6.6.508 LOSS RATIO STANDARDS AND REFUND OR CREDIT OF PREMIUM
(1) A Medicare supplement policy form or certificate form must not be delivered or issued for delivery unless the policy form or certificate form can be expected, as estimated for the entire period for which rates are computed to provide coverage, to return to policyholders and certificateholders in the form of aggregate benefits (not including anticipated refunds or credits) provided under the policy form or certificate form:
(a) at least 75% of the aggregate amount of premiums earned in the case of group policies; or
(b) at least 65% of the aggregate amount of premiums earned in the case of individual policies.
(2) For purposes of (1), the loss ratio must be calculated on the basis of incurred claims experience or incurred health care expenses where coverage is provided by a health maintenance organization on a service rather than reimbursement basis and earned premiums for the period and in accordance with accepted actuarial principles and practices. Incurred health care expenses where coverage is provided by a health maintenance organization must not include:
(a) home office and overhead costs;
(b) advertising costs;
(c) commissions and other acquisition costs;
(e) capital costs;
(f) administrative costs; or
(g) claims processing costs.
(3) All filings of rates and rating schedules must demonstrate that expected claims in relation to premiums comply with the requirements of this rule when combined with actual experience to date. Filings of rate revisions must also demonstrate that the anticipated loss ratio over the entire future period for which the revised rates are computed to provide coverage can be expected to meet the appropriate loss ratio standards.
(4) The experience used to calculate an expected loss ratio must be the separate experience of any plan. However, if there is more than one Plan H, I, or J because of the requirements of the MMA, the experience of each plan issued before September 9, 2005, and of each H, I, or J Plan issued on or after September 9, 2005, must be combined for the purpose of determining the expected loss ratio. The experience must also be provided separately for each of these plans for the department's records.
(5) For policies issued prior to September 30, 1993, expected claims in relation to premiums shall meet:
(a) the originally filed anticipated loss ratio when combined with the actual experience since inception;
(b) the appropriate loss ratio requirement from (1)(a) and (b) when combined with actual experience beginning with June 21, 1996 to date; and
(c) the appropriate loss ratio requirement from (1)(a) and (b) over the entire future period for which the rates are computed to provide coverage.
(6) Annual reporting and refund or credit calculations must conform to the following requirements:
(a) an issuer shall collect and file with the commissioner by May 31 of each year the data contained in the reporting form contained in ARM 6.6.524 for each type in a standard Medicare supplement benefit plan;
(b) if, on the basis of the experience as reported, the benchmark ratio since inception (ratio 1) exceeds the adjusted experience ratio since inception (ratio 3), then a refund or credit calculation is required. The refund calculation (see ARM 6.6.524) must be done on a statewide basis for each type in a standard Medicare Supplement Benefit Plan. For purposes of the refund or credit calculation, experience on policies issued within the reporting year shall be excluded;
(c) for the purposes of this subsection, for policies or certificates issued prior to September 30, 1993, the issuer shall make the refund or credit calculation separately for all individual policies combined and all group policies combined for experience after February 13, 2004; and
(d) a refund or credit must be made only when the benchmark loss ratio exceeds the adjusted experience loss ratio and the amount to be refunded or credited exceeds a de minimis level. The refund shall include interest from the end of the calendar year to the date of the refund or credit at a rate specified by the secretary, but in no event shall it be less than the average rate of interest for 13-week treasury notes. A refund or credit against premiums due shall be made by September 30 following the experience year upon which the refund or credit is based.
(7) An issuer of Medicare supplement policies and certificates issued before or after the effective date of these rules in this state must file annually its rates, rating schedule, and supporting documentation including ratios of incurred losses to earned premiums by policy duration for approval by the commissioner in accordance with the filing requirements and procedures prescribed by the commissioner, demonstrating that it is in compliance with the foregoing. The supporting documentation must also demonstrate in accordance with actuarial standards of practice using reasonable assumptions that the appropriate loss ratio standards can be expected to be met over the entire period for which rates are computed. Such demonstration must exclude active life reserves. An expected third-year loss ratio which is greater than or equal to the applicable percentage shall be demonstrated for policies or certificates in force less than three years.
(8) As soon as practicable, but prior to the effective date of enhancements in Medicare benefits, every issuer of Medicare supplement policies or certificates in the state must file with the commissioner, in accordance with the applicable filing procedures of this state:
(a) appropriate premium adjustments necessary to produce loss ratios as anticipated for the current premium for the applicable policies or certificates; and
(b) any appropriate riders, endorsements, or policy forms needed to accomplish the Medicare supplement policy or certificate modifications necessary to eliminate benefit duplications with Medicare. The riders, endorsements, or policy forms shall provide a clear description of the Medicare supplement benefits provided by the policy or certificate.
(9) As required by (9), an issuer must make such premium adjustments necessary to produce an expected loss ratio under the policy or certificate to conform with minimum loss ratio standards for Medicare supplement policies and which are expected to result in a loss ratio at least as great as that originally anticipated in the rates used to produce current premiums by the issuer for the Medicare supplement policies or certificates. No premium adjustment which would modify the loss ratio experience under the policy, other than the adjustments described in this rule, should be made with respect to a policy at any time other than upon its renewal date or anniversary date. Any premium adjustment filings must include all necessary supporting documents to justify the adjustment.
(10) If an issuer fails to make premium adjustments acceptable to the commissioner, the commissioner may order premium adjustments, refunds, or premium credits deemed necessary to achieve the loss ratio required by this rule.
(11) The commissioner may conduct a public hearing to gather information concerning a request by an issuer for an increase in a rate for a policy form or certificate form issued before or after the effective date of this rule if the experience of the form for the previous reporting period is not in compliance with the applicable loss ratio standard. Any determination of compliance should be made without consideration of any refund or credit for the reporting period. Public notice of the hearing shall be furnished in a manner deemed appropriate by the commissioner.
History: 33-1-313, 33-22-904, 33-22-906, MCA; IMP, 33-15-303, 33-22-902, 33-22-906, MCA; NEW, 1981 MAR p. 1474, Eff. 2/1/82; AMD, 1990 MAR p. 1688, Eff. 9/1/90; AMD, 1993 MAR p. 1487, Eff. 7/16/93; AMD, 1996 MAR p. 1637, Eff. 6/21/96; AMD, 2000 MAR p. 3518, Eff. 12/22/00; AMD, 2004 MAR p. 313, Eff. 2/13/04; AMD, 2005 MAR p. 1672, Eff. 9/9/05; AMD, 2009 MAR p. 1107, Eff. 7/17/09; AMD, 2018 MAR p. 572, Eff. 3/17/18.