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Oregon Bulletin

August 1, 2013

Department of Consumer and Business Services, Insurance Division, Chapter 836

Rule Caption: Rating and filing requirements for individual and small employer health benefit plan rate filings

Adm. Order No.: ID 4-2013(Temp)

Filed with Sec. of State: 6-17-2013

Certified to be Effective: 6-17-13 thru 12-6-13

Notice Publication Date:

Rules Adopted: 836-053-0064

Rules Amended: 836-053-0065, 836-053-0471

Subject: This rule suspends a requirement that health insurers include, as a component of a small employer or individual health benefit plan rate filing, a document containing, among other important disclosures, summary information breaking down the expenditure of premium contributions, and further breaking down expenditures on medical claims. The form is similar to a federal form that insurers must file. To eliminate duplication of effort as rate filings are received for the start of the Oregon Health Insurance Exchange Corporation operation, the state will rely on the forms required to be filed by federal law. New provisions for rating of grandfathered and nongrandfathered health benefit plans reflect changes required under federal law for nongrandfathered small group plans and the need to distinguish the rating requirements for grandfathered and nongrandfathered plans. It is necessary to make these changes immediately in order to have correct rules in place as the department makes decisions about the approval or disapproval of rates and plans for plans effective on or after January 1, 2014.

Rules Coordinator: Victor Garcia—(503) 947-7484

836-053-0064

Rating for Nongrandfathered Small Group Plans

The following provisions relating to rating apply to nongrandfathered health benefit plans offered to small employers:

(1) A small employer carrier shall file a single geographic average rate for each nongrandfathered health benefit plan that is offered to small employers within a geographic area and for each category of family composition. The geographic rate must be determined on a pooled basis and the pool shall only include all of the carrier’s nongrandfathered business in the small employer market.

(2) There shall be one rating class for each small employer carrier. All nongrandfathered small employer health benefit plans of the carrier shall be rated in that class. A rating of a health benefit plan is subject to adjustments reflecting age, tobacco use and differences in family composition.

(3) The variation in geographic average rates among different nongrandfathered small employer health benefit plans offered by a carrier must be based solely on objective differences in plan design or coverage. The variation shall not include differences based on the risk characteristics or claims experience of the actual or expected enrollees in a particular plan.

(4) A small employer carrier shall file its geographic average rates for nongrandfathered small employer health benefit plans in accordance with the rate filing requirements of OAR 836-053-0910.

(5) A small employer carrier shall assess administrative expenses in a uniform manner to all nongrandfathered small employer health benefit plans. Administrative expenses shall be expressed as a percentage of premium and the percentage may not vary with the size of the small employer.

(6) Nongrandfathered small group plans shall be rated within the following geographic areas comprising counties as follows:

(a) Area 1 shall include: Clackamas, Multnomah, Washington, and Yamhill;

(b) Area 2 shall include: Benton, Lane, and Linn;

(c) Area 3 shall include: Marion and Polk;

(d) Area 4 shall include: Deschutes, Klamath, and Lake;

(e) Area 5 shall include: Clatsop, Columbia, Coos, Curry, Lincoln, and Tillamook;

(f) Area 6 shall include: Baker, Crook, Gilliam, Grant, Harney, Hood River, Jefferson, Malheur, Morrow, Sherman, Umatilla, Union, Wallowa, Wasco, and Wheeler.

(g) Area 7 shall include: Douglas, Jackson and Josephine.

(7) For nongrandgathered small group plans, a small employer carrier may use the same geographic average rate for multiple rating areas.

(8) Premium rates for nongrandfathered small employer health benefit plans:

(a) For each group, shall total the sum of the product of the base rate and the applicable factors in section (9) of this rule for each employee and dependent 21 years of age and older and the sum of the product of the base rate and the applicable factors in section (9) of this rule for each of the three oldest dependent children under the age of 21 within each family in the group.

