OLR Bill Analysis
AN ACT CONCERNING RATE APPROVALS FOR CERTAIN HEALTH INSURANCE POLICIES.
This bill establishes a new rate approval process for individual health insurance companies, HMOs, and hospital and medical service corporations. The bill:
1. increases the amount of time required before a new rate can go into effect,
2. requires the Insurance Department to post rate filings on its website and provide a 30–day public comment period,
3. requires a public hearing to be held on a proposed rate filing if it would increase rates by more than 10% and the healthcare advocate or attorney general requests the hearing within a specified time period,
4. allows the healthcare advocate and attorney general to be parties to such a hearing, and
5. establishes disclosure and record retention requirements for rate filings.
The bill also makes minor, technical, and conforming changes.
EFFECTIVE DATE: July 1, 2010
RATE APPROVAL PROCESS
Current law requires individual health insurers, HMOs, and hospital and medical service corporations to file proposed premium rates with the insurance commissioner for review and approval. Rates may not be excessive, inadequate, or unfairly discriminatory. For individual health insurance, rates are deemed approved if not otherwise disapproved within 30 days of being filed with the department. For HMOs and hospital and medical service corporations, the commissioner has to approve or disapprove rates within a reasonable time.
The bill instead requires the entities to file rates with the department within 120 days before their proposed effective date. The department must post the filing and supporting documents on its website within three business days of receiving it and update the file to include any correspondence between the department and the entity that filed it.
The department must provide for a 30-day public comment period once the filing is posted on the website. The website posting must include the day the public comment period ends and how to submit written comments to the department.
Unless a hearing is required on the filing (see below), the commissioner must issue a written decision approving, modifying, or disapproving a rate filing within 45 days after receiving the filing. The decision must specify all factors used to reach it and be posted on the department's website within two business days from being issued.
Disclosure to Insureds or Subscribers
The bill requires each entity to disclose to its insureds or subscribers, on the date it submits a rate filing to the department, clearly and conspicuously, in writing, and in a form the commissioner prescribes:
1. the proposed general rate increase and the dollar amount by which a person's policy or agreement will increase, including any increase because of the person's age or change in age rating classification and the percentage increase or decrease of the proposed rate from the current rate;
2. a statement that the proposed rate or amount is subject to department review and approval; and
3. information on the person's right to submit public comment.
The entity must disclose in writing to a prospective customer the (1) fact that the department is reviewing the policy rates and (2) proposed rate increase or decrease.
If the insurance commissioner approves or modifies a rate filing, the entity must provide written notice to each insured or subscriber by first class mail that states:
1. the approved rate for the person's policy or agreement,
2. any increase in the rate due to the person's age or change in age rating classification, and
3. the percentage increase or decrease of the approved rate from the person's current rate.
The bill prohibits a new rate from taking effect until 30 days after the notice has been sent.
The entity's rate filing must include an actuarial memorandum certified by a qualified actuary (i. e. , a member in good standing with the American Academy of Actuaries who meets requirements set forth in regulations that the commissioner may prescribe). The actuary must certify that, to the best of his or her knowledge, the rate filing complies with law and is not excessive.
Excessive, Inadequate, Unfairly Discriminatory
By law, rates may not be excessive, inadequate, or unfairly discriminatory. The bill defines these terms.
A rate is “excessive” if it is unreasonably high for the insurance in relation to the underlying risks and costs. It is “inadequate” if it is unreasonably low in relation to the underlying risks and costs and continued use of the rate would endanger the filer's solvency. A rate is “unfairly discriminatory” if the premium charged for any classification is not reasonably related to the underlying risks and costs, such that different premiums result for insureds with similar risks and costs.
Rate Filing Review Requirements
The bill requires the insurance commissioner, when reviewing a rate filing to determine that it is not excessive, inadequate, or unfairly discriminatory, to conduct his own actuarial review to determine if the methodology and assumptions used to develop the rate filing are actuarially sound and comply with the Actuarial Standards of Practice issued by the Actuarial Standards Board. The commissioner must also give due consideration to:
1. the filer's experience;
2. the filer's past and projected costs, including amounts paid and to be paid for commissions;
3. any transfers of funds to the filer's holding or parent company, subsidiary, or affiliate;
4. the filer's rate of return on assets or profitability, as compared to similar filers,
5. a reasonable margin for profit and contingencies,
6. any public comments received related to the filing, and
7. other factors the commissioner deems relevant.
Public Hearing Required for Certain Rate Filings
Under the bill, the commissioner must hold a public hearing on certain rate filings. A hearing must be held if:
1. the rate filing is from an HMO, hospital or medical service corporation, or an individual health insurer that issues policies that cover (a) basic hospital expenses; (b) basic medical-surgical expenses; (c) major medical expenses; and (d) hospital or medical services;
2. the rate filing is for more than a 10% increase; and
3. the healthcare advocate or attorney general requests a hearing within five business days of when the department posts the filing on its website.
If these criteria are met, the commissioner must, within five days from the healthcare advocate's or attorney general's request, set a hearing date and conspicuously post on the department's website the date, place, and time of the hearing. The bill requires the hearing to be held (1) within 90 days before the proposed effective date of the rate filing at a place and time convenient for the public and (2) in accordance with law. The commissioner must immediately notify the filer of the hearing date, place, and time.
The commissioner must, within 30 days after the hearing, issue a written decision approving, modifying, or disapproving the rate filing. The decision must specify all factors used to reach it and be posted on the department's website within two business days from being issued.
Healthcare Advocate and Attorney General
The bill authorizes the healthcare advocate, the attorney general, or both, to be a party to any rate filing hearing held.
It grants these officials access to the department's rate filing records. Department attorneys, actuaries, accountants, and other experts who review or assist in the determination of a rate filing must cooperate with the officials.
The officials may (1) summon and examine under oath witnesses either deems necessary to the rate filing review and (2) require the filer, or any holding or parent company or subsidiary, to produce books, vouchers, memoranda, papers, letters, contracts, and other documents. Such material must be limited to information or transactions between the filer and the holding or parent company or subsidiary that are reasonably related to the filing.
The bill requires each insurer, HMO, or hospital or medical service corporation to retain records of earned premiums and incurred benefits by calendar year for each policy or agreement for which a rate filing was made under the bill. The records must be kept for at least seven years after the filing was made and must include records for any rider or endorsement used in connection with the policy or agreement.
The bill requires the Insurance Department to retain rate filing records for at least seven years from when the department approved, modified, or disapproved the filing.
Insurance and Real Estate Committee
Joint Favorable Substitute