Title of Rule and Other Identifying Information: Chapter 284-43 WAC, Subchapter I - Health plan rates.

     Purpose of the Proposal and Its Anticipated Effects, Including Any Changes in Existing Rules: The purpose of this proposed rule making is to improve the regulatory framework of chapter 284-43 WAC, Subchapter I - Health plan rates, eliminate outdated provisions, and bring the regulations into compliance with HB 2460 (chapter 244, Laws of 2004) and E2SSB 6067 (chapter 79, Laws of 2000).

     Reasons Supporting Proposal: The commissioner is committed to the review of existing regulations to improve the clarity and efficiency of Title 284 WAC. This subchapter contains outdated references and confusing language. Additionally, it conflicts with rate provisions enacted subsequent to the adoption of this chapter.

     Statutory Authority for Adoption: RCW 48.02.060, 48.44.050, and 48.46.200.

     Statute Being Implemented: RCW 48.44.020, 48.44.023, 48.46.060, and 48.46.066.

     Rule is not necessitated by federal law, federal or state court decision.

     Name of Proponent: Mike Kreidler, Insurance Commissioner, governmental.

     Name of Agency Personnel Responsible for Drafting: Ruth Ammons, P.O. Box 40255, Olympia, WA 98504-0255, (360) 725-7036; Implementation: Beth Berendt, P.O. Box 40255, Olympia, WA 98504-0255, (360) 725-7117; and Enforcement: Carol Sureau, P.O. Box 40255, Olympia, WA 98504-0255, (360) 725-7050.

December 1, 2004

Mike Kreidler

Insurance Commissioner

OTS-7575.2

AMENDATORY SECTION(Amending Matter No. R 97-2, filed 1/23/98, effective 3/1/98)

WAC 284-43-905   Applicability and scope.   This subchapter applies to health benefit plans as defined in RCW 48.43.005(((9))), and contracts for limited health care services as defined in RCW 48.44.035(((1))), offered by health care service contractors and health maintenance organizations ((registered)) transacting business in this state under chapter 48.44 or 48.46 RCW. It applies to such plans purchased directly by individuals, small employers, ((and)) large employers((, or)) and other organizations.

[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 (Matter No. R 97-2), § 284-43-905, filed 1/23/98, effective 3/1/98.]

     (1) "Adjusted earned premium" means the amount of "earned premium" the "carrier" would have earned had the "carrier" charged current "premium rates" for all applicable "plans."

     (2) (("Amount charged" means all sums charged, received, or deposited as consideration for a "contract" or "group contract" or the continuance thereof. An assessment or a membership, contract, survey, inspection, service, or similar fee or charge made by the carrier in consideration for a "contract" or "group contract" is considered part of the "amount charged."

     (3))) "Annualized earned premium" means the "earned premium" that would be earned in a twelve-month period if earned at the same rate as during the applicable period.

     (((4))) (3) "Anticipated loss ratio" means the "projected incurred claims" divided by the "projected earned premium."

     (((5))) (4) "Base rate" means the ((amount charged)) "premium" for a specific "plan," expressed as a monthly amount per "covered person or subscriber," prior to any adjustments for geographic area, age, family size, wellness activities((, tenure,)) or any other factors as may be allowed.

     (((6))) (5) "Capitation expenses" means the amount paid to a provider or facility on a per "covered person" basis, or as part of risk-sharing provisions, for the coverage of specified health care services.

     (((7))) (6) "Carrier" means a health care service contractor or health maintenance organization.

     (((8))) (7) "Certificate" means the statement of coverage document furnished "subscribers" covered under a "group contract."

     (((9))) (8) "Claim reserves" means the "claims" that have been reported but not paid plus the "claims" that have not been reported but may be reasonably expected.

     (((10))) (9) "Claims" means the cost to the "carrier" of health care services provided to a "covered person" or paid to or on behalf of the "covered person" in accordance with the terms of a "plan." This includes "capitation payments" or other similar payments made to (("providers")) providers or facilities for the purpose of paying for health care services for a "covered person."

     (((11))) (10) "Community rate" means the weighted average of all "premium rates" within a filing with the weights determined according to current enrollment.

     (((12))) (11) "Contract" means an agreement to provide health care services or pay health care costs for or on behalf of a "subscriber" or group of "subscribers" and such eligible dependents as may be included therein.

     (((13))) (12) "Contract form" means the prototype of a "contract" and any associated riders and endorsements filed with the commissioner by a health care service contractor or health maintenance organization.

     (((14))) (13) "Contribution to surplus, contingency charges, or risk charges" means the portion of the "projected earned premium" not associated directly with "claims" or "expenses((," that in the case of investor owned companies, provide the carrier with a fair rate of return on investor-supplied capital commensurate with the risk assumed by the overall business of the carrier. In the case of a not-for-profit carrier, these are the portion of the "projected earned premium" that provide assurance of the carrier's solvency))."

     (((15))) (14) "Covered person((s))" ((means all "subscribers" and their eligible dependents)) or "enrollee" has the same meaning as that contained in RCW 48.43.005.

     (((16))) (15) "Current community rate" means the weighted average of the "community rates" at the renewal or initial effective dates of each plan for the year immediately preceding the renewal period, with weights determined according to current enrollment.

     (((17))) (16) "Current enrollment" means the monthly average number and demographic makeup of the "covered persons" for the applicable contracts during the most recent twelve months for which information is available to the carrier.

     (((18))) (17) "Earned premium" means the (("amount charged")) "premium" plus any rate credits or recoupments, applicable to an accounting period whether received before, during, or after such period.

     (((19))) (18) "Expenses" means costs that include but are not limited to the following:

     (a) Claim adjudication costs;

     (b) Utilization management costs if distinguishable from "claims";

     (c) Home office and field overhead;

     (d) Acquisition and selling costs;

     (e) Taxes; and

     (f) All other costs except "claims."