(b) Shall be allocated to an employee by dividing the total premium described in subsection (a) of this section by the sum of the products of the number of employees and the applicable tier factors specified in paragraphs (A) through (D) of this subsection, and multiplying the quotient by the applicable tier factor for the employee as specified in paragraphs (A) through (D) of this subsection. The tier factors are:

(A) 1.00 for an employee only;

(B) 1.85 for an employee and one or more children age 25 or younger;

(C) 2.00 for an employee and spouse; and

(D) 2.85 for an employee and family.

(9) The variations in rates described in this rule may be based on one or more of the following factors as determined by the carrier:

(a) The ages of enrolled employees and their dependents according to Exhibit 1 to this rule. Variations in rates based on age may not exceed a ratio of 3 to 1.

(b) A tobacco use factor of no more than 1.5 times the non-tobacco use rate for persons 18 years or older except that the factor may not be applied when the person is enrolled in a tobacco cessation program.

(c) The level at which enrolled employees and their dependents engage in health promotion, disease prevention or wellness programs.

Stat. Auth.: ORS 731.244 & 743.731 & 743.758

Stats. Implemented: ORS 743.731, 743.734 & 743.737

Hist.: ID 4-2013(Temp), f. & cert. ef. 6-17-13 thru 12-6-13

836-053-0065

Rating for Grandfathered Small Group Plans

The following provisions relating to rating apply to grandfathered health benefit plans offered to small employers:

(1) A small employer carrier shall file a single geographic average rate for each grandfathered health benefit plan that is offered to small employers within a geographic area and for each category of family composition. The geographic average rate must be determined on a pooled basis and the pool shall include all of the carrier’s grandfathered business in the small employer market.

(2) There shall be one rating class for each small employer carrier. All grandfathered small employer health benefit plans of the carrier shall be rated in that class. A rating of a grandfathered health benefit plan is subject to adjustments reflecting the level of benefits provided and differences in family composition and age.

(3) The variation in geographic average rates among different grandfathered small employer health benefit plans offered by a carrier must be based solely on objective differences in plan design or coverage. The variation shall not include differences based on the risk characteristics or claims experience of the actual or expected enrollees in a particular plan, except that a carrier may make further adjustment at renewal to reflect the expected claims experience of the covered small employer; however, this adjustment may not exceed five percent of the annual premium otherwise payable by the small employer, is not cumulative year to year, and may be based only on the carrier’s claims experience with the small employer. A variation based on the level of contribution by the small employer or on the level of participation by eligible employees, or on both, must be actuarially sound.

(4) A small employer carrier shall file its geographic average rates for grandfathered small employer health benefit plans in accordance with the rate filing requirements of OAR 836-053-0910.

(5) A small employer carrier shall assess administrative expenses in a uniform manner to all grandfathered small employer health benefit plans. Administrative expenses shall be expressed as a percentage of premium and the percentage may not vary with the size of the small employer.

(6) Grandfathered small employer plans shall be rated within the following geographic areas comprising counties as follows:

(a) Area 1 shall include: Clackamas, Multnomah, Washington, and Yamhill;

(b) Area 2 shall include: Benton, Lane, and Linn;

(c) Area 3 shall include: Marion and Polk;

(d) Area 4 shall include: Deschutes, Klamath, and Lake;

(e) Area 5 shall include: Clatsop, Columbia, Coos, Curry, Lincoln, and Tillamook;

(f) Area 6 shall include: Baker, Crook, Gilliam, Grant, Harney, Hood River, Jefferson, Malheur, Morrow, Sherman, Umatilla, Union, Wallowa, Wasco, and Wheeler.

(g) Area 7 shall include: Douglas, Jackson and Josephine.

(7) For grandfathered small employer plans, a small employer carrier may use five digit zip code groupings to define the carrier’s geographic areas. The zip code groupings may vary from the county areas defined in section (6) of this rule by no more than ten percent of the population of a county. The small employer carrier must use either the zip code system or the county system and shall not modify the geographic areas in any other manner.

(8) For grandfathered small employer plans, a small employer carrier may use the same geographic average rate for multiple rating areas.

(9) For grandfathered small employer plans, a small employer carrier may deviate from the variation described in section (1) of this rule for coverage that extends to a geographic area outside the state of Oregon. The carrier must do so in a reasonable fashion and maintain records regarding the basis for the rate charged in the small employer’s file.

