Section 42.06 - Review of Policy Forms and Rate Filings(1) Policy forms will be reviewed according to 211 CMR 42.00 as well as any other relevant statute or regulation. This provision, 211 CMR 42.06, may not be used to issue a policy that is defined in 211 CMR 42.00 or any other statute or regulation and that does not otherwise meet the requirements set forth therein.(2) All rate filings shall at least explain formulas used to derive rates, expected claim costs, assumptions regarding mortality, morbidity and lapse rates, and the detailed commission schedule and anticipated administrative expenses associated with the policy. In order to substantiate rate revision filings, filings must maintain experience for that policy form, may combine experience for different policy forms where the coverage is substantially the same, and must demonstrate that the carrier is using fund accounting for guaranteed renewable policies to reflect premiums, investment income, losses, expenses, and provisions for reserves specific to that policy form. Any rates filed, whether initial or revised, will be disapproved unless the aggregate anticipated loss ratio for the entire period for which rates are computed to provide coverage meets the following standards: (a) for purposes of 211 CMR 42.06(2)(b) and 42.06(2)(c) optionally renewable means renewal is at the option of the insurance company; conditionally renewable means renewal can be declined by the insurance company only for stated reasons other than deterioration of health; guaranteed renewable means renewal cannot be declined by the insurance company for any reason, but the insurance company can revise rates on a class basis; and guaranteed rate means renewal cannot be declined nor can rates be revised by the insurance company;(b) for hospital and medical expense policies (including indemnity policies) and for similar policies the minimum loss ratio shall be: 1.60% for optionally renewable policies;
2.55% for conditionally renewable and guaranteed renewable policies; and
3.50% for guaranteed rate policies.
(c) for loss of income policies, including business buyout and business expense policies, the actuarial memorandum may be limited to lifetime loss ratios as certified by an actuary and the minimum loss ratio shall be : 1.60% for optionally renewable policies;
2.55% for conditionally renewable policies;
3.50% for guaranteed renewable policies; and
4.45% for guaranteed rate policies.
(d) for policies providing either substantially full coverage for specified perils (e.g., auto, common carrier) or short term non-renewable coverage (e.g., trip insurance) the minimum loss ratio is 45%;(e) for policies providing coverage for accidents only, the minimum loss ratio shall be 45%;(f) for policies meeting the requirements of both 211 CMR 42.06(2)(d) and 42.06(2)(e), the minimum loss ratio is 45%;(g) for policies issued to and actually held by persons ages 65 or older, the minimum loss ratio shall be 65%;(h) for policies under 211 CMR 42.06(2)(b) or 42.06(2)(c), the minimum loss ratio shall be five percentage points less than those given if the expected average annual premium for the policy, including riders and endorsements, is less than $200; and(i) for long- term care insurance policies, whether the filling is for an initial or revised rate, the aggregate lifetime loss ratio shall be no less than 60% for policies sold as standard individual policies and no less than 80% for policies sold as group conversion policies; provided, that "aggregate lifetime loss ratio" means the present value at the form's inception of all expected future benefits under the form divided by the present value at the form's inception of all future premiums to be received under the form; and(j) for specified disease policies, whether the filing is for an initial or revised rate, the minimum loss ratio shall be no less than 60% for individual policies; any rate filing for a specified disease insurance policy shall state the carrier's Expected Durational Loss Ratios that will be used in completing future experience monitoring forms described in 211 CMR 146.102.(k) if, for any policy which provides benefits of substantial economic value to the insured, it can be demonstrated that the minimum loss ratio standards given above cannot possibly be attained, a lower loss ratio is allowable.(3)Time Provisions. The following provisions shall apply to individual accident and health insurance policies subject to M.G.L. c. 175, § 108. (a) All rate filings are subject to review by an actuary specified by the Commissioner whose costs will be paid by the company submitting the filing.(b) If a filing has been disapproved and is resubmitted, the cover letter shall note the disapproval and any changes made since the earlier filing, with an explanation of why the new filing should be approved. Resubmission of disapproved forms should, where possible, be made within 90 days of disapproval.(c) The filer shall have the right to request a hearing within ten days of receiving a final disapproval. Within 20 days of the receipt of the request, the Division shall schedule a date for the hearing, which must occur within 30 days of the scheduling. At least ten days written notice of the hearing shall be given to all interested parties.(d) The hearing officer may order a pre-hearing conference for the resolution or simplification of issues, to be held no less than three days prior to the scheduled date of a hearing.(e) For a time period of ten days or less only, business days shall be counted. For time periods greater than ten days, calendar days must be used.(4)Rate Manual. Every carrier must maintain on file with the Division an up-to-date rate manual for all individual accident and health policies, riders, and endorsements currently available for sale in Massachusetts. The manual must include: (a) name of the carrier on each page;(b) table of contents or index; and(c) identification by form number of each policy or endorsement to which the rates apply.