BILL REQ. #:  Z-0428.1 

Read first time 01/18/11.   Referred to Committee on Health Care & Wellness.

     AN ACT Relating to health insurance rates; adding a new section to chapter 48.43 RCW; creating a new section; and providing an effective date.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF WASHINGTON:

NEW SECTION.  Sec. 1   The legislature finds that health insurance rate increases in Washington state have resulted in premiums increasing faster than incomes. While the legislature acknowledges that a vital health insurance market is essential to Washington's economy and its citizens, the accumulation of capital and surplus for nonprofit health insurance carriers exceeds two billion dollars even as they request rate increases. By requiring carriers to propose rates that acknowledge actual net underwriting gain exceeding the gain originally projected by the carrier, premiums will more closely align with the benefits they confer without providing a windfall to the nonprofit health carrier at the consumer's expense.

NEW SECTION.  Sec. 2   A new section is added to chapter 48.43 RCW to read as follows:
     (1) For the purpose of this section:
     (a) "Carrier" means a nonprofit health care service contractor or health maintenance organization that offers a health plan.
     (b) "Contribution to surplus, contingency charges, or risk charges" means the portion of the projected earned premium not associated directly with claims or expenses.
     (c) "Surplus" means the amount reported on line 31, page 3 of the 2010 health annual statement filed with the commissioner or the comparable amount on any subsequent revision of the health annual statement.
     (2) For each proposed rate filing submitted by a nonprofit health carrier for either the individual or small group markets, the filing must include a determination of whether the carrier's surplus exceeds the three month average of the amount reported on line 16, page 4 of the 2010 health annual statement, or the comparable amount reported on any subsequent revision of the health annual statement.
     (3) If the carrier's surplus exceeds the three-month average, the carrier must submit the following information to the commissioner with its proposed rate filing:
     (a) The actual net underwriting gain for the line of business for the three calendar years preceding the year in which the rate filing being reviewed is submitted, as reported on the additional data statement form filed with the health annual statement;
     (b) A comparison of the underwriting gains reported under (a) of this subsection to the prior projections of contribution to surplus, contingency charges or risk charges, or any combination thereof, that were submitted with its proposed rate filings for the three calendar years preceding the year in which the rate filing being reviewed is submitted; and
     (c) For each of the three preceding calendar years, with its proposed rate filing, a report on investment income based on the total of line 25, page 4 of the health annual statement, apportioned by premium volume. This investment income must be included in the calculation of actual net underwriting gain.
     (4) If the total of the actual net underwriting gain is greater than the total of the proposed contribution to surplus, contingency charges, or risk charges, or any combination thereof, the commissioner must disallow the rate unless the carrier has adjusted its proposed rate:
     (a) By reducing the overall rate by the three-year averaged difference between the gain and proposed contribution; and
     (b) By reducing its proposed contribution to surplus, contingency charges, or risk charges, or any combination thereof, to zero.
     (5) If the total of the actual net underwriting gain is the same or less than the total of the proposed contribution to surplus, contingency charges, or risk charges, or any combination thereof, the commissioner must disallow the rate unless the carrier has reduced its proposed contribution to surplus, contingency charges, or risk charges, or any combination thereof, to zero.
     (6) In addition to the requirements set forth in subsections (2) through (4) of this section, the commissioner must disallow a proposed rate if the carrier:
     (a) Does not recognize investment earnings, allocated proportionally to each product line based on the ratio of its premium volume to the entire premium collected by the company, in its calculation or in the development of its proposed rates;
     (b) Includes fines, remittances, penalties, administrative sanctions, or similar impositions paid by the carrier, directly or indirectly, in the calculation of rates; or
     (c) Includes, directly or indirectly, any net loss incurred on a self-funded plan for which it performs only administrative services in the calculation or development of rates for underwritten health plans.
     (7) All other statutes and rules related to rate filing for the individual and small group plan market remain in effect to the extent that they are consistent with this section.
     (8) If a proposed rate filing is for a line of business without a three-year history, and the carrier's surplus exceeds the standard set forth in this section, the carrier may not propose a contribution to surplus, contingency charges, or risk charges, or any combination thereof, during the first three years of the line's operation.
     (9) The commissioner may approve a rate that would otherwise be disapproved if the commissioner finds that failure to approve the proposed rate unreasonably impairs the financial health of the carrier. The commissioner may waive or modify these requirements upon a finding that a line of business contains or involves unique provisions or circumstances and that the requirements represent an extraordinary administrative burden on the carrier.

NEW SECTION.  Sec. 3   If any provision of this act or its application to any person or circumstance is held invalid, the remainder of the act or the application of the provision to other persons or circumstances is not affected.

NEW SECTION.  Sec. 4   This act takes effect January 1, 2012.