(10) The premium rates charged during a rating period for a grandfathered health benefit plan issued to a small employer may not vary from the geographic average rate by more than 50.0 percent

(11) The variations in premium rates described in section (10) of this rule may be based on one or more of the following factors as determined by the carrier:

(a) The ages of enrolled employees and their dependents;

(b) The level at which the small employer contributes to the premiums payable for enrolled employees and their dependents;

(c) The level at which eligible employees participate in the health benefit plan;

(d) The level at which enrolled employees and their dependents engage in tobacco use;

(e) The level at which enrolled employees and their dependents engage in health promotion, disease prevention or wellness programs;

(f) The period of time during which a small employer retains uninterrupted coverage in force with the same small employer carrier; and

(g) Adjustments to reflect the level of benefits provided and differences in family composition.

Stat. Auth.: ORS 731.244 & 743.731

Stats. Implemented: ORS 743.731, 743.734 & 743.737

Hist.: ID 17-1992, f. 12-3-92, cert. ef. 12-7-92; ID 1-1994, f. & cert. ef. 1-26-94; ID 12-1996, f. & cert. ef. 9-23-96; Renumbered from 836-053-0020; ID 5-1998, f. & cert. ef. 3-9-98; ID 5-2000, f. & cert. ef. 5-11-00; ID 5-2007(Temp), f. 8-17-07, cert. ef. 8-20-07 thru 2-15-08; ID 2-2008, f. & cert. ef. 2-11-08; ID 4-2013(Temp), f. & cert. ef. 6-17-13 thru 12-6-13

836-053-0471

Required Materials for Rate Filing for Individual or Small Employer Health Benefit Plans

(1) Every insurer that offers a health benefit plan for small employers or an individual health benefit plan covering an Oregon resident shall file the information specified in subsections (2) and (3) of this rule when the insurer files with the director a schedule or table of premium rates for approval.

(2) A schedule or table of base premium rates filed under subsection (1) of this section shall include sufficient information and data to allow the director to consider the factors set forth in ORS 743.018(4) and (5). The filing shall include all of the following separately set forth and labeled as indicated:

(a) A filing description.

(A) Label: FILING DESCRIPTION.

(B) The filing description shall be submitted in the form of a cover letter. The filing description must provide a summary of the reasons an insurer is requesting a rate change and the minimum and maximum rate impact to all groups or members affected by the rate change, including the anticipated change in number of enrollees if the proposed premium rate is approved. The description also must include the name and contact information of the filer and a description of any significant changes the insurer is making to the following:

(i) Rating factor changes;

(ii) Plan modification or discontinuance; and

(iii) Benefit or administration changes.

(b) A rate filing summary.

(A) Label: RATE FILING SUMMARY.

(B) This summary must explain the filing in a manner that allows consumers to understand the rate change. The summary shall be in accordance with the form established in Exhibit 1 or Exhibit 2 to this rule. The information contained in this summary must match the information provided elsewhere in the filing.

(c) An actuarial memorandum.

(A) Label: ACTUARIAL MEMORANDUM.    

(B) This memorandum must include all of the following:

(i) A description of the benefit plan and a quantification of any changes to the benefit plan as set forth in subsection (j) of this section.

(ii) A discussion of assumptions, factors, calculations, rate tables and any other information pertinent to the proposed rate.

(iii) A description of any changes in rating methodology supported by sufficient detail to permit the department to evaluate the effect on rates and the rationale for the change.

(iv) The range of rate impact to groups or members including the distribution of the impact on members.

(v) Signature of and date that a qualified actuary reviewed the rate filing.

(d) Rate tables and factors.

(A) Label: RATE TABLES AND FACTORS.

(B) The insurer must include base and geographic average rate tables, identify factors used by the insurer in developing the rates and explain how the information is used in the development of rates. The rate tables and factors must include a table of rating factors reflecting ages of employees and dependents and geographic area. If base rates are not provided by rating tier, the rate tier tables also must be provided.

