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Oregon State Archives

Oregon Bulletin

April 1, 2011

Department of Consumer and Business Services,
Insurance Division
Chapter 836

Rule Caption: Life and Health Actuarial Opinion including Asset Adequacy Analysis and Regulatory Asset Adequacy Issues Summary.

Adm. Order No.: ID 5-2011

Filed with Sec. of State: 2-23-2011

Certified to be Effective: 2-23-11

Notice Publication Date: 12-1-2010

Rules Amended: 836-031-0600, 836-031-0620, 836-031-0630, 836-031-0640, 836-031-0670, 836-031-0680, 836-031-0690

Rules Repealed: 836-031-0650, 836-031-0660

Subject: This rule requires life insurers to submit an actuarial opinion that includes a regulatory asset adequacy issues summary. The summary would require a more rigorous actuarial demonstration of the adequacy of an insurer’s assets backing all of its reserves and other liabilities. The proposed rule also incorporates changes to the National Association of Insurance Commissioners’ (NAIC) Model Law #822 that were adopted in 2001 but never adopted in Oregon. Adoption of these changes provides uniformity for insurers submitting the requisite actuarial opinions by bringing Oregon into conformity with most other states. Although the division had adopted most of the pertinent changes to the model law, the changes proposed in this rulemaking have been added to the model since the division originally adopted the model.

Adoption of the model law with the changes proposed in this rulemaking became an accreditation standard effective January 1, 2010.

Rules Coordinator: Sue Munson—(503) 947-7272

836-031-0600

Purpose

The purpose of OAR 836-031-0600 to 836-031-0690 is to prescribe:

(1) Requirements for statements of actuarial opinion to be submitted in accordance with ORS 733.304 and for memoranda in support thereof;

(2) Rules applicable to the appointment of an appointed actuary.

(3) Guidance as to the meaning of “adequacy of reserves.”

Stat. Auth.: ORS 731.244 & 733.304

Stats. Implemented: ORS 733.304

Hist.: ID 10-1992, f. & cert. ef. 5-27-92; ID 5-2011, f. & cert. ef. 2-23-11

830-031-0620

Scope

(1) OAR 836-031-0600 to 836-031-0690 apply to all life insurers transacting insurance in this state and to all life insurers that are authorized to reinsure life insurance, annuities or health insurance business in this state OAR 836-031-0600 to 836-031-0690 shall be applied in a manner that allows the appointed actuary to utilize his or her professional judgment in performing the asset analysis and developing the actuarial opinion and supporting memoranda, consistent with relevant actuarial standards and practices. However, the director may specify specific methods of actuarial analysis and actuarial assumptions when, in the director’s judgment, these specifications are necessary for an acceptable opinion to be rendered relative to the adequacy of reserves and related items.

(2) OAR 836-031-0600 to 836-031-0690 shall be applicable to all annual statements filed with the office of the director after the effective date of this change to OAR 836-031-0600 to 836-031-0690. A statement of opinion on the adequacy of the reserves and related actuarial items based on an asset adequacy analysis in accordance with 836-031-0670 and a memorandum in support thereof in accordance with 836-031-0680 are required each year.

Stat. Auth.: ORS 731.244 & 733.304

Stats. Implemented: ORS 733.304

Hist.: ID 10-1992, f. & cert. ef. 5-27-92; ID 5-2011, f. & cert. ef. 2-23-11

836-031-0630

Definitions

As used in OAR 836-031-0600 to 836-031-0690:

(1) “Actuarial Opinion” means the opinion of an appointed actuary regarding the adequacy of the reserves and related actuarial items based on an asset adequacy analysis in accordance with 836-031-0670 and with currently accepted actuarial standards;

(2) “Actuarial Standards Board” is the board established by the American Academy of Actuaries to develop and promulgate standards of actuarial practice.

(3) “Annual Statement” means that statement required by ORS 731.574 of the Insurance Code to be filed by the company with the Director annually.

(4) “Appointed Actuary” means any individual who is appointed or retained in accordance with the requirements set forth in OAR 836-031-0640(3) to provide the actuarial opinion and supporting memorandum as required by ORS 733.304.

(5) “Asset Adequacy Analysis” means an analysis that meets the standards and other requirements referred to in OAR 836-031-0640(4).

(6) “Company” means a life insurance company or reinsurer subject to the provisions of OAR 836-031-0600 to 836-031-0690.

(7) “Qualified Actuary” means any individual who meets the requirements set forth in OAR 836-031-0640(2).

Stat. Auth.: ORS 731.244

Stats. Implemented: ORS 733.304

Hist.: ID 10-1992, f. & cert. ef. 5-27-92; ID 1-1993(Temp), f. & cert. ef. 2-4-93; ID 4-1993, f. 7-27-93, cert. ef. 7-30-93; ID 5-2011, f. & cert. ef. 2-23-11

836-031-0640

General Requirements

(1) The following provisions apply to submission of the statement of actuarial opinions:

(a) There is to be included on or attached to page 1 of the annual statement for each year beginning with 1992 the statement of an appointed actuary, entitled “Statement of Actuarial Opinion,” setting forth an opinion relating to reserves and related actuarial items held in support of policies and contracts, in accordance with OAR 836-031-0670.

(b) Upon written request by the company, the Director may grant an extension of the date for submission of the statement of actuarial opinion.

(2) For purposes of OAR 836-031-0600 to 836-031-0690, a “qualified actuary” is an individual who:

(a) Is a member in good standing of the American Academy of Actuaries;

(b) Is qualified to sign statements of actuarial opinion for life and health insurance company annual statements in accordance with the American Academy of Actuaries qualification standards for actuaries signing such statements;

(d) Has not been found by the Director, or if so found has subsequently been reinstated as a qualified actuary, following appropriate notice and hearing to have:

(A) Violated any provision of, or any obligation imposed by, the Insurance Code or other law in the course of the qualified actuary’s dealings as a qualified actuary;

(B) Been found guilty of fraudulent or dishonest practices;

(D) Submitted to the Director during the past five years, pursuant to OAR 836-031-0600 to 836-031-0690, an actuarial opinion or memorandum that the Director rejected because it did not meet the provisions of 836-031-0600 to 836-031-0690, including standards set by the Actuarial Standards Board; or

(E) Resigned or been removed as an actuary within the past five years as a result of acts or omissions indicated in any adverse report on examination or as a result of failure to adhere to generally acceptable actuarial standards; and

(e) Has not failed to notify the Director of any action taken by any insurance regulator of any other state similar to that under subsection (d) of this section.

(3) For purposes of OAR 836-031-0600 to 836-031-0690, an “appointed actuary” is a qualified actuary who is appointed or retained to prepare the statement of actuarial opinion required by 836-031-0600 to 836-031-0690, either directly by or by the authority of the board of directors through an executive officer of the company other than the qualified actuary. The company shall give the Director timely written notice of the name, title (and, in the case of a consulting actuary, the name of the firm) and manner of appointment or retention of each person appointed or retained by the company as an appointed actuary and shall state in the notice that the person meets the requirements set forth in section (2) of this rule. Once notice is furnished, no further notice is required with respect to this person if the company gives the Director timely written notice in the event the actuary ceases to be appointed or retained as an appointed actuary or to meet the requirements set forth in section (2) of this rule. If any person appointed or retained as an appointed actuary replaces a previously appointed actuary, the notice shall so state and give the reasons for replacement.

