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Oregon Bulletin

December 1, 2011

 

Department of Consumer and Business Services,
Insurance Division
Chapter 836

Rule Caption: Require risk based capital trend test by property and casualty insurers.

Adm. Order No.: ID 14-2011

Filed with Sec. of State: 10-31-2011

Certified to be Effective: 10-31-11

Notice Publication Date: 9-1-2011

Rules Amended: 836-011-0300, 836-011-0305, 836-011-0310, 836-011-0320, 836-011-0380, 836-011-0390

Subject: This rule provides the Insurance Division with an additional tool to determine whether a property and casualty insurer falls within a risk based capital (RBC) company action level. Current rules define a company ac tion level as an RBC ratio of 200 percent. This rule requires the Division to take action if a company’s RBC falls between 200 and 300 percent and its combined ratio is above 120 percent. This additional tool assists in determining whether an insurer is maintaining adequate capital and surplus to meet statutory requirements and policyholder obligations.

      The changes to the rules also correct and update internal references.

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

836-011-0300

Statutory Authority; Statutes Implemented

(1) OAR 836-011-0300 to 836-011-0390 apply to insurers that are subject to the capital and surplus requirements of ORS 731.554 and insurers that are subject to the capital and surplus requirements of 731.566.

(2) OAR 836-011-0300 to 836-011-0390 are adopted pursuant to the authority of ORS 731.244, 731.554, 731.574 and 733.210 for the purpose of implementing 731.554 and 731.574.

Stat. Auth.: ORS 731.244, ORS 731.554 & ORS 733.210

Stats. Implemented: ORS 731.554 & ORS 731.574

Hist.: ID 7-1995, f. & cert. ef. 11-15-95; ID 14-2011, f. & cert. ef. 10-31-11

836-011-0305

Definitions

As used in OAR 836-011-0300 to 836-011-0390:

(1) “Adjusted RBC report” means a risk-based capital (RBC) report that has been adjusted by the Director in accordance with OAR 836-011-0310(5).

(2) “Corrective order” means an order issued by the Director specifying corrective actions that the Director has determined are required.

(3) “NAIC” means the National Association of Insurance Commissioners.

(4) “Life or health insurer” means an insurer transacting life insurance or health insurance or both or an insurer authorized to transact property and casualty insurance but writing only health insurance.

(5) “Property and casualty insurer” means an insurer transacting property and casualty insurance, or either, but does not include an insurer transacting only monoline mortgage guaranty insurance, financial guaranty insurance or title insurance, or an insurer authorized to transact property and casualty insurance but writing only health insurance.

(6) “Negative trend” means, with respect to a life or health insurer, negative trend over a period of time, as determined in accordance with the “trend test calculation” included in the RBC instructions.

(7) “RBC instructions” means the RBC report, including risk-based capital instructions adopted by the NAIC, as such RBC instructions may be amended by the NAIC from time to time in accordance with the procedures adopted by the NAIC and identified by the Department of Consumer and Business Services to be applicable to the RBC report period. RBC instructions may be obtained by contacting the Insurance Division of the Department of Consumer and Business Services using the contact information provided on the Insurance Division website at: http://insurance.oregon.gov/Contactus.html .

(8) “RBC level” means an insurer’s company action level RBC, regulatory action level RBC, authorized control level RBC, or mandatory control level RBC, defined as follows:

(a) “Company action level RBC” means, with respect to any insurer, the product of 2.0 and its authorized control level RBC;

(b) “Regulatory action level RBC” means the product of 1.5 and its authorized control level RBC;

(c) “Authorized control level RBC” means the number determined under the risk-based capital formula in accordance with the RBC instructions; and

(d) “Mandatory control level RBC” means the product of .70 and the authorized control level RBC.

(9) “RBC plan” means a comprehensive financial plan containing the elements specified in OAR 836-011-0320(2). If the Director rejects the RBC plan and it is revised by the insurer with or without the Director’s recommendation, the plan shall be called the “revised RBC plan.”

(10) “RBC report” means the report required in OAR 836-011-0310.