(C) The document must indicate whether the rate increases are the same for all policies. The document must clearly explain how the rate increases apply to different policies including the entire distribution of rate changes and the average of the highest and lowest rates resulting from the application of other rating factors.

(D) The geographic average rate table must include family type, geographic area and the average of the highest and lowest rates resulting from the application of other rating factors.

(E) The rate tables must contain at a minimum the base rates for each available plan. This document must include information that would permit the determination of rates for each benefit plan, each age bracket, each geographic area, each rate tier and any other variable used to determine rates. If the rates vary more frequently than annually, separate rates must either be provided for each effective date of change or information provided to permit their determination and the justification for such variation in rates.

(F) If the filing is for a health benefit plan issued to a small employer, the insurer also shall include the following factors if applied by the insurer as allowed under ORS 743.737:

(i) Contribution;

(ii) Level of participation;

(iii) Tobacco usage;

(iv) Participation in wellness programs;

(v) Duration of coverage in force; and

(vi) Any adjustment to reflect expected claims experience, which may not exceed the limits established in ORS 743.737.

(e) Plan relativities.

(A) Label: PLAN RELATIVITIES.

(B) This document must explain the presentation of rates for each benefit plan, explain the methodology of how the benefit plan relativities were developed and demonstrate the comparison and reasonableness of benefits and costs between plans.

(f) A description of the development of the proposed rate change or base rate.

(A) Label: DEVELOPMENT OF RATE CHANGE OR BASE RATE.

(B) This document is the core of the rate filing and must explain how the proposed rate or rate change was calculated. The calculation must be based on generally accepted actuarial rating principles for rating blocks of business and should provide sufficient detail to allow reasonable review. The development of rate change or base rate also should include actual or expected membership information and identify a proposed loss ratio for the rating period. A rate renewal calculation must begin with an assumed experience period of at least one year ending within the immediately preceding year, or, if more recent data is available for one-year period that concludes with the most recent period for which data is available. The total premium earned during the experience period should be adjusted to yield premium adjusted to current rates. A projection is made of premiums and claims for the period during which the proposed rates are to be effective. Claims for a renewal projection should reflect an assumed medical trend rate as well as other expected changes in claims cost, including but not limited to the impact of benefit changes or provider reimbursement.

(g) Trend information and projection.

(A) Label: TREND INFORMATION AND PROJECTION.

(B) This document must describe how the assumed future growth of medical claims (the medical trends rate) was developed based on generally accepted actuarial principles. The trend document also must include historical monthly average claim costs for at least the immediately preceding two years when applicable. If the carrier’s structure does not include claims cost, the carrier shall submit this information based on allocated costs.

(h) Premium retention.

(A) Label: PREMIUM RETENTION.

(B) This document must include a description of retention. As used in this paragraph, “retention” means the amount to be retained by the insurer to cover all of the insurer’s non-claim costs including expected profit or contribution to surplus for a nonprofit entity. Retention must be reported on a percentage of premium basis.

(i) Worksheet for Individual Health Benefit Plan Rates (if applicable).

(A) Label: WORKSHEET FOR INDIVIDUAL HEALTH BENEFIT PLAN RATES.

(B) This standardized schedule for individual health benefit plan rates must include earned premiums, incurred claims and membership totals for the past five years on an annual basis as well as accumulated to the current date. The same elements must be projected and reported for each of the next three years. If an active life reserve has been established, that reserve also should be included.

(j) Changes to covered benefits or health benefit plan design.

(A) Label: COVERED BENEFIT OR PLAN DESIGN CHANGES.

(B) This document must explain benefit and administrative changes with rating impact, including covered benefit level changes, member cost-sharing changes, elimination of plans, implementation of new plan designs, provider network changes, new utilization or prior authorization programs, changes to eligibility requirements, changes to exclusions, or any other change in the plan offerings that impacts costs or coverage provided.

(k) Changes in the insurer’s health care cost containment and quality improvement efforts.

(A) Label: COST CONTAINMENT AND QUALITY IMPROVEMENT EFFORTS.