(4) This section establishes standards for asset adequacy analysis. The asset adequacy analysis required by OAR 836-031-0600 to 836-031-0690:

(a) Shall conform to the Standards of Practice as promulgated from time to time by the Actuarial Standards Board and acceptable to the Director, and on any additional standards under OAR 836-031-0600 to 836-031-0690, which standards are to form the basis of the statement of actuarial opinion in accordance with OAR 836-0331-0600 to 836-031-0690; and

(b) Shall be based on methods of analysis as are deemed appropriate for such purposes by the Actuarial Standards Board and acceptable to the Director.

(5) The following apply to liabilities to be covered:

(a) Under authority of ORS 733.304, the statement of actuarial opinion shall apply to all in force business on the statement date whether directly issued or assumed regardless of when or where issued, e.g., reserves of Exhibits 8, 9, and 10, and claim liabilities in Exhibit 11, Part I and equivalent items in the separate account statement or statements;

(b) If the appointed actuary determines as the result of asset adequacy analysis that a reserve should be held in addition to the aggregate reserve held by the company and calculated in accordance with methods set forth in ORS 733.312, 733.314, 733.320, and 733.322, the company shall establish such additional reserve;

(c) Additional reserves established under subsection (b) of this section and deemed not necessary in subsequent years may be released. Any amount released shall be disclosed in the actuarial opinion for the applicable year. The release of such reserves is not to be deemed an adoption of a lower standard of valuation.

[ED. NOTE: Exhibits referenced are available from the agency.]

Stat. Auth.: ORS 731.244 & 733.304

Stats. Implemented: ORS 733.304

Hist.: ID 10-1992, f. & cert. ef. 5-27-92; ID 5-2011, f. & cert. ef. 2-23-11

836-031-0670

Statement of Actuarial Opinion Based On an Asset Adequacy Analysis

(1) General Description. The statement of actuarial opinion submitted in accordance with this rule must consist of:

(a) A paragraph identifying the appointed actuary and the qualifications of the qualified actuary, as provided in subsection (2)(a) of this rule;

(b) A scope paragraph identifying the subjects on which an opinion is to be expressed and describing the scope of the appointed actuary’s work, including a tabulation delineating the reserves and related actuarial items that have been analyzed for asset adequacy and the method of analysis, as provided in subsection (2)(b) of this rule, and identifying the reserves and related actuarial items covered by the opinion that have not been so analyzed;

(c) A reliance paragraph describing those areas, if any, where the appointed actuary has deferred to other experts in developing data, procedures or assumptions, (e.g., anticipated cash flows from currently owned assets, including variation in cash flows according to economic scenarios, as provided in subsection (2)(c) of this rule, supported by a statement of each such expert in the form prescribed by section (5) of this rule;

(d) An opinion paragraph expressing the appointed actuary’s opinion with respect to the adequacy of the supporting assets to mature the liabilities, as provided in subsection (2)(f) of this rule; and

(e) One or more additional paragraphs, to be included in individual company cases as follows:

(A) If the appointed actuary considers it necessary to state a qualification of the appointed actuary’s opinion;

(B) If the appointed actuary must disclose an inconsistency in the method of analysis or basis of asset allocation used at the prior opinion date with that used for the appointed actuary’s opinion;

(C) If the appointed actuary must disclose whether additional reserves of the prior opinion date are released as of this opinion date, and the extent of the release; and

(D) If the appointed actuary chooses to add a paragraph briefly describing the assumptions forming the basis for the actuarial opinion.

(2) Recommended Language. The following paragraphs must be included in the statement of actuarial opinion in accordance with this section. The following provisions of this section are those that in typical circumstances would be included in a statement of actuarial opinion. The language may be modified as needed to meet the circumstances of a particular case, but the appointed actuary must use language that clearly expresses the professional judgment of the appointed actuary. However, in any event, the opinion must retain all pertinent aspects of the language provided in this section. The following provisions apply:

(a) The opening paragraph must indicate generally the appointed actuary’s relationship to the company and qualifications of the appointed actuary to sign the opinion, as follows:

(A) For a company actuary, the opening paragraph of the actuarial opinion must include a statement such as:

“I, (name), am (title) of (insurance company name) and a member of the American Academy of Actuaries. I was appointed by, or by the authority of, the Board of Directors of the insurer to render this opinion as stated in the letter to the director dated (insert date). I meet the Academy qualification standards for rendering the opinion and am familiar with the valuation requirements applicable to life and health insurance companies.”

(B) For a consulting actuary, the opening paragraph must include a statement such as:

“I, (name), a member of the American Academy of Actuaries, am associated with the firm of (name of consulting form). I have been appointed by, or by the authority of, the Board of Directors of (name of company) to render this opinion as stated in the letter to the Commissioner dated (insert date). I meet the Academy qualification standards for rendering the opinion and am familiar with the valuation requirements applicable to life and health insurance companies.”

(b) The scope paragraph must include a statement such as:

“I have examined the actuarial assumptions and actuarial methods used in determining reserves and related actuarial items listed below, as shown in the annual statement of the company, as prepared for filing with state regulatory officials, as of December 31, 20( ). Tabulated below are those reserves and related actuarial items that have been subjected to asset adequacy analysis.” See Table 1 (Reserves and Liabilities).

(c) If the appointed actuary has relied on other experts to develop certain portions of the analysis, the reliance paragraph must include a statement such as the following:

“I have relied on (name), (title) for (e.g., “anticipated cash flows from currently owned assets, including variations in cash flows according to economic scenarios” or “certain critical aspects of the analysis performed in conjunction with forming my opinion.”), as certified in the attached statement. I have reviewed the information relied upon for reasonableness.”

Such a statement of reliance on other experts must be accompanied by a statement by each of such experts on the form prescribed in section (5) of this rule.

(d) If the appointed actuary has examined the underlying asset and liability records, the reliance paragraph must include a statement such as:

“My examination included such review of the actuarial assumptions and actuarial methods and of the underlying basic asset and liability records and such tests of the actuarial calculations as I considered necessary. I also reconciled the underlying basic asset and liability records to (exhibits and schedules listed as applicable) of the company’s current annual statement.”

(e) If the appointed actuary has not examined the underlying records, but has relied upon data (e.g., listings and summaries of policies in force or asset records) prepared by the company, the reliance paragraph must include a statement such as:

“In forming my opinion on (specify types of reserves) I relied upon data prepared by (name and title of company officer certifying in force records or other data) as certified in the attached statements. I evaluated that data for reasonableness and consistency. I also reconciled that data to (exhibits and schedules to be listed as applicable) of the company’s current annual statement. In other respects, my examination included review of the actuarial assumptions and actuarial methods used and tests of the calculations I considered necessary.”

Such a section shall be accompanied by a statement by each person relied upon, in the form prescribed by section (5) of this rule.

(f) The opinion paragraph must include a statement such as:

“In my opinion, the reserves and related actuarial values concerning the statement items identified above:

(i) Are computed in accordance with presently accepted actuarial standards consistently applied and are fairly stated, in accordance with sound actuarial principles;

(ii) Are based on actuarial assumptions that produce reserves at least as great as those called for in any contract provision as to reserve basis and method, and are in accordance with all other contract provisions;

(iii) Meet the requirements of the Insurance Law and regulation of the state of (state of domicile) and are at least as great as the minimum aggregate amounts required by the state in which this statement is filed;

(iv) Are computed on the basis of assumptions consistent with those used in computing the corresponding items in the annual statement of the preceding year-end (with any exceptions noted below);

(v) Include provision for all actuarial reserves and related statement items that ought to be established.

