.]