(11) “Total adjusted capital” means the sum of:

(a) An insurer’s statutory capital and surplus as determined in accordance with the statutory accounting applicable to the annual financial statements required to be filed under ORS 731.574; and

(b) Such other items, if any, as the RBC instructions may provide.

Stat. Auth.: ORS 731.244, 731.554 & 733.210

Stats. Implemented: ORS 731.554 & 731.574

Hist.: ID 7-1995, f. & cert. ef. 11-15-95; ID 14-2011, f. & cert. ef. 10-31-11

836-011-0310

RBC Reports

(1) Each domestic insurer shall, on or prior to each March 1 (the “filing date”), prepare and submit to the Director a report of its RBC levels as of the end of the calendar year just ended, in a form and containing such information as is required by the RBC instructions. In addition, each domestic insurer shall file its RBC report:

(a) With the NAIC in accordance with the RBC instructions; and

(b) With the insurance commissioner in any state in which the insurer is authorized to do business, if the insurance commissioner has notified the insurer of its request in writing, in which case the insurer shall file its RBC report not later than the later of:

(A) 15 days from the receipt of notice to file its RBC report with that state; or

(B) The filing date.

(2) A life or health insurer’s RBC shall be determined in accordance with the formula set forth in the RBC instructions. The formula shall take into account (and may adjust for the covariance between) the following, determined in each case by applying the factors in the manner set forth in the RBC instructions:

(a) The risk with respect to the insurer’s assets;

(b) The risk of adverse insurance experience with respect to the insurer’s liabilities and obligations;

(c) The interest rate risk with respect to the insurer’s business; and

(d) All other business risks and such other relevant risks as are set forth in the RBC instructions.

(3) A property and casualty insurer’s RBC shall be determined in accordance with the formula set forth in the RBC instructions. The formula shall take into account (and may adjust for the covariance between) the following, determined in each case by applying the factors in the manner set forth in the RBC instructions:

(a) Asset risk;

(b) Credit risk;

(c) Underwriting risk; and

(d) All other business risks and such other relevant risks as are set forth in the RBC instructions.

(4) An excess of capital over the amount produced by the risk-based capital requirements contained in OAR 836-011-0300 to 836-011-0390 and the formulas, schedules and instructions referenced in 836-011-0300 to 836-011-0390 is desirable in the business of insurance. Accordingly, insurers should seek to maintain capital above the RBC levels required by 836-011-0300 to 836-011-0390. additional capital is used and useful in the insurance business and helps to secure an insurer against various risks inherent in, or affecting, the business of insurance and not accounted for or only partially measured by the risk-based capital requirements contained in 836-011-0300 to 836-011-0390.

(5) If a domestic insurer files an RBC report that in the judgment of the Director is inaccurate, the Director shall adjust the RBC report to correct the inaccuracy and shall notify the insurer of the adjustment. The notice shall contain a statement of the reason for the adjustment. An RBC report as so adjusted is an “adjusted RBC report” for purposes of OAR 836-011-0300 to 836-011-0390.

Stat. Auth.: ORS 731.244, 731.554 & 733.210

Stats. Implemented: ORS 731.554 & 731.574

Hist.: ID 7-1995, f. & cert. ef. 11-15-95; ID 14-2011, f. & cert. ef. 10-31-11

836-011-0320

Company Action Level Event

(1) “Company action level event” means any of the following events:

(a) The filing of an RBC report by an insurer indicating that:

(A) The insurer’s total adjusted capital is greater than or equal to its regulatory action level RBC but less than its company action level RBC;

(B) If a life or health insurer, the insurer has total adjusted capital that is greater than or equal to its company action level RBC but less than the product of its authorized control level RBC and 2.5 and has a negative trend; or

(C) If a property and casualty insurer, the insurer has total adjusted capital that is greater than or equal to its company action level RBC but less than the product of its authorized control level RBC and 3.0 and triggers the trend test determined in accordance with the trend test calculation included in the property and casualty RBC instructions.

