Section 031-420-6 - Rating standards on or after May 1, 2008The requirements of this section apply to rates in effect on or after May 1, 2008, for policies subject to this rule pursuant to Section 3.
A. Rate filings may be filed electronically, using the System for Electronic Rate and Form Filing (SERFF), or on paper. Paper filings must include two copies of the cover letter. If the filing is found to be in compliance with the law, one copy of the cover letter (and any other materials sent in duplicate) will be returned to the insurer stamped to confirm that the rates are acceptable. Every rate submission must contain the following information: 1.Insurer Information: Include the name and address of the insurer. The name, title, email address, and direct phone number of the person responsible for the filing must also be included.2.Description of Benefits: Include a brief description of the benefits provided by each policy form and any attached riders or endorsements.3.Dates of Issue: State the period during which the policy form was issued in Maine.4.In Force Business: State the policy or certificate count and annualized premium of Maine policyholders or certificate holders who will be affected by the proposed rate revision.5.Proposed Effective Date: State the proposed effective date and method of the proposed rate revision implementation (e.g. next anniversary or next premium due date).6.History of Rate Adjustments: List the approval dates and average percentage rate adjustments for the form both nationwide and in Maine since inception of the policy form.7.Maine and National Experience on the Form (Past and Future Anticipated): Experience from inception for each calendar year and, where appropriate, each policy year must be displayed. If there have been prior rate adjustments, past experience must be presented on both an actual basis and a current premium rate basis. Show experience separately for Maine and for all states in which the form is or was sold. State whether the proposed rates are based on Maine experience, national experience, or a combination and explain the reasons this basis was used. If nationwide experience is used, premiums must be adjusted to the Maine rate level.8.Waiver of Premium: Specify whether waived premiums are included in earned premiums and incurred claims. a. If waived premiums are included, include the following: (i) Specify the amount of waived premiums over the last 12 months.(ii) Specify the amount of reserves held for future waived premiums.(iii) Indicate the effect of the proposed rate increase on future waived premiums and reserves.b. If waived premiums are not included, specify the amount of waived premiums in each year. 9.Supporting Information: The filing must include sufficient supporting information to demonstrate that the rates are not excessive, inadequate, or unfairly discriminatory. At a minimum, the filing must include an analysis of actual and projected experience with respect to morbidity, mortality, lapsation, and any other relevant factors. Include a comparison to original pricing assumptions and to the assumptions at the time of any previous rate adjustment. Include a demonstration that the actual and projected experience meets the standards of subsection B.10.Premium breakdown: Separately for the future period and for the lifetime of the form, show the following items as a percentage of earned premium. Past experience must be accumulated with interest. Future experience must be on a present value basis. a. Initial contract reserves (applies to future period only; zero for lifetime);d. Administrative expenses other than commissions that are a percentage of premium (e.g., premium tax);e. Fixed administrative expenses; andf. Profit = 100% + (a) - (b) - (c) - (d) - (e). For purposes of this section, incurred claims do not include any active life reserves, claim adjustment expenses, or cost containment expenses.
11.Similar formsa. If the form is no longer actively marketed, a statement must be included as to whether a similar form is actively marketed and, if so, a discussion of equity between the two forms, including a comparison of the benefits and premium rates, must also be included. "Similar forms" means all of the long-term care or nursing home care policies and certificates issued by an insurer in the same benefit classification as the policy form being considered. Certificates of employee groups as defined in 24-A M.R.S.A. §2804, labor union groups as defined in 24-A M.R.S.A. §2805, or trustee groups as defined in 24-A M.R.S.A. §2806 are not considered similar to certificates or policies otherwise issued as long-term care or nursing home care insurance but are similar to other comparable certificates with the same benefit classifications. The different benefit classifications are: institutional benefits only, non-institutional benefits only, and comprehensive (institutional and non-institutional) benefits.b. Rates for individual policy forms for closed blocks must not exceed rates for an open block, unless the difference is justified by differences in benefits or other conditions, or unless the fact that renewal rates would exceed new business rates was disclosed at issue. The Superintendent may approve exceptions to this requirement, if the enrollees are permitted to change to the new form based on original issue age and the Superintendent determines that the change would be in the best interest of the enrollees.12.Actuarial Certification: There must be certification by a qualified actuary that, to the best of the actuary's knowledge and judgment, the entire rate filing is in compliance with the applicable laws of the State of Maine and with the rules of the Bureau of Insurance. "Qualified actuary," as used herein, means a member in good standing of the American Academy of Actuaries.13. Any additional information that the Superintendent deems necessary. B.1. For purposes of this subsection, the following definitions apply: a. "Future" means the period after the proposed rate increase takes effect.b. "Past" means the period beginning when the first policy was issued and ending on the date the proposed rate increase takes effect. Past experience includes actual experience plus projected experience for the portion of the period beyond which actual experience is available;c. "Past adjusted earned premiums" means past earned premiums adjusted to the proposed rate level.d. "Initial premium" means the premium at the rate initially filed for the form, before any rate increases.e. "Increased portion of premium" means the total premium minus the initial premium.2. Except as provided in subsection C, no rate increase will be approved unless the actual and projected experience submitted pursuant to subsection A meets the terms of this paragraph. The accumulated value of past incurred claims plus the present value of future incurred claims must not be less than the sum of the following: a. Sixty percent of the accumulated value of past adjusted earned premiums plus the present value of future projected earned premiums; and (Drafting Note: Past premiums are adjusted to the current rate level in order to ensure that the proposed increase does not recoup past losses.
This methodology is set forth as the "Variation in Future Loss Ratio Approach" in the article entitled "Long-Term Care Insurance Rate Increase Considerations" published by the Society of Actuaries in the December 2003 edition of the Long-Term Care News.)
b. Twenty-five percent of the accumulated value of the increased portion of past adjusted earned premiums plus the present value of the increased portion of future projected earned premiums; (Drafting Note: The addition of 25% of the increased portion of the premiums reflects the lack of first-year expenses associated with this portion of the premium. This assumes that 15% of premium will cover renewal expenses. If this is not the case, the insurer may request an exception under subsection C.)
C. An insurer will be granted an exception to the requirements of subsection B if it demonstrates that its reasonable renewal expenses exceed 15% of the increased premium. In that case, the 25% in subparagraph B(2)(b) will be replaced by 40% minus the demonstrated reasonable renewal expenses as a percentage of the increased premium.D. All present and accumulated values used to determine rate increases must use the maximum valuation interest rate for contract reserves as specified in Bureau of Insurance Rule Chapter 130. The filing must disclose the use of any appropriate averages.E. If the policy form affects policies issued both before and after October 1, 2004, separate filings must be submitted. The filing for policies issued prior to October 1, 2004 must meet the standards of this rule. The filing for policies issued on or after October 1, 2004 must meet the standards of Rule 425. 02-031 C.M.R. ch. 420, § 6