The reserves and related items, when considered in light of the assets held by the company with respect to such reserves and related actuarial items including, but not limited to, the investment earnings on the assets, and the considerations anticipated to be received and retained under the policies and contracts, make adequate provision, according to currently accepted actuarial standards of practice, for the anticipated cash flows required by the contractual obligations and related expenses of the company. At the discretion of the director, this language may be omitted for an opinion filed on behalf of a company doing business only in Oregon and in no other state.

The actuarial methods, considerations and analyses used in forming my opinion conform to the appropriate Standards of Practice as promulgated by the Actuarial Standards Board, which standards form the basis of this statement of opinion.

This opinion is updated annually as required by statute. To the best of my knowledge, there have been no material changes from the applicable date of the annual statement to the date of the rendering of this opinion that should be considered in reviewing this opinion; or

The following material change or changes that occurred between the date of the statement for which this opinion is applicable and the date of this opinion should be considered in reviewing this opinion: (Describe the change or changes.)

The appointed actuary must choose one of the above two paragraphs, whichever is applicable.

The impact of unanticipated events subsequent to the date of this opinion is beyond the scope of this opinion. The analysis of asset adequacy portion of this opinion should be viewed recognizing that the company’s future experience may not follow all the assumptions used in the analysis.

__________________________________________

Signature of Appointed Actuary

__________________________________________

Address of Appointed Actuary

__________________________________________

Telephone Number of Appointed Actuary

__________________________________________

Date”

(3) Assumptions for New Issues. The adoption, for new issues or new claims or other new liabilities, of an actuarial assumption that differs from a corresponding assumption used for prior new issues or new claims or other new liabilities is not a change in actuarial assumptions within the meaning of this rule.

(4) Adverse Opinions. If the appointed actuary is unable to form an opinion, the appointed actuary must refuse to issue a statement of actuarial opinion. If the appointed actuary’s opinion is adverse or qualified, the appointed actuary must issue an adverse or qualified actuarial opinion explicitly stating the reason or reasons for the opinion. Such a statement must follow the scope paragraph and precede the opinion paragraph.

(5) Reliance on Information Furnished by Other Persons. If the appointed actuary relies on the certification of others on matters concerning the accuracy or completeness of any data underlying the actuarial opinion, or the appropriateness of any other information used by the appointed actuary in forming the actuarial opinion, the actuarial opinion should so indicate the persons the actuary is relying upon and a precise identification of the items subject to reliance. In addition, the persons on whom the appointed actuary relies shall provide a certification that precisely identifies the items on which the person is providing information and a statement as to the accuracy, completeness or reasonableness, as applicable, of the items. This certification shall include the signature, title, company, address and telephone number of the person rendering the certification, as well as the date on which it is signed.

(6) Alternate Option

(a) The Standard Valuation Law gives the director broad authority to accept the valuation of a foreign insurer when that valuation meets the requirements applicable to a company domiciled in this state in the aggregate. As an alternative to the requirements of subsection B(6)(c), the director may make one or more of the following additional approaches available to the opining actuary:

(A) A statement that the reserves “meet the requirements of the insurance laws and regulations of the State of (state of domicile) and the formal written standards and conditions of this state for filing an opinion based on the law of the state of domicile.” If the director chooses to allow this alternative, a formal written list of standards and conditions shall be made available. If a company chooses to use this alternative, the standards and conditions in effect on July 1 of a calendar year shall apply to statements for that calendar year, and they shall remain in effect until they are revised or revoked. If no list is available, this alternative is not available.

(B) A statement that the reserves “meet the requirements of the insurance laws and regulations of the State of (state of domicile) and I have verified that the company’s request to file an opinion based on the law of the state of domicile has been approved and that any conditions required by the director for approval of that request have been met.” If the director chooses to allow this alternative, a formal written statement of such allowance shall be issued no later than March 31 of the year it is first effective. It shall remain valid until rescinded or modified by the director. Such rescission or modifications shall be issued no later than March 31 of the year they are first effective. Subsequent to that statement being issued, if a company chooses to use this alternative, the company shall file a request to do so, along with justification for its use, no later than April 30 of the year of the opinion to be filed. The request shall be deemed approved on October 1 of that year if the director has not denied the request by that date.

(C) A statement that the reserves “meet the requirements of the insurance laws and regulations of the State of (state of domicile) and I have submitted the required comparison as specified by this state.”

(i) If the director chooses to allow this alternative, a formal written list of products (to be added to the table in Item (ii) below) for which the required comparison shall be provided will be published. If a company chooses to use this alternative, the list in effect on July 1 of a calendar year shall apply to statements for that calendar year, and it shall remain in effect until it is revised or revoked. If no list is available, this alternative is not available.

(ii) If a company desires to use this alternative, the appointed actuary shall provide a comparison of the gross nationwide reserves held to the gross nationwide reserves that would be held under NAIC codification standards. Gross nationwide reserves are the total reserves calculated for the total company in force business directly sold and assumed, indifferent to the state in which the risk resides, without reduction for reinsurance ceded. The information provided shall be at least:

Product Type

Death Benefit or Account Value

Reserves Held

Codification Reserves

Codification Standard

(iii) The information listed shall include all products identified by either the state of filing or any other states subscribing to this alternative

(iv) If there is no codification standard for the type of product or risk in force or if the codification standard does not directly address the type of product or risk in force, the appointed actuary shall provide detailed disclosure of the specific method and assumptions used in determining the reserves held.

(v) The comparison provided by the company is to be kept confidential to the same extent and under the same conditions as the actuarial memorandum.

(b) Notwithstanding the above, the director may reject an opinion based on the laws and regulations of the state of domicile and require an opinion based on the laws of this state. If a company is unable to provide the opinion within 60 days of the request or such other period of time determined by the director after consultation with the company, the director may contract an independent actuary at the company’s expense to prepare and file the opinion.

[ED. NOTE: Tables referenced are available from the agency.]

Stat. Auth.: ORS 731.244

Stats. Implemented: ORS 733.304

Hist.: ID 10-1992, f. & cert. ef. 5-27-92; ID 1-1993(Temp), f. & cert. ef. 2-4-93; ID 4-1993, f. 7-27-93, cert. ef. 7-30-93; ID 5-2011, f. & cert. ef. 2-23-11

836-031-0680

Description of Actuarial Memorandum Including an Asset Adequacy Analysis and Regulatory Asset Adequacy Summary

(1) General provisions. The following general provisions apply to actuarial memoranda that include an asset adequacy analysis:

(a) In accordance with ORS 733.304 (Standard Valuation Law), the appointed actuary shall prepare a memorandum to the Company describing the analysis done in support of the appointed actuary’s opinion regarding the reserves under an opinion pursuant to OAR 836-0310-670. The memorandum must be made available for examination by the Director upon request of the Director but shall be returned to the company after such examination and not be filed with the Department;

(b) In preparing the memorandum, the appointed actuary may rely on, and include as a part of the appointed actuary’s own memorandum, memoranda prepared and signed by other actuaries who are qualified within the meaning of OAR 836-031-0640(2), with respect to the areas covered in such memoranda, and so state in their memoranda;

(c) If the Director requests a memorandum and no such memorandum exists or if the Director finds that the analysis described in the memorandum fails to meet the standards of the Actuarial Standards Board or the standards and requirements of OAR 836-031-0600 to 836-031-0690, the Director may designate a qualified actuary to review the opinion and prepare such supporting memorandum as is required for review. The reasonable and necessary expense of the independent review shall be paid by the company but shall be directed and controlled by the Director;

(d) The reviewing actuary shall have the same status as an examiner for purposes of obtaining data from the company and the work papers and documentation of the reviewing actuary shall be retained by the Director. However, any information provided by the company to the reviewing actuary and included in the work papers shall be considered as material provided by the company to the Director and shall be kept confidential to the same extent as is prescribed by law with respect to other material provided by the company to the Director pursuant to the Standard Valuation Law. The reviewing actuary shall not be an employee of a consulting firm involved with the preparation of any prior memorandum or opinion for the insurer pursuant to OAR 836-031-0600 to 836-031-0690 for any one of the current year or the preceding three years.

