PERMANENT RULES
INSURANCE COMMISSIONER
Purpose: Improve the regulatory framework of chapter 284-43 WAC, Subchapter I. This rule making will eliminate outdated provisions and bring the regulation into compliance with HB 2460 (chapter 244, Laws of 2004) and E2SSB 6067 (chapter 79, Laws of 2000).
Citation of Existing Rules Affected by this Order: Repealing WAC 284-43-900 and 284-43-955; and amending WAC 284-43-905, 284-43-910, 284-43-915, 284-43-920, 284-43-925, 284-43-930, 284-43-935, 284-43-940, 284-43-945, and 284-43-950.
Statutory Authority for Adoption: RCW 48.02.060, 48.44.050, and 48.46.200.
Adopted under notice filed as WSR 04-24-099 on December 1, 2004.
Number of Sections Adopted in Order to Comply with Federal Statute: New 0, Amended 0, Repealed 0; Federal Rules or Standards: New 0, Amended 0, Repealed 0; or Recently Enacted State Statutes: New 0, Amended 0, Repealed 0.
Number of Sections Adopted at Request of a Nongovernmental Entity: New 0, Amended 0, Repealed 0.
Number of Sections Adopted on the Agency's Own Initiative: New 0, Amended 10, Repealed 2.
Number of Sections Adopted in Order to Clarify, Streamline, or Reform Agency Procedures: New 0, Amended 0, Repealed 0.
Number of Sections Adopted Using Negotiated Rule Making: New 0, Amended 0, Repealed 0; Pilot Rule Making: New 0, Amended 0, Repealed 0; or Other Alternative Rule Making: New 0, Amended 0, Repealed 0.
Date Adopted: March 1, 2005.
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.]
(1) For individual and small group plans, benefits shall be found not to be unreasonable in relation to the amount charged if one or more of the following is true:
(a) The requested increase in the community rate is zero percent or less and the anticipated loss ratio is seventy percent or more; or
(b) The anticipated loss ratio is eighty percent or more and the requested increase in the community rate is not more than the applicable rate in the following table.
(((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.]
(a) Before ((being)) the contract form is offered for
sale to the public and before the rate schedule is used; and
(b) Within thirty days after the end of an eighteen-month period during which a previous filing has remained unchanged for such period, including contract forms filed prior to the effective date of this regulation.
(2) Filings of negotiated contract forms, and applicable
rate schedules, that are placed into effect at time of
negotiation or that have a retroactive effective date are not
required to be filed in accordance with subsection (1)(a) and
(b) of this section, but ((shall)) must be filed within thirty
working days after the earlier of:
(a) The date group contract negotiations are completed; or
(b) The date renewal premiums are implemented.
(3) An explanation for any filing delayed beyond the
thirty-day period as described in subsection (2) of this
section ((shall)) must be given on the filing document as set
forth in WAC 284-43-950.
(4) If ((a return copy)) written confirmation of the
((filing)) commissioner's final action is desired, ((it shall
be submitted in duplicate)) the carrier must submit with the
filing duplicate copies of the filing transmittal and cover
letter, along with a return self-addressed, stamped envelope. The duplicate ((copy will be stamped by the commissioner to
indicate receipt of the filing)) transmittal will note the
commissioner's final action and will be returned to the sender
((if a)) in the return ((self-addressed)) envelope ((is))
enclosed with the filing.
[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), § 284-43-920, filed 1/23/98, effective 3/1/98.]
[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), § 284-43-925, filed 1/23/98, effective 3/1/98.]
(1) An actuarially sound estimate of incurred claims. Experience data, assumptions, and justifications of the
carrier's projected incurred claims ((shall)) must 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)) must 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)) must 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)) must
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)) must 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 extraordinary 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)) must be provided by ((a)) the
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 and end 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)) must 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)) must be provided ((that)) and must include:
(a) Justifications for adjustments to the base rate,
supported by data if appropriate, attributable to geographic
region, age, family size((, use of)) and 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, that the benefits and
services to be provided are reasonable in relation to the
amount charged)) as required by RCW 48.44.023(3) and
48.46.066(3).
(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 and 48.92.140. 98-11-089 (Matter No. R 98-8), § 284-43-930, filed 5/20/98, effective 6/20/98. 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), § 284-43-930, filed 1/23/98, effective 3/1/98.]
(a) Incurred claims;
(b) Earned premiums; and
(c) Expenses.
(2) Such records ((shall)) must include data for rider
and endorsement forms that are used with the contract forms. Separate data may be maintained for each rider or endorsement
form as appropriate. For recordkeeping purposes, carriers may
combine experience under contract forms that provide
substantially similar coverage ((may be combined for
recordkeeping purposes)).