(b) The notification by the Director to the insurer of an adjusted RBC report that indicates an event in subsection (a) of this section, if the insurer does not challenge the adjusted RBC report under OAR 836-011-0360; or

(c) If, pursuant to OAR 836-011-0360, an insurer challenges an adjusted RBC report that indicates the event in subsection (a) of this section, the notification by the Director to the insurer that the Director has, after a hearing, rejected the insurer’s challenge.

(2) In the event of a company action level event, the insurer shall prepare and submit to the Director an RBC plan that shall:

(a) Identify the conditions contributing to the company action level event;

(b) Contain proposals of corrective actions that the insurer intends to take and would be expected to result in the elimination of the company action level event;

(c) Provide projections of the insurer’s financial results in the current year and at least the four succeeding years, both in the absence of proposed corrective actions and giving effect to the proposed corrective actions, including projections of statutory operating income, net income, capital and surplus. The projections for both new and renewal business must include separate projections for each major line of business and separately identify each significant income, expense and benefit component, if the Director so requires;

(d) Identify the key assumptions affecting the insurer’s projections and the sensitivity of the projections to the assumptions; and

(e) Identify the quality of and problems associated with the insurer’s business, including but not limited to its assets, anticipated business growth and associated surplus strain, extraordinary exposure to risk, mix of business and use of reinsurance, if any, in each case.

(3) The insurer shall submit the RBC Plan:

(a) Not later than the 45th day after the company action level event; or

(b) If the insurer challenges an adjusted RBC report pursuant to OAR 836-011-0360, not later than the 45th day after the Director’s notification to the insurer that the Director has, after a hearing, rejected the insurer’s challenge.

(4) Not later than the 60th day after an insurer has submitted an RBC plan to the Director, the Director shall notify the insurer whether the RBC plan shall be implemented or is unsatisfactory, in the judgment of the Director. If the Director determines the RBC plan is unsatisfactory, the notification to the insurer shall set forth the reasons for the determination and may set forth proposed revisions that will render the RBC plan satisfactory, in the judgment of the Director. Upon notification from the Director, the insurer shall prepare a revised RBC plan, which may incorporate by reference any revisions proposed by the Director, and shall submit the revised RBC plan to the Director:

(a) Not later than the 45th day after the notification from the Director; or

(b) If the insurer challenges the notification from the Director under OAR 836-011-0360, not later than the 45th day after a notification to the insurer that the Director has, after a hearing, rejected the insurer’s challenge.

(5) In the event of a notification by the Director to an insurer that the insurer’s RBC plan or revised RBC plan is unsatisfactory, the Director at the Director’s discretion, subject to the insurer’s right to a hearing under OAR 836-011-0360, may specify in the notification that the notification constitutes a regulatory action level event.

(6) A domestic insurer that files an RBC plan or revised RBC plan with the Director shall file a copy of the RBC plan or revised RBC plan with the insurance commissioner in any state in which the insurer is authorized to transact insurance if such a state has an RBC provision substantially similar to ORS 731.752, and the insurance commissioner of that state has notified the insurer of its request for the filing in writing. The insurer shall file the copy in that state not later than the later of the following:

(a) The 15th day after receipt of the notice to file a copy of its RBC plan or revised RBC plan with the state; or

(b) The date on which the RBC plan or revised RBC plan is filed under section (3) or (4) of this rule, as applicable.

Stat. Auth.: ORS 731.244, 731.554 & 733.210

Stats. Implemented: ORS 731.554 & 731.574

Hist.: ID 7-1995, f. & cert. ef. 11-15-95; ID 14-2011, f. & cert. ef. 10-31-11

836-011-0380

Supplemental Provisions; Exemption

(1) 836-011-0300 to 836-011-0390 are supplemental to any other provisions of the laws of this state, and do not preclude or limit any other powers or duties of the Director under such laws, including, but not limited to, OAR 836-011-0100 to 836-011-0120.

(2) OAR 836-011-0300 to 836-011-0390 do not apply to any domestic insurer transacting property and casualty insurance that:

(a) Writes direct business only in this state;

(b) Writes direct annual premiums of $2 million or less; and

(c) Assumes no reinsurance in excess of five percent of direct premium written.