(e) In accordance with ORS 733.304, the appointed actuary shall prepare a regulatory asset adequacy issues summary, the contents of which are specified in section (3) of this rule. All companies domiciled in Oregon shall submit the regulatory asset adequacy issues summary no later than March 15 of the year following the year for which a statement of actuarial opinion based on asset adequacy is required. For all other companies, the memorandum must be made available for examination by the Director upon request of the Director. The regulatory asset adequacy issues summary is to be kept confidential to the same extent and under the same conditions as the actuarial memorandum.

(2) Provisions relating to the Memorandum Section Documenting Asset Adequacy Analysis. When an actuarial opinion under OAR 836-031-0670 is provided, the memorandum shall demonstrate that the analysis has been done in accordance with standards for asset adequacy referred to in 836-031-0640(4) and any additional standards under OAR 836-031-0600 to 836-031-0690. It must specify:

(a) For reserves:

(A) Product descriptions, including market description, underwriting and other aspects of a risk profile and the specific risks the appointed actuary deems significant;

(B) Source of liability in force;

(D) Investment reserves;

(E) Reinsurance arrangements;

(F) Identification of any explicit or implied guarantees made by the general account in support of benefits provided through a separate account or under a separate account policy or contract and the methods used by the appointed actuary to provide for the guarantees in the asset adequacy analysis; and

(G) Documentation of the following assumptions, sufficient for an actuary reviewing the actuarial memorandum to form the following conclusion as to the reasonableness of the assumptions in the context of asset adequacy testing:

(i) Base and excess lapse rates;

(ii) Interest crediting rate strategy;

(iii) Mortality;

(iv) Policyholder dividend strategy;

(v) Competitor or market interest rate;

(vi) Annuitization rates;

(vii) Commission and expenses; and

(viii) Morbidity.

(b) For assets:

(A) Portfolio descriptions, including a risk profile disclosing the quality, distribution and types of assets;

(B) Investment and disinvestment assumptions;

(D) Asset valuation bases;

(E) Documentation of assumptions sufficient for an actuary reviewing the actuarial memorandum to form a conclusion as to the reasonableness of the assumption, made for:

(i) Default costs;

(ii) Bond call function;

(iii) Mortgage prepayment function;

(iv) Determining market value for assets sold due to disinvestment strategy; and

(v) Determining yield on assets acquired through the investment strategy.

(A) Methodology;

(B) Rationale for inclusion and exclusion of different blocks of business and how pertinent risks were analyzed;

(C) Rational for degree of rigor in analyzing different blocks of business (include in the rationale the level of “materiality” that was used in determining how rigorously to analyze different blocks of business);

(D) Criteria for determining asset adequacy (include in the criteria the precise basis for determining if assets are adequate to cover reserves under “moderately adverse conditions” or other conditions as specified in relevant actuarial standards of practice); and

(E) Whether the impact of federal income taxes was considered and the method of treating reinsurance in the asset adequacy analysis;

(d) A summary of material changes in methods, procedures or assumptions from prior year’s asset adequacy analysis.

(e) Summary of results; and

(f) Conclusion or conclusions.

(3)Details of the Regulatory Asset Adequacy Issues Summary. The regulatory asset adequacy issues summary shall:

(a) Include all of the following:

(A) Descriptions of the scenarios tested, including whether those scenarios are stochastic or deterministic, and the sensitivity testing done relative to those scenarios. If negative ending surplus results under certain tests in the aggregate, the actuary should describe those tests and the amount of additional reserve as of the valuation date, which, if held, would eliminate the negative aggregate surplus values. Ending surplus values shall be determined by either extending the projection period until the in-force and associated assets and liabilities at the end of the projection period are immaterial or by adjusting the surplus amount at the end of the projection period by an amount that appropriately estimates the value that can reasonably be expected to arise from the assets and liabilities remaining in force.

(B) The extent to which the appointed actuary uses assumptions in the asset adequacy analysis that are materially different than the assumptions used in the previous asset adequacy analysis.

(C) The amount of reserves and the identity of the product lines that had been subjected to asset adequacy analysis in the prior opinion but were not subject to analysis for the current opinion.

(D) Comments on any interim results that may be of significant concern to the appointed actuary. For example, the impact of the insufficiency of assets to support the payment of benefits and expenses and the establishment of statutory reserves during one or more interim periods.

(E) The methods used by the actuary to recognize the impact of reinsurance on the company’s cash flows, including both assets and liabilities, under each of the scenarios tested.

(F) Whether the actuary has been satisfied that all options whether explicit or embedded, in any asset or liability, including but not limited to those affecting cash flows embedded in fixed income securities, and equity-like features in any investments have been appropriately considered in the asset adequacy analysis.

(b) Contain the name of the company for which the regulatory asset adequacy issues summary is being supplied and shall be signed and dated by the appointed actuary rendering the actuarial opinion.

(4) Conformity to Standards of Practice. The memorandum must include the following statement:

“Actuarial methods, considerations and analyses used in the preparation of this memorandum conform to the appropriate Standards of Practice as promulgated by the Actuarial Standards Board, which standards form the basis for this memorandum.”

Stat. Auth.: ORS 731.244 & 733.304

Stats. Implemented: ORS 733.304

Hist.: ID 10-1992, f. & cert. ef. 5-27-92; ID 5-2011, f. & cert. ef. 2-23-11

836-031-0690

Additional Considerations for Analysis

(1) Use of Assets Supporting the Interest Maintenance Reserve and the Asset Valuation Reserve. An appropriate allocation of assets in the amount of the Interest Maintenance Reserve (IMR), whether positive or negative, must be used in any asset adequacy analysis. Analysis of risks regarding asset default may include an appropriate allocation of assets supporting the Asset Valuation Reserve (AVR); these AVR assets may not be applied for any other risks with respect to reserve adequacy. Analysis of these and other risks may include assets supporting other mandatory or voluntary reserves available to the extent not used for risk analysis and reserve support. The amount of the assets used for the AVR shall be disclosed in the Table of Reserves and Liabilities of the opinion and in the memorandum. The method used for selecting particular assets or allocated portions of assets shall be disclosed in the memorandum.

(2) Documentation. The appointed actuary shall retain on file, for at least seven years, sufficient documentation so that it will be possible to determine the procedures followed, the analyses performed, the bases for assumptions and the results obtained.

Stat. Auth.: ORS 731.244

Stats. Implemented: ORS 733.304

Hist.: ID 10-1992, f. & cert. ef. 5-27-92; ID 1-1993(Temp), f. & cert. ef. 2-4-93; ID 4-1993, f. 7-27-93, cert. ef. 7-30-93; ID 5-2011, f. & cert. ef. 2-23-11

Rule Caption: Disclosures Required for Small Face Amount Life Insurance Policies.