(B) This document must explain any changes the insurer has made in its health care cost containment efforts and quality improvement efforts since the insurer’s last rate filing for the same category of health benefit plan. Significant new health care cost containment initiatives and quality improvement efforts should be described and an estimate made of potential savings together with an estimated cost or savings for the projection period. The insurer shall provide information about whether the cost containment initiatives reduce costs by eliminating waste, improving efficiency, by improving health outcomes through incentives, or by elimination or reduction of covered services or reduction in the fees paid to providers for services.

(l) Information about the insurer’s financial position.

(A) Label: INSURER’S FINANCIAL POSITION.

(B) This document must include information about the insurer’s financial position, including but not limited to profitability, surplus, reserves and investment earnings. This document also must include a discussion of whether the proposed change in the premium rate is necessary to maintain the insurer’s solvency or to maintain rate stability and prevent excessive rate increases for the line of business in the future. In providing this information, the insurer may reference documents filed with the department as part of the annual statement or other requisite filings. The referenced material must be available to the public.

(m) Certification of compliance.

(A) Label: CERTIFICATION OF COMPLIANCE.

(B) The certificate must comply with OAR 836-010-0011 and must certify that the filing complies with Oregon statutes, rules, product standards and filing requirements.

(n) Third party filer’s letter of authorization (if applicable).

(A) Label: THIRD PARTY AUTHORIZATION.

(B) If the filing is submitted by a person other than the insurer, the filing must include a letter from the insurer that authorizes the third party to submit and correspond with the department on matters pertaining to the rate filing.

(3)(a) For each schedule or table of premium rates filed, the insurer shall separately include a statement of administrative expenses for the line of business and complete the chart displaying the five-year trend of administrative costs included as Exhibit 3 to this rule. The chart must break down the insurer’s administrative expenses relating to:

(A) Salaries, wages, employment taxes and other benefits;

(B) Commissions;

(C) Cost depreciations including but not limited to depreciation for equipment, software or furniture;

(D) Rent or occupancy expenses;

(E) Marketing and advertising;

(F) General offices expenses, including but not limited to sundries, supplies, telephone, printing and postage;

(G) Third party administration expenses or fees or other group service expense or fees;

(H) Legal fees and expenses and other professional or consulting fees;

(I) Other taxes, licenses and fees; and

(J) Travel expenses.

(b) The statement of administrative expenses required under this subsection must include:

(A) As set forth in Exhibit 3, a statement of administrative expenses on a per member per month basis set forth separately for claim-related and non-claim expenses;

(B) As set forth in Exhibit 3, an explanation of the basis for any proposed premium rate increase or decrease related to changes in the administrative expenses of the insurer; and

(C) An explanation of how the insurer allocates administrative expenses for the filed line of business.

(4)(a) Within 10 days after receiving a proposed table or schedule of premium rate filing, the director shall:

(A) Determine whether the proposed table or schedule of premium rate filing is complete. If the director determines that a filing is complete, the director shall review the proposed schedule or table of premium rate in accordance with ORS 742.003, 742.005, 742.007 and 743.018. If the director determines that the filing is not complete, the director shall notify the insurer in writing that the filing is deficient and give the insurer an opportunity to provide the missing information.

(B) If the filing is complete, the director shall open the 30-day public comment period. For purposes of determining the beginning of the public comment period, the date the carrier files a proposed schedule or table of premium rates shall be the date the director determines that the filing is complete.

(b) The director shall issue a decision approving, disapproving or modifying the proposed table or schedule of premium rate filing within 10 days after the close of the public comment period.

(5) The director shall post on the Insurance Division website all materials submitted under subsections (2) and (3) of this rule at the beginning of the public comment period.

Stat. Auth.: ORS 731.244, 743.018, 743.019 & 743.020

Stats. Implemented: ORS 742.003, 742.005, 742.007, 743.018, 743.019, 743.020, 743.730 & 743.767

Hist.: ID 5-2010, f. & cert. ef. 2-16-10; ID 14-2012, f. & cert. ef. 8-1-12; ID 4-2013(Temp), f. & cert. ef. 6-17-13 thru 12-6-13

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, 2012.

2.) Copyright 2013 Oregon Secretary of State: Terms and Conditions of Use

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