Stat. Auth.: ORS 731.244, 731.554 & 733.210

Stats. Implemented: ORS 731.554 & 731.574

Hist.: ID 7-1995, f. & cert. ef. 11-15-95; ID 14-2011, f. & cert. ef. 10-31-11

836-011-0390

Foreign Insurers

(1) A foreign insurer shall, upon the written request of the Director, submit to the Director an RBC report as of the end of the calendar year just ended on the later of:

(a) The date by which an RBC report would be required to be filed by a domestic insurer under OAR 836-011-0300 to 836-011-0390; or

(b) The 15th day after the request is received by the foreign insurer.

(2) A foreign insurer shall, at the written request of the Director, promptly submit to the Director a copy of any RBC plan that is filed with the insurance commissioner of any other state.

(3) In the event of a company action level event, regulatory action level event or authorized control level event with respect to any foreign insurer as determined under the statute or rule governing risk based capital reporting applicable in the state of domicile of the insurer (or, if no such statute or rule is in force in that state, under the provisions of OAR 836-011-0300 to 836-011-0390), if the insurance commissioner of the state of domicile of the foreign insurer fails to require the foreign insurer to file an RBC plan in the manner specified under that state’s statute or rule governing risk-based capital reporting (or, if no such statute or rule is in force in that state, under 836-011-0320), the Director may require the foreign insurer to file an RBC plan with the Director. In such event, the failure of the foreign insurer to file an RBC plan with the Director shall be grounds to order the insurer to cease and desist from writing new insurance business in this state.

(4) In the event of a mandatory control level event with respect to any foreign insurer, if a domiciliary receiver has not been appointed with respect to the foreign insurer under the rehabilitation and liquidation statute applicable in the state of domicile of the foreign insurer, the Director may apply for an order under ORS 734.190 with respect to the conservation of property of foreign insurers found in this state, and the occurrence of the mandatory control level event shall be considered adequate grounds for the application under 734.150(1) or (4).

Stat. Auth.: ORS 731.244, 731.554 & 733.210

Stats. Implemented: ORS 731.554 & 731.574

Hist.: ID 7-1995, f. & cert. ef. 11-15-95; ID 14-2011, f. & cert. ef. 10-31-11

 

Rule Caption: Clarifies applicability of limitation on premium rate increases for Medical Supplement policies or certificates.

Adm. Order No.: ID 15-2011

Filed with Sec. of State: 10-31-2011

Certified to be Effective: 10-31-11

Notice Publication Date: 9-1-2011

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

Subject: Amends rules to clarify that the provision that limits premium increases for Medicare supplement insurance policies to once in a 12-month period does not apply to changes in policy or payment terms initiated by the insured. Specifies that limitation applies to all existing 1990 Standardized Medicare supplement benefit plans and all 2010 Standardized Medicare supplement policies or certificates renewed on or after January 1, 2012. Clarifies that the changes to the 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 and that the limitation on premium increases effective on February 17, 2011 applies to all new Medicare supplement policies or certificates issued on or after July 1, 2011.

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 effective on February 17, 2011 apply to all new Medicare supplement policies or certificates issued on or after July 1, 2011. The changes to OAR 836-052-0145 and 836-052-0151 effective on February 17, 2011 apply to all existing 1990 Standardized Medicare supplement benefit plans and all 2010 Standardized Medicare supplement benefit plans policies or certificates renewed on or after January 1, 2012. The changes to the 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

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 10-2005, f. & cert. ef. 7-26-05; ID 7-2011, f. & cert. ef. 2-23-11; ID 15-2011, f. & cert. ef. 10-31-11

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;

(C) Commissions and other acquisition 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. The limitation on premium adjustments under this paragraph does not apply to a premium adjustment that results from a change in the policy or premium payment terms requested by an insured including but not limited to changes in the method of payment such as discontinuing payment by a preauthorized electronic funds transfer.