Adm. Order No.: ID 6-2011

Filed with Sec. of State: 2-23-2011

Certified to be Effective: 2-23-11

Notice Publication Date: 12-1-2010

Rules Adopted: 836-051-0030, 836-051-0032, 836-051-0034, 836-051-0036, 836-051-0038, 836-051-0040

Subject: Often small face amount policies are purchased later in life, and many times premiums paid for these policies exceed the face amount of the policy itself. Policyholders often continue to pay the premiums without understanding their options under the policy. To ensure that consumers better understand the implications of purchasing a policy with a face amount of less than $15,000, these rules adopt the National Association of Insurance Commissioners’ (NAIC) Model #605 relating to Disclosure for Small Face Amount Life Insurance Policies. The rules require disclosure to the purchaser about when the premiums paid would exceed the face value of the policy. The rules also require a 10-day period for the insured to examine the policy during which the insured could cancel the policy for a complete refund of premium paid if the insured decided not to keep the policy. The rules apply to policies issued on or after July 1, 2011.

Rules Coordinator: Sue Munson—(503) 947-7272

836-051-0030

Purpose and Applicability

(1) The purpose of OAR 836-051-0030 to 836-051-0040 is to establish rules that ensure meaningful information is provided to the purchasers of small face amount policies.

(2) OAR 836-051-0030 to 836-051-0040 apply to insurance policies and certificates issued on or after July 1, 2011.

Stat. Auth.: ORS 731.244 & ORS 746.240

Stats. Implemented: ORS 746.075, 743.218, 746.100, 746.110 & 746.240

Hist.: ID 6-2011, f. & cert. ef. 2-23-11

836-051-0032

Definition

“Small face amount policy” means a life insurance policy or certificate with an initial face amount of $15,000 or less.

Stat. Auth.: ORS 731.244 & 746.240

Stats. Implemented: ORS 746.075, 743.218, 746.100, 746.110 & 746.240

Hist.: ID 6-2011, f. & cert. ef. 2-23-11

836-051-0034

Exemptions

OAR 836-051-0030 to 836-051-0040 apply to all group and individual life insurance policies and certificates except:

(1) Variable life insurance;

(2) Individual and group annuity contracts;

(3) Credit life insurance;

(4) Group or individual policies of life insurance issued to members of an employer group or other permitted group where:

(a) Every plan of coverage was selected by the employer or other group representative;

(b) Some portion of the premium is paid by the group or through payroll deduction; and

(5) Policies and certificates where an illustration has been provided pursuant to the requirements of OAR 836-051-0500 to 836-051-0600.

Stat. Auth.: ORS 731.244 & 746.240

Stats. Implemented: ORS 746.075, 743.218, 746.100, 746.110 & 746.240

Hist.: ID 6-2011, f. & cert. ef. 2-23-11

836-051-0036

Disclosure Requirements

(1) An insurer issuing a small face amount policy, where over the term of the policy the cumulative policy premiums paid may exceed the face amount of the policy, shall clearly and prominently disclose, on or before policy delivery, the length of time until the cumulative policy premiums paid may exceed the face amount of the policy.

(2) If an insurer is required to provide a disclosure under section (1) of this rule, the insurer shall clearly and prominently disclose, on or before policy delivery, available premium payment plans.

(3) Cumulative premiums shall include premiums paid for riders. However, the face amount shall not include the benefit attributable to the riders.

(4) Each policy subject to the disclosure requirements of this section shall contain a provision that allows the policyholder to cancel the policy within 10 days following the delivery of the policy with full premium refund to the consumer and with no charge or penalty. The free-look period shall be clearly and prominently disclosed to the consumer.

Stat. Auth.: ORS 731.244 & 746.240

Stats. Implemented: ORS 746.075, 743.218, 746.100, 746.110 & 746.240

Hist.: ID 6-2011, f. & cert. ef. 2-23-11

836-051-0038

Insurer Duties

The insurer and its producers shall provide additional information to any policyholder or certificate holder who asks questions about the disclosure statement.

Stat. Auth.: ORS 731.244 & 746.240

Stats. Implemented: ORS 746.075, 743.218, 746.100, 746.110 & 746.240

Hist.: ID 6-2011, f. & cert. ef. 2-23-11

836-051-0040

Trade Practice Regulation

Violation of any provision of OAR 836-051-0030 to 836-051-0040 is an unfair trade practice under ORS 746.240.

Stat. Auth.: ORS 731.244 &746.240

Stats. Implemented: ORS 746.075, 743.218, 746.100, 746.110 & 746.240

Hist.: ID 6-2011, f. & cert. ef. 2-23-11

Rule Caption: Limit Medicare Supplement Insurance Premium Increases to Once Yearly and Correct Exhibits.

Adm. Order No.: ID 7-2011

Filed with Sec. of State: 2-23-2011

Certified to be Effective: 2-23-11

Notice Publication Date: 12-1-2010

Rules Amended: 836-052-0114, 836-052-0145, 836-052-0151, 836-052-0160

Subject: Amend rules to limit premium increases for Medicare supplement insurance policies to once in 12-month period and to correct errors in exhibits to the Medicare Supplement rules.

Rules Coordinator: Sue Munson—(503) 947-7272

836-052-0114

Applicability and Scope

(1) Except as otherwise specifically provided in OAR 836-052-0134, 836-052-0140, 836-052-0145, 836-052-0160 and 836-052-0185, 836-052-0103 to 836-052-0194 apply to the following Medicare supplement policies and certificates issued under group Medicare supplement policies, as follows:

(a) All Medicare supplement policies delivered or issued for delivery in this state on or after July 1, 1992; and

(b) All certificates issued under group Medicare supplement policies and delivered or issued for delivery in this state on or after July 1, 1992.

(2) Except as otherwise specifically provided in OAR 836-052-0134, 836-052-0140, 836-052-0154, 836-052-0160, and 836-052-0185, on or after September 1, 1993, 836-052-0103 to 836-052-0194 apply to Medicare supplement policies and certificates issued under group Medicare supplement policies that are made subject to 836-052-0103 to 836-052-0194 because of amendments to the definition of “Medicare supplement policy” in ORS 743.680 and OAR 836-052-0119.

(3) A prepayment plan offered by a health maintenance organization under which the health maintenance organization and competitive medical plans provides Medicare services under the authority of Title XVIII Part C of the Social Security Act or Section 1876 of the federal Social Security Act (42 U.S.C. section 1395 et seq.) is not subject to OAR 836-052-0103 through 836-052-0194. The health maintenance organization and competitive medical plans must file with the Director, for information purposes, a copy of the Medicare contract forms and rates that the plan or health maintenance organization uses in this state, and the marketing and sales materials used therewith.

(4) OAR 836-052-0103 to 836-052-0194 do not apply to an issued policy under a demonstration project specified in 42 U.S.C. sec. 1395ss (g)(1).

(5) OAR 836-052-0103 to 836-052-0194 do not apply to a policy or contract of one or more employers or labor organizations; or of the trustees of a fund established by one or more employers or labor organizations, or combination thereof; for employees or former employees, or a combination thereof; or for members or former members, or a combination thereof, of the labor organizations.

(6) OAR 836-052-0103 to 836-052-0194 are effective on August 1, 2005. Insurers may continue using current forms, or may make changes to current forms if offering Plan K or L, as appropriate, through 2005. Insurers may offer any authorized plan upon approval by the Director of the Department of Consumer and Business Services.

(7) The changes to OAR 836-052-0145 and 836-052-0151 and Exhibits to OAR 836-052-0160 effective on February 17, 2011 apply to all Medicare Supplement policies or certificates issued on or after July 1, 2011.

