INSURANCE COMMISSIONER'S OFFICE
[Insurance Commissioner Matter No. R 98-8--Filed May 20, 1998, 8:06 a.m.]
Date of Adoption: May 19, 1998.
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.
Citation of Existing Rules Affected by this Order: Repealing WAC 284-05-070; and amending WAC 284-05-040, 284-05-060, and 284-43-930.
Statutory Authority for Adoption: RCW 48.02.060, 48.92.140.
Adopted under notice filed as WSR 98-07-105 on March 18, 1998.
Number of Sections Adopted in Order to Comply with Federal Statute: New 0, amended 0, repealed 0; Federal Rules or Standards: New 0, amended 0, repealed 0; or Recently Enacted State Statutes: New 0, amended 0, repealed 0.
Number of Sections Adopted at Request of a Nongovernmental Entity: New 0, amended 0, repealed 0.
Number of Sections Adopted on the Agency's Own Initiative: New 0, amended 3, repealed 1.
Number of Sections Adopted in Order to Clarify, Streamline, or Reform Agency Procedures: New 0, amended 0, repealed 0.
Number of Sections Adopted Using Negotiated Rule Making: New 0, amended 0, repealed 0; Pilot Rule Making: New 0, amended 0, repealed 0; or Other Alternative Rule Making: New 0, amended 0, repealed 0.
Effective Date of Rule: Thirty-one days after filing.
May 19, 1998
Greg J. Scully
Chief Deputy 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.]