(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; ID 15-2011, f. & cert. ef. 10-31-11

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. The limitation on premium adjustments under this subsection does not apply to a premium adjustment that results from a change in the policy or premium payment terms requested by an insured including but not limited to changes in the method of payment such as discontinuing payment by a preauthorized electronic funds transfer.

(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;

(c) The addition of either guaranteed issue or underwritten coverage.

(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; ID 15-2011, f. & cert. ef. 10-31-11

 

Rule Caption: Adoption of Oregon Companion Guide for Health Care Claims: Professional, Dental and Institutional (837).

Adm. Order No.: ID 16-2011

Filed with Sec. of State: 10-31-2011

Certified to be Effective: 10-31-11

Notice Publication Date: 8-1-2011

Rules Amended: 836-100-0105, 836-100-0110, 836-100-0115

Subject: This rule adopts by reference uniform standards for administrative simplification of health care claims transactions developed and recommended by the Oregon Health Authority under Section 2, chapter 130, Oregon Laws 2011 (replacing Section 1192, Chapter 595, Oregon Laws 2009. The standards adopted by this rulemaking pertain to health care claims and encounter transactions and are set forth in the “Oregon Companion Guide for the Implementation of the EDI Transaction: ASC X12/005010X222 Health Care Claim: Professional (837),” “The Oregon Companion Guide for the Implementation of the EDI Transaction: ASC X12/005010X223 Health Care Claim: Institutional (837)” and “The Oregon Companion Guide for the Implementation of the EDI Transaction: ASC X12/005010X224 Health Care Claim: Dental (837).”

      These rules also establish a waiver for plans that are certified by the Council for Affordable Quality Healthcare’s (CAQH) Committee on Operating Rules for Information Exchange (CORE). Because the Oregon Companion Guides have been developed in alignment with CORE and CORE is now recognized by federal agencies as the national standard, meeting either the CORE or the Companion Guide standard will allow for standardization.

      The rules also clarify that “health care entity” does not include a pharmacy or a pharmacy benefits manager, thus exempting these entities from the requirements of the rules.

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

836-100-0105

Definitions

(1) “Electronic transaction” means to conduct a transaction:

(a) Through the use of a computer program or an electronic or other automated means independently to initiate an action or respond to electronic records or performances in whole or in part, without review or action by an individual; or

(b) Through the use of a web portal or the internet.

(2)(a) “Health care entity” includes:

(A) A health care service contractor as required under ORS 750.055;

(B) A multiple employer welfare arrangement as required under ORS 750.333;

(C) A prepaid managed care health services organization as defined in ORS 414.736;

(D) Any entity licensed as a third party administrator under ORS 744.702;

(E) Any person or public body that either individually or jointly established a self-insurance plan, program or contract, including but not limited to persons and public bodies that are otherwise exempt from the Insurance Code under ORS 731.036;

(F) A health care clearinghouse or other entity that processes or facilitates the processing of health care financial and administrative transactions from a nonstandard format to a standard format; and

(G) Any other person identified by the department that processes health care financial and administrative transactions between a health care provider and an entity described in this subsection.

(b) “Health care entity” does not include a pharmacy or a pharmacy benefits manager.

(3) “Health insurer” means any insurer authorized to transact health insurance in Oregon.

(4) “Oregon Companion Guide” means one of the compilations of uniform standards adopted by the Department of Consumer and Business Services and posted on the Oregon Insurance Division’s website that provide standards for health care financial and administrative transactions. The following Oregon Companion Guides are applicable to respective transactions with health insurers and health care entities in Oregon:

(a) Oregon Companion Guide for the Implementation of the ASC X12N/005010X279 Health Care Eligibility Benefit Inquiry and Response (270/271).

(b) The Oregon Companion Guide for the Implementation of the EDI Transaction: ASC X12/005010X222 Health Care Claim: Professional (837).

(c) The Oregon Companion Guide for the Implementation of the EDI Transaction: ASC X12/005010X223 Health Care Claim: Institutional (837).