Stat. Auth.: ORS 731.244 & 743.682

Stats. Implemented: ORS 743.010 & 743.683

836-052-0145

Loss Ratio Standards and Refund or Credit of Premium

(1) The following provisions of this section establish loss ratio standards:

(a) A Medicare supplement policy form or certificate form shall 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 the applicable percentage specified in this section to the policyholder and certificate holder in the form of aggregate benefits, not including anticipated refunds or credits, provided under the policy form or certificate form:

(A) At least 75 percent of the aggregate amount of premiums earned, in the case of group policies; or

(B) At least 65 percent of the aggregate amount of premiums earned, in the case of individual policies.

(b) A percentage under subsection (a) of this subsection shall 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 shall not include:

(A) Home office and overhead costs;

(B) Advertising costs;

(D) Taxes;

(E) Capital costs;

(F) Administrative costs; and

(G) Claims processing costs.

(c) All filings of rates and rating schedules shall 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 shall 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;

(d) For purposes of applying section (1)(a) of this rule and section (3)(c) of OAR 836-052-0151 only, policies issued as a result of solicitations of individuals through the mails or by mass media advertising (including both print and broadcast advertising) shall be deemed to be individual policies;

(e) For policies issued prior to September 1, 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 section (1)(a)(A) and (B) of this rule when combined with actual experience beginning with April 28, 1996, to date; and

(C) The appropriate loss ratio requirement from section (1)(a)(A) and (B) of this rule over the entire future period for which the rates are computed to provide coverage.

(2) The following provisions of this section apply to refund and credit calculations:

(a) An issuer shall collect and file with the Director by May 31 of each year the data contained in the applicable reporting form contained in Exhibit 1 to this rule 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 shall 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 purpose of this rule, policies or certificates issued prior to September 1, 1993, the issuer shall make the refund or credit calculation separately for all individual policies, including all group policies subject to an individual loss ratio standard when issued, combined and all other group policies combined for experience after April 28, 1996. The first such report shall be due by May 31, 1998.

(d) A refund or credit shall be made only when the benchmark loss ratio exceeds the adjusted experience loss ratio and the amount to be refunded or credited exceeds a negligible level. The refund must include interest from the end of the calendar year to the date of the refund or credit at a rate specified by the Secretary of Health and Human services, 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.

(3) An issuer of Medicare supplement policies and certificates issued before, on or after July 1, 1992, in this state shall file annually its rates, rating schedule and supporting documentation, including ratios of incurred losses to earned premiums by policy duration for approval by the Director in accordance with the filing requirements and procedures prescribed by the Director. The supporting documentation shall 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. The demonstration shall exclude active life reserves. An expected third year loss ratio that is greater than or equal to the applicable percentage shall be demonstrated for policies or certificates in force less than three years. As soon as practicable, but prior to the effective date of enhancements in Medicare benefits, every issuer of Medicare supplement policies or certificates in this state shall file with the Director for approval, in accordance with the applicable filing procedures of this state the following:

(a)(A) Appropriate premium adjustments necessary to produce loss ratios as anticipated for the current premium for the applicable policies or certificates. Supporting documents necessary to justify the adjustment shall accompany the filing.

(B) An issuer shall make premium adjustments necessary to produce an expected loss ratio under the policy or certificate to conform to minimum loss ratio standards for Medicare supplement policies and to be 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 that would modify the loss ratio experience under the policy other than the adjustments described herein shall be made with respect to a policy at any time other than upon its renewal date or anniversary date. Except as provided in OAR 836-052-0138, an insurer may not increase the rates for a Medicare supplement policy or certificate issued in this state more than once in a 12-month period. If an issuer intends to exercise the right to adjust a premium for age attainment under OAR 836-052-0138, and such adjustment results in more than one increase in a 12-month period, the issuer must provide written disclosure to the consumer prior to the issuance of the policy or certificate.

(C) If an issuer fails to make premium adjustments acceptable to the Director, the Director may order premium adjustments, refunds or premium credits that the Director considers necessary to achieve the loss ratio required by this rule.

(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.

(4) For purposes of this rule, experience of insureds who qualify for Medicare by reason of disability shall be combined with experience of insureds who qualify for Medicare by reason of age.

(5) The Director 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, on or after July 1, 1992, if the experience of the form for the previous reporting period is not in compliance with the applicable loss ratio standard. The determination of compliance may be made without consideration of any refund or credit for the reporting period. Public notice of the hearing shall be furnished as the Director determines to be appropriate.

[ED. NOTE: Exhibits referenced are available from the agency.]

Stat. Auth.: ORS 743.684

Stats. Implemented: ORS 743.010 & 743.684

Hist.: ID 1-1989(Temp), f. & cert. ef. 1-3-89; ID 5-1989, f. 6-30-89, cert. ef. 7-3-89; ID 11-1990, f. 5-11-90, cert. ef. 9-1-90; ID 7-1992, f. & cert. ef. 5-8-92; ID 5-1993(Temp), f. 8-11-93, cert. ef. 9-1-93; ID 9-1993, f. 9-28-93, cert. ef. 10-1-93; ID 5-1996, f. & cert. ef. 4-26-96; ID 9-1997, f. & cert. ef. 7-10-97; ID 8-2001(Temp), 6-15-01, cert. ef. 6-18-01 thru 12-10-01; ID 11-2001, f. & cert. ef. 9-24-01; ID 10-2005, f. & cert. ef. 7-26-05; ID 7-2011, f. & cert. ef. 2-23-11

836-052-0151

Filing and Approval of Policies and Certificates and Premium Rates

(1) An issuer shall not deliver or issue for delivery a policy or certificate to a resident of this state unless the policy form or certificate form has been filed with and approved by the Director in accordance with filing requirements and procedures prescribed by the Director.

(2) An issuer shall file any riders or amendments to policy or certificate forms to delete outpatient prescription drug benefits as required by the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 only with the Insurance Commissioner in the state in which the policy or certificate was issued.

(3)(a) An issuer shall not use or change premium rates for a Medicare supplement policy or certificate unless the rates, rating schedule and supporting documentation have been filed with and approved by the Director in accordance with filing requirements and procedures prescribed by the Director.

(b) Except for an adjustment of premium on the basis of attained age under OAR 836-052-0138, an issuer may not increase the rates for a Medicare supplement policy or certificate issued in this state more than once in a 12-month period. Annual rate increases shall be effective on the policy or certificate anniversary date or renewal date. If an issuer intends to exercise the right to adjust a premium for age attainment under OAR 836-052-0138, and such adjustment results in more than one increase in a 12-month period, the issuer must provide written disclosure to the consumer prior to the issuance of the policy or certificate.

(4) Except as provided in this section, an issuer shall not file for approval more than one form of a policy or certificate of each type for each standard Medicare supplement benefit plan. For the purposes of this section, a “type” means an individual policy or a group policy. An issuer may offer, with the approval of the Director, not more than four additional policy forms or certificate forms of the same type for the same standard Medicare supplement benefit plan, one for each of the following cases:

(a) The inclusion of new or innovative benefits;

(b) The addition of either direct response or agent marketing methods;

(5) The following applies to continuance and discontinuance of Medicare supplement policies and certificates:

(a) Except as provided in this subsection, an issuer shall continue to make available for purchase any policy form or certificate form issued after July 1, 1992, that has been approved by the Director. A policy form or certificate form shall not be considered to be available for purchase unless the issuer has actively offered it for sale in the previous twelve months. The following applies to discontinuance of a policy form or certificate form to which this subsection applies:

(A) An issuer may discontinue the availability of a policy form or certificate form for new issues if the issuer provides to the Director in writing its decision at least 30 days prior to discontinuing the availability of the form of the policy or certificate. After receipt of the notice by the Director, the issuer shall no longer offer for sale the policy form or certificate form in this state. The issuer must continue to renew outstanding policies and certificates;

(B) An issuer that discontinues the availability of a policy form or certificate form pursuant to paragraph (A) of this subsection shall not file for approval a new policy form or certificate form of the same type for the same standard Medicare supplement benefit plan as the discontinued form for a period of five years after the issuer provides notice to the Director of the discontinuance. The period of discontinuance may be reduced if the Director determines that a shorter period is appropriate.

