3 Colo. Code Regs. § 702-3-1-15-6
Current through Register Vol. 47, No. 24, December 25, 2024
Section 3 CCR 702-3-1-15-6 - Restrictions and Other GuidelinesA.Accuracy Review - Determinations of the reserve may be done monthly, quarterly, annually, or any time the actuary determines is reasonable, or is necessary for statutory reporting purposes, but no less frequently than annually. As of the date of each successive statutory financial statement, the Premium Deficiency Reserve must be re-evaluated and adjusted to reflect the losses that have been realized since the previous financial statement, and any deficiencies that have arisen.B.Actuarial Opinions - The Premium Deficiency Reserve amount is expected to be included in each Statement of Actuarial Opinion submitted to the Colorado Division of Insurance.C.Assumptions - All underlying assumptions should be specified and supported by as much company data as possible and other supporting data deemed necessary. These include, but are not limited to, the following assumptions; lapse, interest rate, claim and expense trend, premium increases and enrollment changes.D.Contract Grouping - Each contract grouping should be large enough to be material relative to the size of the company as a whole. In some cases, considerations of similarity and materiality may result in all health contracts being treated as a single grouping. Each contract grouping should be reviewed to determine if earned premiums and reserves will be sufficient to cover incurred claims and related expenses for each contract period. Each contract grouping should remain relatively consistent from valuation to valuation. A Premium Deficiency Reserve must be recognized for each contract grouping where a premium deficiency is indicated.E.Enrollment - The Premium Deficiency Reserve must be calculated using reasonable and supportable enrollment assumptions. Enrollment assumptions should be tied to any anticipated rate increases during the deficiency period. The effect of new business must be considered in the enrollment assumptions.F.Expenses - The actuary should disclose whether expenses from a start-up situation, where the entity has just begun to write business, were considered in the Premium Deficiency Reserve calculations. The actuary may only exclude relevant start-up expenses in the calculation if they explicitly identify the expenses excluded, and clearly justify their decision and rationale for doing so.G.Interest Rate - The interest rate used in determining the present values should be reasonable and supportable based upon the type of business and the deficiency period. Guidance may be found in Colorado Insurance Regulation 3-1-9.H.Investment Income - The calculation may reflect investment income that is appropriately attributable to the contract grouping and the time period for which the calculation is being performed. Investment income should be reflected as a cash inflow in the calculation.I.Profit Recognition - Under no circumstances may anticipated future profits from contracts in one contract grouping from future renewal periods be used to reduce or mitigate the calculated Premium Deficiency Reserve for prior periods for contracts in a different contract grouping. Within a contract grouping, if rate increases are on file with the Division of Insurance that increase rates for the new contract period, and these increases will be adequate to cover claims and expenses in the new contract period, the anticipated profits may be used to reduce or mitigate the calculated Premium Deficiency Reserve for prior contract periods. Considerable actuarial judgment, including consideration of all pertinent factors, should be incorporated to determine if it is highly probable that these future profits will offset the calculated deficiencies in the valuation period.37 CR 20, October 25,2014, effective 11/15/201437 CR 20, October 25,2014, effective 1/1/201537 CR 23, December 10, 2014, effective 1/1/201538 CR 17, September 10, 2015, effective 10/1/201539 CR 05, March 10, 2016, effective 4/1/201639 CR 14, July 25, 2016, effective 8/15/201639 CR 23, December 10, 2016, effective 1/1/201740 CR 03, February 10, 2017, effective 3/15/201740 CR 05, March 10, 2017, effective 4/1/201740 CR 13, July 10, 2017, effective 8/1/201740 CR 17, September 10, 2017, effective 11/1/201743 CR 06, March 25, 2020, effective 4/15/202044 CR 03, February 10, 2021, effective 3/15/202144 CR 23, December 10, 2021, effective 1/1/202246 CR 03, February 10, 2023, effective 3/2/2023