(d) The Oregon Companion Guide for the Implementation of the EDI Transaction: ASC X12/005010X224 Health Care Claim: Dental (837).

(5) “Oregon Companion Guide Oversight Committee” means the committee appointed jointly by the Department of Consumer and Business Services and the Oregon Health Authority to carry out the responsibilities under OAR 836-100-0120.

(6) “Provider” means a health care provider that provides health care or medical services within Oregon for a fee and is eligible for reimbursement for these services.

Stat. Auth.: ORS 731.244 & 2011 OL Ch. 130 Sec. 2 (Enrolled SB 94)

Stats. Implemented: 2011 OL Ch. 130 Sec. 2 (Enrolled SB 94)

Hist.: ID 12-2011, f. & cert. ef. 7-15-11; ID 16-2011, f. & cert. ef. 10-31-11

836-100-0110

Adoption of Standards

(1) All health insurers and health care entities must conduct eligibility benefit inquiry and response transactions with health care providers as electronic transactions that conform to the uniform standards developed by the Office for Oregon Health Policy and Research pursuant to section 3, chapter 130, Oregon Laws 2011 (Enrolled Senate Bill 94) as set forth in the Oregon Companion Guide for Health Care Eligibility Benefit Inquiry and Response in accordance with the following schedule:

(a) On and after January 1, 2012 for those health care providers that submit the inquiry electronically on the effective date of these rules.

(b) On and after October 1, 2012, for all inquiries from all health care providers.

(2) All health insurers and health care entities must conduct claims or encounter transactions with health care providers in conformance with the uniform standards developed by the Office for Oregon Health Policy and Research pursuant to section 3, chapter 130, Oregon Laws 2011 (Enrolled Senate Bill 94) as set forth in the Oregon Companion Guide for Health Care Claim: Professional, Oregon Companion Guide for Health Care Claim: Institutional and Oregon Companion Guide for Health Care Claim: Dental in accordance with the following schedule:

(a) On and after October 1, 2012 for those health care providers that conduct claims or encounter transactions electronically on the effective date of these rules.

(b) On and after January 1, 2013, all claims or encounter transactions with all health care providers must be conducted electronically.

Stat. Auth.: ORS 731.244 & 2011 OL Ch. 130 Sec. 2 (Enrolled SB 94)

Stats. Implemented: 2011 OL Ch. 130 Sec. 2 (Enrolled SB 94)

Hist.: ID 12-2011, f. & cert. ef. 7-15-11; ID 16-2011, f. & cert. ef. 10-31-11

836-100-0115

Waiver

(1) If a health insurer or health care entity demonstrates that the insurer or entity is certified by the Council for Affordable Quality Healthcare’s (CAQH) Committee on Operating Rules for Information Exchange (CORE), the Director of the Department of Consumer and Business Services shall grant a waiver from the requirement to comply with the Oregon Companion Guide. A health insurer or health care entity granted a waiver under this subsection shall be deemed in compliance with the standards of the applicable Oregon Companion Guide.

(2) Until January 1, 2014, the Director of the Department of Consumer and Business Services may grant a waiver to a health insurer or health care entity subject to OAR 836-100-0110 that demonstrates that the health insurer or health care entity is unable to comply with its provisions, or for whom compliance would be an undue hardship. A health insurer or health care entity requesting a waiver must submit a letter of need to the director. If the health insurer or health care entity requires an extension of the waiver, the health insurer or health care entity may apply to the Director of the Department of Consumer and Business Services for a temporary waiver of some or all of the provisions of the applicable Oregon Companion Guide. The waiver request must:

(a) Specify the name of the Oregon Companion Guide for which the waiver is requested;

(b) Indicate whether the waiver is for the entire Oregon Companion Guide or for specific provisions in the Oregon Companion Guide for which a waiver is requested.

(c) Explain the reasons the health insurer or health care entity is unable to comply or for which compliance would cause undue hardship, including systemic or structural impediments, financial hardship, and any other factors the health insurer or health care entity believes pertinent to the request.