(b) The sale or other transfer of Medicare supplement business to another issuer shall be considered a discontinuance for the purposes of this subsection;

(c) A change in the rating structure or methodology shall be considered a discontinuance under subsection (a) of this section unless the issuer complies with the following requirements:

(A) The issuer provides an actuarial memorandum satisfactory to the Director, in a form and manner prescribed by the Director, describing the manner in which the revised rating methodology and resultant rates differ from the existing rating methodology and existing rates;

(B) The issuer does not subsequently put into effect a change of rates or rating factors that would cause the percentage differential between the discontinued and subsequent rates as described in the actuarial memorandum to change. The Director may approve a change to the differential that is in the public interest.

(6) Except as provided in this section, the experience of all policy forms or certificate forms of the same type in a standard Medicare supplement benefit plan shall be combined for purposes of the refund or credit calculation prescribed in OAR 836-052-0145. Forms assumed under an assumption reinsurance agreement shall not be combined with the experience of other forms for purposes of the refund or credit calculation.

Stat. Auth.: ORS 743.683

Stats. Implemented: ORS 743.010, 743.684(1) - (2) & 743.683(2)

Hist.: ID 7-1992, f. & cert. ef. 5-8-92; ID 5-1993(Temp), f. 8-11-93, cert. ef. 9-1-93; ID 9-1993, f. 9-28-93, cert. ef. 10-1-93; ID 2-1995, f. & cert. ef. 4-26-95; ID 10-2005, f. & cert. ef. 7-26-05; ID 7-2011, f. & cert. ef. 2-23-11

836-052-0160

Required Disclosure Provisions

(1) The following provisions apply to all Medicare supplement policies and certificates:

(a) Each Medicare supplement policy and certificate shall include a renewal or continuation provision. The language or specifications of the provision must be consistent with the type of contract issued. The provision shall be appropriately captioned, shall appear on the first page of the policy and shall include any reservation by the issuer of the right to change premiums and any automatic renewal premium increases based on the policyholder’s or certificate holder’s age;

(b) Each rider or endorsement added to a Medicare supplement policy after the date that the policy is issued or at reinstatement or renewal, that reduces or eliminates benefits or coverage in the policy, shall require a signed acceptance by the insured, except for riders or endorsements by which the issuer effectuates a request made in writing by the insured, exercises a specifically reserved right under a Medicare supplement policy or is required to reduce or eliminate benefits to avoid duplication of Medicare benefits. After the date of issuance of the policy or certificate, any rider or endorsement that increases benefits or coverage with a concomitant increase in premium during the policy term shall be agreed to in writing signed by the insured, unless the benefits are required by the minimum standards for Medicare supplement policies, or if the increased benefits or coverage is required by law. When a separate additional premium is charged for benefits provided in connection with riders or endorsements, the premium charge shall be set forth in the policy;

(c) Medicare supplement policies or certificates shall not provide for the payment of benefits based on standards described as “usual and customary,” “reasonable and customary” or words of similar import;

(d) If a Medicare supplement policy or certificate contains any limitations with respect to preexisting conditions, such limitations must appear as a separate paragraph of the policy and be labeled as “Preexisting Condition Limitations”;

(e) Medicare supplement policies and certificates shall have a notice prominently printed on the first page of the policy or certificate or attached thereto stating in substance that the policyholder or certificate holder may return the policy or certificate within 30 days of its delivery and may have the premium refunded if, after examination of the policy or certificate, the insured person is not satisfied for any reason;

(f)(A) An issuer of health policies or certificates that provide hospital or medical expense coverage on an expense incurred or indemnity basis to a person eligible for Medicare shall provide to those applicants a Guide to Health Insurance for People with Medicare in the form developed jointly by the National Association of Insurance Commissioners and CMS and in a type size no smaller than 12 point type. Delivery of the Guide shall be made whether or not such policies or certificates are advertised, solicited or issued as Medicare supplement policies or certificates as defined in OAR 836-052-0119. Except in the case of direct response issuers, delivery of the Guide shall be made to the applicant at the time of application, and acknowledgment of receipt of the Guide shall be obtained by the issuer. Direct response issuers shall deliver the Guide to the applicant upon request but not later than at the time the policy is delivered.

(B) For the purposes of this rule, “form” means the language, format, type size, type proportional spacing, bold character and line spacing.

(2) The following notice requirements apply to all insurers providing Medicare supplement insurance:

(a) As soon as practicable, but no later than 30 days prior to the annual effective date of any Medicare benefit change, an issuer shall notify its policyholders and certificate holders of modification it has made to Medicare supplement insurance policies or certificates. The notice must be made in a format acceptable to the Director. The notice shall:

(A) Include a description of revisions to the Medicare program and a description of each modification made to the coverage provided under the Medicare supplement policy or certificate; and

(B) Inform each policyholder or certificate holder as to when any premium adjustment is to be made due to changes in Medicare.

(b) The notice of benefit modifications and any premium adjustments shall be in outline form and in clear and simple terms so as to facilitate comprehension;

(3) MMA Notice Requirements. Issuers shall comply with any notice requirements of the Medicare Prescription Drug, Improvement and Modernization Act of 2003.

(4) Each issuer shall provide an outline of coverage for Medicare supplement policies as follows:

(a) An issuer shall provide an outline of coverage to each applicant at the time the sales presentation is made to the prospective applicant and, except for direct response policies, shall obtain an acknowledgment of receipt of the outline of coverage from the applicant;

(b) If an outline of coverage provided at the time of the sales presentation and the Medicare supplement policy or certificate is issued on a basis that would require revision of the outline of coverage, a substitute outline of coverage properly describing the policy or certificate must accompany the policy or certificate when it is delivered. The revised outline of coverage shall contain the following statement, or similar language approved by the Director, in not less than twelve point type, immediately above the insurer’s name: “Notice: Read this outline of coverage carefully. It is not identical to the outline of coverage provided upon application and the coverage originally applied for has not been issued”;

(c) The outline of coverage provided to applicants pursuant to this section consists of four parts; a cover page, premium information, disclosure pages and charts displaying the features of each benefit plan offered by the issuer. The outline of coverage shall be in the language and format prescribed in Exhibit 1;

(d) The outline of coverage may be designated by the insurer either as an outline of coverage or as a fact sheet.

(5) An issuer shall give notice regarding policies or certificates that are not Medicare supplement policies, as follows:

(a) Any health insurance policy, other than a Medicare supplement policy, a policy issued pursuant to a contract under Section 1876 of the federal Social Security Act (42 U.S.C. Section 1395 et seq.); any disability income policy or other policy identified in OAR 836-052-0114(4), issued for delivery in this state to persons eligible for Medicare shall notify insureds under the policy that the policy is not a Medicare supplement policy or certificate;

(b) The notice under subsection (a) of this section shall be printed on or attached to the first page of the outline of coverage delivered to insureds under the policy, or if no outline of coverage is delivered, to the first page of the policy or certificate delivered to insureds. The notice shall be in no less than 12 point type and shall contain the following language: “THIS (POLICY OR CERTIFICATE) IS NOT A MEDICARE SUPPLEMENT (POLICY OR CONTRACT). If you are eligible for Medicare, review the Guide to Health Insurance for People with Medicare available from the company”;

(c) Applications provided to persons eligible for Medicare for the health insurance policies or certificates described in section (4)(a) of this rule shall disclose, using the applicable standard statement in Appendix C, the extent to which the policy duplicates Medicare. The disclosure statement shall be provided as part of, or together with, the application for the policy or certificate.