     (((20))) (19) "Experience period" means the most recent twelve-month period from which the carrier accumulates the data to support a filing.

     (((21))) (20) "Extraordinary expenses" means "expenses" resulting from occurrences atypical of the normal business activities of the "carrier" that are not expected to recur regularly in the near future.

     (((22))) (21) "Group contract" or "group plan" means an agreement issued to an employer, corporation, labor union, association, trust, or other organization to provide health care services to employees or members of such entities and the dependents of such employees or members.

     (((23))) (22) "Incurred claims" means "claims" paid during the applicable period plus the "claim reserves" as of the end of the applicable period minus the "claim reserves" as of the beginning of the applicable period. Alternatively, for the purpose of providing monthly data or trend analysis, "incurred claims" may be defined as the current best estimate of the "claims" for services provided during the applicable period.

     (((24))) (23) "Individual contract" means a "contract" issued to and covering an individual. An "individual contract" may include dependents.

     (((25))) (24) "Investment earnings" means the income, dividends, and realized capital gains earned on an asset.

     (((26))) (25) "Loss ratio" means "incurred claims" as a percentage of "earned premiums" before any deductions.

     (((27))) (26) "Medical care component of the consumer price index for all urban consumers" means the similarly named figure published monthly by the United States Bureau of Labor Statistics.

     (((28))) (27) "Net worth or reserves and unassigned funds" means the excess of assets over liabilities on a statutory basis.

     (((29))) (28) "Plan" means a "contract" that is a health benefit((s)) plan as defined in RCW 48.43.005(((9))) or a "contract" for limited health care services as defined in RCW 48.44.035(((1))).

     (29) "Premium" has the same meaning as that contained in RCW 48.43.005.

     (30) "Premium rate" means the (("amount charged")) "premium" per "subscriber" or "covered person" obtained by adjusting the "base rate" for geographic area, family size, age, wellness activities, ((tenure,)) or any other factors as may be allowed.

     (31) "Projected earned premium" means the "earned premium" that would be derived from applying the proposed "premium rates" to the current enrollment.

     (32) "Projected incurred claims" means the estimate of "incurred claims" for the rate renewal period based on the current enrollment.

     (33) "Proposed community rate" means the weighted average of the "community rates" at the renewal dates of each plan for the renewal period, with weights determined according to current enrollment.

     (34) "Provider" ((means any health professional, hospital, or other institution, organization, prescription drug vendor, or person that furnishes health care services and is licensed or otherwise authorized to furnish such services)) has the same meaning as that contained in RCW 48.43.005.

     (35) "Rate renewal period" means the period for which the proposed "premium rates" are intended to remain in effect.

     (36) "Rate schedule" means the schedule of all "base rates" for "plans" included in the filing.

     (37) "Requested increase in the community rate" means the amount, expressed as a percentage, by which the "proposed community rate" exceeds the "current community rate."

     (38) "Service type" means the category of service for which "claims" are paid, such as hospital, professional, dental, prescription drug, or other.

     (39) "Small group contracts" or "small group plans" means the class of "group contracts" issued to "small employers" ((with no more than fifty eligible employees, including sole proprietors. "Small employer")), as that term is defined ((at)) in RCW 48.43.005(((13))).

     (40) "Staffing data" means statistics on the number of (("))providers((")) and associated compensation required to provide a fixed number of services or provide services to a fixed number of "covered persons."

     (41) "Subscriber" means a person on whose behalf a "contract" or "certificate" is issued.

     (42) "Unit cost data" means statistics on the cost per health care service provided to a "covered person."

     (43) "Utilization data" means statistics on the number of services used by a fixed number of "covered persons" over a fixed length of time.

[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 (Matter No. R 97-2), § 284-43-910, filed 1/23/98, effective 3/1/98.]

	CPI*	Maximum Rate Increase
	7% or less	CPI*+3%
	7% to 10%	10%
	10% or more	CPI*

*	CPI refers to the rate of increase in the medical care component of the consumer price index for all urban consumers.

     (2) For group plans other than small group plans, benefits shall be found not to be unreasonable in relation to amount charged if the anticipated loss ratio is eighty percent or more)).

     (((3) If the conditions of subsection (1) or (2) of this section are not met,)) (2) Benefits ((shall be found not to be unreasonable)) will be found not to be unreasonable if the projected earned premium for the rate renewal period is equal to the following:

     (a) An actuarially sound estimate of incurred claims associated with the filing for the rate renewal period, where the actuarial estimate of claims ((shall)) recognizes, as applicable, the savings and costs associated with managed care provisions of the plans included in the filing; plus

     (b) An actuarially sound estimate of prudently incurred expenses associated with the plans included in the filing for the rate renewal period, where the estimate ((shall be)) is based on an equitable and consistent expense allocation or assignment methodology; plus

     (c) An actuarially sound provision for contribution to surplus, contingency charges, or risk charges, where the justification ((shall)) recognizes the carrier's investment earnings on assets other than those related to claim reserves or other similar liabilities; minus

     (d) An actuarially sound estimate of the forecasted investment earnings on assets related to claim reserves or other similar liabilities for the plans included in the filing for the rate renewal period.

     (((4))) (3) The contribution to surplus, contingency charges, or risk charges in subsection (((3))) (2)(c) of this section, ((shall)) will not be required to be less than zero.

     (((5) For the purposes of this section, the rate of increase in the medical care component of the consumer price index for all urban consumers shall be measured by comparing the index for the month immediately preceding the month in which the filing is submitted to the index for the corresponding calendar month for the prior year.))

[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 (Matter No. R 97-2), § 284-43-915, filed 1/23/98, effective 3/1/98.]