(d) Specify the period of time for which the waiver is requested. After January 1, 2014, an insurer or health care entity may not request a waiver for a period longer than twelve months. An insurer or entity may request a waiver for an additional twelve months as previous waivers lapse.

(e) Include the insurer’s or entity’s plan for coming into compliance with the provisions of OAR 836-100-0110 during the time granted by the waiver.

(3)(a) After considering a request for a waiver submitted under section (1) of this rule, and at the director’s discretion, the director may grant or deny the request.

(b) In considering whether to allow a waiver requested pursuant to section (1) of this rule, the director shall consider the efforts of the health insurer or health care entity to comply with federal requirements contained in Section 1104 of the Patient Protection and Affordable Care Act.

(4) Information and standards related to CORE certification are located at the CAQH website: http://www.caqh.org/benefits.php

Stat. Auth.: ORS 731.244 & 2011 OL Ch. 130 Sec. 2 (Enrolled SB 94)

Stats. Implemented: 2011 OL Ch. 130 Sec. 2 (Enrolled SB 94)

Hist.: ID 12-2011, f. & cert. ef. 7-15-11; ID 16-2011, f. & cert. ef. 10-31-11

 

Rule Caption: Allows use of 2001 CSO Preferred Mortality Tables to be used for certain contracts.

Adm. Order No.: ID 17-2011

Filed with Sec. of State: 10-31-2011

Certified to be Effective: 10-31-11

Notice Publication Date: 9-1-2011

Rules Amended: 836-031-0810, 836-031-0815

Subject: The amendments to these rules reflect changes to the National Association of Insurance Commissioners (NAIC) Model Regulation #815. The rules generally specify which mortality table is recognized for use in determining minimum reserve liabilities. Adoption of these amendments to the rules would allow a company to substitute the 2001 CSO Preferred Mortality Tables in place of the 2001 CSO Smoker or Nonsmoker Mortality Tables for policies issued prior to January 1, 2007. The conditions for use of the preferred tables are also set out in the rules and the use does require the consent of the director of the Department of Consumer and Business Services.

      These changes are necessary to maintain Oregon’s accreditation.

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

836-031-0810

2001 CSO Preferred Class Structure Table

(1) At the election of the insurer, for each calendar year of issue, for any one or more specified plans of insurance and subject to satisfying the conditions stated in OAR 836-031-0800 to 836-031-0815, the 2001 CSO Preferred Class Structure Mortality Table may be substituted in place of the 2001 CSO Smoker or Nonsmoker Mortality Table as the minimum valuation standard for policies issued on or after January 1, 2007. For policies issued on or after January 1, 2004 (the date of adoption of OAR 836-051-0106, Life Insurance Valuation and Nonforfeiture Standards), and prior to January 1, 2007, the 2001 CSO Preferred Class Structure Mortality Tables may be substituted with the consent of the director and subject to the conditions of OAR 836-031-0815. In determining whether to consent to the substitution, the director may rely on the consent of the Insurance Commissioner of the company’s state of domicile. No such election may be made until the insurer demonstrates at least 20 percent of the business to be valued on this table is in one or more of the preferred classes. A table from the 2001 CSO Preferred Class Structure Mortality Table used in place of a 2001 CSO Mortality Table, pursuant to the requirements of OAR 836-031-0800 to 836-031-0815, will be treated as part of the 2001 CSO Mortality Table only for purposes of reserve valuation pursuant to the requirements of the NAIC model regulation “Recognition of the 2001 CSO Mortality Table For Use in Determining Minimum Reserve Liabilities and Nonforfeiture Benefits Model Regulation.”

(2) Tables referenced in this rule are available from the Insurance Division of the Department of Consumer and Business Services.

