2018-S AMH CONW H2865

2018-S AMH CONW H2865.1

SHB 2018 - H AMD TO H AMD (H-2836.2/97) 301 FAILED 3-18-97

By Representative Conway

Beginning on page 40, after line 25 of the amendment, strike all of sections 213 through 218 and insert the following:

"NEW SECTION. Sec. 213. A new section is added to chapter 48.01 RCW to read as follows:

(1) The commissioner may disapprove a health care service contractor or health maintenance organization's health benefit plan if the benefits provided in the plan are unreasonable in relation to the amount charged for the contract. A rate is reasonable in relation to benefits if it is based on the following elements and is at or above the minimum loss ratio in subsection (2) of this section:

(a) An actuarially sound estimate of all future claims costs associated with the filing for the rate renewal period. Claims costs and capitation expenses used in the actuarial estimate should recognize, as applicable, the savings and costs associated with managed care provisions of the contracts included in the filing;

(b) An actuarially sound estimate of all prudently incurred claims settlement, operational, and administrative expenses that are allocated to the filing on the basis of a reasonable and consistent method;

(c) A reasonable, expected cost of capital or contribution to surplus to the extent not offset by investment income and other income, and considering the level of unassigned surplus available to the carrier.

When a carrier files rates with the commissioner, it must demonstrate that it has accounted for and allocated each of these costs in a well-supported and verifiable manner so that the commissioner can determine whether the proposed rates satisfy the requirements of RCW 48.44.020 and 48.46.060.

(2) For purposes of this section, equity, net worth, or unassigned surplus shall be computed according to statutory accounting principles that must be reconciled to the books and records of the company. In the absence of a means to allocate equity or unassigned surplus to specific products or groups of products, the equity calculation and the related cost of capital calculation or required contribution to surplus shall be made on a total company basis. The rate derived shall be assigned to the contract filing at issue.

(a) The anticipated loss ratio for each contract included in a filing shall be at or above the following:

Individual contracts 75%

Small employer contracts 75%

Merit pool 85%

Negotiated contracts 85%

(b) Negotiated contracts for which the anticipated loss ratio is as great as shown in (a) of this subsection shall be deemed reasonable in relation to the amount charged, except in the case of extraordinary circumstances.

(c) The loss ratio shall be calculated on the basis of the projected incurred claims divided by the anticipated total earned premium for the contract or grouping of contracts in the filing for the projected renewal period; but in no case shall the loss ratio for any contract included in the filing be less than that shown in (a) of this subsection."

Renumber the remaining sections consecutively and correct internal references accordingly.

EFFECT: Deletes rate-setting provisions that would have established precise loss ratios and thus, if met, would presume rates to be "reasonable in relation to benefits." Adds a multi-criteria process for health care service contractors or health maintenance organizations (loss ratio exist for disability insurer in rule). Establishes explicit authority for the Insurance Commissioner to approve or disapprove rates.