[ED. NOTE: Exhibits and Appendices referenced are available from the agency.]

[Publications: Publications referenced are available from the agency.]

Stat. Auth.: ORS 731.244, 743.683 & 743.685

Stats. Implemented: ORS 743.683, 743.685 & 743.686

Hist.: ID 1-1989(Temp), f. & cert. ef. 1-3-89; ID 5-1989, f. 6-30-89, cert. ef. 7-3-89; ID 11-1990, f. 5-11-90, cert. ef. 9-1-90; ID 7-1992, f. & cert. ef. 5-8-92; ID 5-1993(Temp), f. 8-11-93, cert. ef. 9-1-93; ID 9-1993, f. 9-28-93, cert. ef. 10-1-93; ID 5-1996, f. & cert. ef. 4-26-96; ID 9-1997, f. & cert. ef. 7-10-97; ID 21-1998(Temp), f. 12-8-98, cert. ef. 1-1-99 thru 6-25-99; ID 4-1999, f. & cert. ef. 4-29-99; ID 6-2001, f. & cert. ef. 5-22-01; ID 8-2001(Temp), f. 6-15-01, cert. ef. 6-18-01 thru 12-10-01; ID 11-2001, f. & cert. ef. 9-24-01; ID 10-2005, f. & cert. ef. 7-26-05; ID 7-2011, f. & cert. ef. 2-23-11

Rule Caption: Annual Update of Rule Relating to Health Insurance Coverage of Prosthetic and Orthotic Devices.

Adm. Order No.: ID 8-2011

Filed with Sec. of State: 2-23-2011

Certified to be Effective: 2-23-11

Notice Publication Date: 1-1-2011

Rules Amended: 836-052-1000

Subject: This rulemaking adopts the annual update to the Insurance Division rule listing the prosthetic and orthotic devices that must be covered by group and individual health insurance policies. The rulemaking implements ORS 743A.144, which requires all such policies that provide coverage for hospital, medical or surgical expenses to include coverage for prosthetic and orthotic devices.

Rules Coordinator: Sue Munson—(503) 947-7272

836-052-1000

Prosthetic and Orthotic Devices

(1) This rule is adopted under the authority of ORS 731.244 and 743A.144, for the purpose of implementing ORS 743A.144.

(2) The list of prosthetic and orthotic devices and supplies in the Medicare fee schedule for Durable Medical Equipment, Prosthetics, Orthotics and Supplies is adopted for the purpose of listing the prosthetic and orthotic devices and supplies for which coverage is required by ORS 743A.144, insofar as the list is consistent with ORS 743A.144. The list is limited to those rigid or semi rigid devices used for supporting a weak or deformed leg, foot, arm, hand, back or neck, or restricting or eliminating motion in a diseased or injured leg, foot, arm, hand, back or neck or an artificial limb device or appliance designed to replace in whole or in part an arm or a leg that the Centers for Medicare and Medicaid Services (CMS) has designated in the 4-digit L Codes of Healthcare Common Procedure Coding System (HCPC) Level II, which is accessible by selecting the link for the most current Alpha-Numeric HCPCS File at: https://www.cms.hhs.gov/HCPCSReleaseCodeSets/ANHCPCS/list.asp (Rev. 12-9-10).

(3) Under ORS 743A.144(4), benefits payable under a policy may not be subject to internal or separate limits or caps other than the policy lifetime maximum benefits as they apply to the coverage for prosthetic and orthotic devices required by ORS 743A.144.

(4) A managed care plan to which ORS 743A.144(6) applies is a health insurance policy that requires an enrollee to use a closed network of providers managed, owned, under contract with or employed by the insurer in order to receive benefits under the plan.

Stat. Auth: ORS 731.244 & 743A.144

Stats. Implemented: ORS 743A.144

Hist.: ID 12-2007, f. 12-18-07, cert. ef. 1-1-08; ID 12-2009, f. & cert. ef. 12-18-09; ID 8-2011, f. & cert. ef. 2-23-11

Rule Caption: Changes to Oregon Standard Health Statement.

Adm. Order No.: ID 9-2011

Filed with Sec. of State: 2-23-2011

Certified to be Effective: 2-23-11

Notice Publication Date: 1-1-2011

Rules Amended: 836-053-0510

Subject: This rule is necessary to reflect the changes to the Oregon Standard Health Statement recommended by the Health Insurance Reform Advisory Committee (HIRAC) pursuant to ORS 743.766. The changes update the form to reflect the federal Affordable Care Act’s rescission standard and its prohibition against insurers limiting or denying coverage for persons under the age of 19 because of health status or preexisting condition. The changes also include corrections of clerical errors, moving a notice to a more prominent location, and the inclusion of a HIRAC recommendation that insurers be allowed to review their own claims history for those applicants 19 years of age or older. The rule as amended refers to the Oregon Standard Health Statement as set forth on the State of Oregon Insurance Division’s website rather than as an exhibit to the rule.

Rules Coordinator: Sue Munson—(503) 947-7272

836-053-0510

Oregon Standard Health Statement

(1) A carrier may not use any health statement except the Oregon Standard Health Statement set forth on the website for the Insurance Division of the Department of Consumer and Business Services at www.insurance.oregon.gov to evaluate the health status of an applicant for coverage in an individual health benefit plan or a late enrollee in a group health benefit plan. In all instances in which a carrier uses the Oregon Standard Health Statement, the cost of processing the statement shall be borne by the carrier.

(2) In evaluating the Oregon Standard Health Statement submitted by an applicant, a carrier may request medical records or an attending physician’s statement for the applicant, but such a request shall be made only for questions that have been marked “Yes” by the applicant in the numbered questionnaire portion of the statement. The cost of obtaining such information shall be borne by the carrier. Although a carrier’s request for additional medical information is limited to the specific questions marked “Yes,” a carrier may use all of the information received in response to such a request in evaluating the applicant’s health statement.

(3) In accordance with ORS 746.135, a carrier may not use genetic information to reject, deny, limit or alter the terms of a health benefit plan.

(4) Violation of any provision of this rule is an unfair trade practice under ORS 746.240.

[ED. NOTE: Exhibits referenced are available from the agency.]

Stat. Auth.: ORS 731.244 & 743.766

Stats. Implemented: ORS 743.766

Hist.: ID 12-1996, f. & cert. ef. 9-23-96; Renumbered from 836-053-0470, ID 5-1998, f. & cert. ef. 3-9-98; ID 5-2000, f. & cert. ef. 5-11-00; ID 9-2004, f. & cert. ef. 11-19-04; ID 9-2011, f. & cert. ef. 2-23-11

Notes
1.) This online version of the OREGON BULLETIN is provided for convenience of reference and enhanced access. The official, record copy of this publication is contained in the original Administrative Orders and Rulemaking Notices filed with the Secretary of State, Archives Division. Discrepancies, if any, are satisfied in favor of the original versions. Use the OAR Revision Cumulative Index found in the Oregon Bulletin to access a numerical list of rulemaking actions after November 15, 2010.