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

Stat. Auth: ORS 731.244 & 733.306

Stats. Implemented: ORS 733.306

Hist.: ID 2-2007, f. & cert. ef. 2-12-07; ID 17-2011, f. & cert. ef. 10-31-11

836-031-0815

Conditions

(1) For each plan of insurance with separate rates for preferred and standard nonsmoker lives, an insurer may use the super preferred nonsmoker, preferred nonsmoker, and residual standard nonsmoker tables to substitute for the nonsmoker mortality table found in the 2001 CSO Mortality Table to determine minimum reserves. At the time of election and annually thereafter, except for business valued under the residual standard nonsmoker table, the appointed actuary shall certify that:

(a) The present value of death benefits over the next ten years after the valuation date, using the anticipated mortality experience without recognition of mortality improvement beyond the valuation date for each class, is less than the present value of death benefits using the valuation basic table corresponding to the valuation table being used for that class;

(b) The present value of death benefits over the future life of the contracts, using anticipated mortality experience without recognition of mortality improvement beyond the valuation date for each class, is less than the present value of death benefits using the valuation basic table corresponding to the valuation table being used for that class.

(2) For each plan of insurance with separate rates for preferred and standard smoker lives, an insurer may use the preferred smoker and residual standard smoker tables to substitute for the smoker mortality table found in the 2001 CSO Mortality Table to determine minimum reserves. At the time of election and annually thereafter, for business valued under the preferred smoker table, the appointed actuary shall certify that:

(a) The present value of death benefits over the next ten years after the valuation date, using the anticipated mortality experience without recognition of mortality improvement beyond the valuation date for each class, is less than the present value of death benefits using the preferred smoker valuation basic table corresponding to the valuation table being used for that class;

(b) The present value of death benefits over the future life of the contracts, using anticipated mortality experience without recognition of mortality improvement beyond the valuation date for each class, is less than the present value of death benefits using the preferred smoker valuation basic table.

(3) Unless exempted by the Director, each authorized insurer using the 2001 CSO Preferred Class structure Table shall annually file with the Director, with the NAIC or with a statistical agent designated by the NAIC and acceptable to the Director, statistical reports showing mortality an such other information ask the Director may deem necessary or expedient for the administration of the provisions of OAR 836-031-0800 to 836-031-0815. The form of the reports shall be established by the Director or the Director may require the use of a form established by the NAIC or by a statistical agent designated by the NAIC and acceptable to the Director.

(4)(a) The use of the 2001 CSO Preferred Class Structure Table for the valuation of policies issued prior to January 1, 2007 is not permitted in any statutory financial statement in which a company reports, with respect to any policy or portion of a policy coinsured, either of the following:

(A) In cases where the mode of payment of the reinsurance premium is less frequent than the mode of payment of the policy premium, a reserve credit that exceeds, by more than the amount specified in the paragraph as Y, the gross reserve calculated before reinsurance. Y is the amount of the gross reinsurance premium that:

(i) Provides coverage for the period from the next policy premium due date to the earlier of the end of the policy year and the next reinsurance premium due date; and

(ii) Would be refunded to the ceding entity upon the termination of the policy.

(B) In cases where the mode of payment of the reinsurance premium is more frequent than the mode of payment of the policy premium, a reserve credit that is less than the gross reserve, calculated before reinsurance, by an amount that is less than the amount specified in this paragraph as Z. Z is the amount of the gross reinsurance premium that the ceding entity would need to pay the assuming company to provide reinsurance coverage from the period of the next reinsurance premium due date to the next policy premium due date minus any liability established for the proportionate amount not remitted to the reinsurer.

(b) A company may estimate and adjust its accounting on an aggregate basis in order to meet the conditions to use the 2001 CSO Preferred Class Structure Table. For purposes of this condition, but the reserve credit and the gross reserve before reinsurance:

(A) For the mean reserve method defined as the mean reserve minus the deferred premium asset; and

(B) For the mid-terminal reserve method which includes the unearned premium reserve.

(5) Tables referenced in this rule are available from the Insurance Division of the Department of Consumer and Business Services.

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

Stat. Auth: ORS 731.244 & 733.306

Stats. Implemented: ORS 733.306

Hist.: ID 2-2007, f. & cert. ef. 2-12-07; ID 17-2011, f. & cert. ef. 10-31-11

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.

2.) Copyright 2011 Oregon Secretary of State: Terms and Conditions of Use

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