OLR Bill Analysis
sSB 11 (File 203, as amended by Senate "A" and "B")*
AN ACT CONCERNING THE RATE APPROVAL PROCESS FOR CERTAIN HEALTH INSURANCE POLICIES.
This bill establishes a new rate approval process for individual and small employer group health insurance companies, HMOs, and hospital and medical service corporations. The bill:
1. requires small employer group health insurers to file risk classifications and premium rates with the insurance commissioner;
2. increases the amount of time required before a new rate can go into effect;
3. requires the Insurance Department to post rate filings on its website and provide a 30–day public comment period;
4. from January 1, 2012 to December 31, 2013, requires a symposium on a proposed rate filing if specified criteria are met and the healthcare advocate and attorney general request it;
5. establishes disclosure and record retention requirements for rate filings; and
6. requires the insurance commissioner to adopt regulations to prescribe standards to ensure that small employer group, HMO, and hospital and medical service corporation rates are not excessive, inadequate, or discriminatory. (He must currently do this for individual health insurance rates. )
The bill also makes minor, technical, and conforming changes.
*Senate Amendment “A” replaces the original file, which similarly established a new rate approval process for individual and group health insurance companies, HMOs, and hospital and medical service corporations. It (1) requires the insurance commissioner to hold a symposium rather than a public hearing on certain proposed rate filings if the healthcare advocate and attorney general request it; (2) applies the new process to small employer group health insurance rates rather than all group health insurance rates; and (3) amends the biennial budget act to adjust amounts appropriated from the Insurance Fund for personnel, fringe benefits, and other expenses as a result of the bill.
*Senate Amendment “B” limits the symposium process to the period between January 1, 2012 and January 1, 2013.
EFFECTIVE DATE: January 1, 2012
RATE APPROVAL PROCESS
The bill applies to any rate filed by an HMO, hospital or medical service corporation, or an individual or small employer group health insurer that issues policies that cover (1) basic hospital expenses, (2) basic medical-surgical expenses, (3) major medical expenses, (4) hospital or medical services, or (5) long-term care.
Under the bill, a “small employer” is a person, firm, corporation, limited liability company, partnership, or association actively engaged in business or self-employed for at least three consecutive months that, on at least 50% of its working days during the preceding 12 months, employed 50 or fewer employees most of whom are in Connecticut. When counting the number of employees, companies that are affiliates under state law or eligible to file a combined tax return are considered one employer.
Current law does not require group health insurers to obtain rate approval from the insurance commissioner (see BACKGROUND).
The bill requires the above 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 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 symposium 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 it. The decision must specify all factors used to reach it and be posted on the department's website within two business days after 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. detailed information on the person's right to submit public comment to the Insurance Department, including the department's website, mailing address, phone number, and instructions on how to submit comments.
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 or the effective date proposed in the rate filing, whichever is later.
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 regulatory requirements 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.
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.
Excessive, Inadequate, Unfairly Discriminatory
By law, rates may not be excessive, inadequate, or unfairly discriminatory and the commissioner must adopt regulations to prescribe standards to ensure that individual health insurance rates comply with this requirement. The bill expands the regulations to include standards for small employer group, HMO, and hospital and medical service corporation rates.
The bill defines the terms. A rate is “excessive” if it is unreasonably high for the insurance in relation to the underlying risks and costs after 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.
A rate 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. It 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.
The bill deletes a provision of current law that deemed rates “not excessive” if the insurer filed a loss ratio guarantee that the insurance commissioner approved. For this purpose, “loss ratio” meant the ratio of incurred claims to earned premiums.
Public Symposium Required for Certain Rate Filings
Under the bill, from January 1, 2012 to December 31, 2013, the commissioner must hold a symposium when (1) any entity files a rate increase of more than 10% and (2) the healthcare advocate or attorney general requests it within five business days after the filing is posted on the department's website. The commissioner must, within five business days of receiving a request, set a symposium date and conspicuously post on the department's website the date, place, and time of the symposium. The bill requires the symposium 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 the bill. The commissioner must immediately notify the filer of the symposium date, place, and time.
The commissioner must, within 30 days after the symposium, 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.
The commissioner is not required to hold, in any year, more than (1) 10 symposiums for individual and small employer group health insurance rates and (2) five symposiums for long-term care rates. The bill specifies that the symposium is not deemed a contested case under the Uniform Administrative Procedures Act and thereby cannot be appealed to Superior Court.
Healthcare Advocate and Attorney General
The bill authorizes the healthcare advocate, the attorney general, or both, to present evidence, information, and a closing argument at any rate filing symposium held.
It requires the insurance commissioner to help these officials obtain the department's rate filing records that are not readily available from its website, provided they are not confidential or prohibited from being disclosed by law.
In making his decision to approve, disapprove, or modify a rate filing, the commissioner must consider any oral or written comments made or submitted at each symposium and written comments submitted directly to the department.
The bill requires the Insurance Department to annually report by January 31 to the Insurance and Real Estate Committee all rates, amounts, and rate schedules filed in the immediately preceding calendar year by the above individual, small group employer, and long-term care entities. The report must include the (1) filer's name, (2) percent rate increase or decrease filed and approved by the department, and (3) market segment and product type.
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 the date it approved, modified, or disapproved the filing.
The bill amends PA 11-6 (the biennial budget act) to adjust amounts appropriated from the Insurance Fund for personnel, fringe benefits, and other expenses as a result of the bill.
Rate Approval Process
The law requires individual health insurers (including those providing long-term care coverage), 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 law does not specify a time frame by which the commissioner must approve individual long-term care insurance rates, but requires such insurance policies to maintain a 60% minimum loss ratio.
Insurance and Real Estate Committee
Joint Favorable Substitute