[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), § 284-43-935, filed 1/23/98, effective 3/1/98.]
(1) Statistical credibility of the amount charged and services and benefits paid, such as low exposure, low loss frequency, and recoupment;
(2) Actual and projected trends relative to changes in medical costs and changes in utilization;
(3) The mix of business by risk classification; and
(4) Adverse selection or lapse factors reasonably expected in connection with revisions to plan provisions, services, benefits, and amount charged.
[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), § 284-43-940, filed 1/23/98, effective 3/1/98.]
((INDIVIDUAL AND)) SMALL GROUP FILING SUMMARY
| Carrier Name | |
| Address | |
| Carrier (( |
|
| Rate Renewal Period: | From | To | ||
| Date Submitted: | ||||
(( |
Individual Plans |
Group Plans )) |
||
Proposed Rate Summary
| Current community rate | per month |
| Proposed community rate | per month |
| Percentage change | % |
Portion of carrier's total enrollment affected |
% |
| Portion of carrier's total premium revenue affected | % |
Components of Proposed Community Rate
| Dollars Per Month | % of Total | |
| a) Claims | ||
| b) Expenses | ||
| c) Contribution to surplus, contingency charges, or risk charges | ||
| d) Investment earnings | ||
e) Total (a + b + c - d) |
Summary of Pooled Experience
| Experience Period | First Prior Period | Second Prior Period | |
| From To | From To | From To | |
| Member Months | |||
| Earned Premium | |||
| Paid Claims | |||
| Beginning Claim Reserve | |||
| Ending Claim Reserve | |||
| Incurred Claims | |||
| Expenses | |||
| Gain/Loss | |||
| (( |
|||
| Loss Ratio Percentage |
General Information
1. Trend Factor Summary |
| Type of Service | Annual Trend Assumed | Portion of Claim Dollars |
| Hospital | % | % |
| Professional | % | % |
| Prescription Drugs | % | % |
| Dental | % | % |
| Other | % | % |
| 2. List the effective date and the rate of increase for all rate
changes in the past three rate periods. |
|||||
| 1) | 2) | 3) | |||
| Date % | Date % | Date % | |||
| 3. Since the previous filing, have any changes been made to the
factors or methodology for adjusting base rates? |
|||||
| Geographic Area | Yes | No | |||
| Family Size | Yes | No | |||
| Age | Yes | No | |||
| Wellness Activities | Yes | No | |||
| (( |
|||||
| Other (specify) | Yes | No |
|||
| 4. Attach a table showing the base rate for each plan affected by this filing. | |||||
| 5. Attach comments or additional information. | |||||
| 6. Preparer's Information | |||||
| Name: | |||||
| Title: | |||||
| Telephone Number: | |||||
[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), § 284-43-945, filed 1/23/98, effective 3/1/98.]
GROUPS OTHER THAN SMALL GROUPS FILING SUMMARY
| Carrier Name | |
| Address | |
| (( |
|
| Single Employer Group: | |
| Employer Name: | |
| Multiemployer other than Association/Trust Groups | |
| Group Pool Name: | |
| Association/Trust Groups | |
| Association/Trust Group Name: | |
| Contract Form Number | |
| (( |
|
| Product Name |
If additional space is required to list the contract/rate form number and product name, attach a separate sheet.
| Rate Renewal Period: | From: | To: | |
| Date Submitted: | |||
| Type of Filing (Check One Box) | New Group
Contract (( |
Revision of
Existing Group
Contract (( |
|
Proposed Rate Schedules: Attach a separate sheet to list all proposed tier rates.
Rate Summary ((of New Rate Development))
| Current Rate(( |
$ per member per month |
| (( |
% |
| (( |
$ per member per month |
| (( |
|
| (( |
% |
| (( |
% |
| Portion of carrier's total premium revenue affected | % |
Summary of Contract Experience
| Experience Period | First Prior Period | Second Prior Period | |
| From To | From To | From To | |
| Member Months | |||
| Billed Premium | |||
| (( |
|||
| (( |
|||
| (( |
|||
| (( |
|||
| (( |
|||
| (( |
|||
| (( Credit |
|||
Corporate Surplus |
|||
| Attach comments or additional (( |
|
| Preparer's Information | |
| Name: | |
| Title: | |
| Telephone Number: | |
[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), § 284-43-950, filed 1/23/98, effective 3/1/98.]
The following sections of the Washington Administrative Code are repealed:
| WAC 284-43-900 | Authority and purpose. |
| WAC 284-43-955 | Effective date. |