Section R590-148-24 - Premium Rate Schedule Increases(1)(a) This section applies to a policy or certificate issued in this state on or after January 1, 2003; and(b) for a certificate issued on or after July 1, 2002, under a group policy that was in force on July 1, 2002, this section shall apply on the first policy anniversary after January 1, 2003.(2) An insurer shall file notice of a pending premium rate schedule increase, including an exceptional increase, with the commissioner before sending the notice to a policyholder. The notice shall include:(a) information required under Section R590-148-19;(b) certification by a qualified actuary that:(i) if the requested premium rate schedule increase is implemented and the underlying assumptions that reflect moderately adverse conditions are realized, no further premium rate schedule increases are anticipated; and(ii) the premium rate filing complies with this section;(c) an actuarial memorandum justifying the rate schedule change request that includes: (i)(A) lifetime projections of earned premiums and incurred claims based on the filed premium rate schedule increase and the method and assumptions used to determine the projected values, including reflection of any assumptions that deviate from those used for pricing other forms currently available for sale;(B) the projections shall include the development of the lifetime loss ratio, unless the rate increase is an exceptional increase;(C) the projections shall demonstrate compliance with Subsection (3); and(D) for an exceptional increase: (I) the projected experience shall be limited to the increases in claims expenses attributable to the approved reasons for the exceptional increase; and(II) in the event the commissioner determines that offsets may exist, the insurer shall use appropriate net projected experience;(ii) disclosure of how reserves are incorporated in this rate increase when the rate increase triggers contingent benefit upon lapse;(iii) disclosure of the analysis performed to determine why a rate adjustment is necessary, which pricing assumptions are not realized and why, and what other actions taken by the insurer were relied on by the actuary;(iv) a statement that policy design, underwriting, and claim adjudication practices were considered; and(v) if it is necessary to maintain a consistent premium rate for a new certificate and a certificate receiving a rate increase, the insurer shall file composite rates reflecting projections of new certificates;(d) a statement that renewal premium rate schedules are not greater than new business premium rate schedules except for differences attributable to benefits, unless sufficient justification is provided to the commissioner; and(e) sufficient information for review of the premium rate schedule increase.(3) A premium rate schedule increase shall be determined using the following requirements: (a) an exceptional increase shall provide that at least 70% of the present value of projected additional premium from the exceptional increase will be returned to a policyholder in benefits;(b) a premium rate schedule increase shall be calculated such that the sum of the accumulated value of incurred claims, without the inclusion of active life reserves, and the present value of future projected incurred claims, without the inclusion of active life reserves, will not be less than the sum of the following:(i) the accumulated value of the initial earned premium times 58%;(ii) 85% of the accumulated value of prior premium rate schedule increases on an earned basis;(iii) the present value of future projected initial earned premium times 58%; and(iv) 85% of the present value of future projected premium not included in Subsection (3)(b)(iii) on an earned basis;(c) if a policy form has both exceptional and other increases, the values in Subsections (3)(b)(ii) and (3)(b)(iv) shall also include 70% for exceptional rate increase amounts; and(d) all present and accumulated values used to determine rate increases shall use the maximum valuation interest rate for contract reserves that is the maximum rate permitted by law in the valuation of whole life insurance issued on the same date as the health insurance policy.(4) The actuary shall disclose, as part of the actuarial memorandum, the use of any appropriate averages.(5)(a) An insurer may request a premium rate schedule increase that is lower than the rate increase necessary to provide the certification required in Subsection (2)(b)(i) and the commissioner may accept such premium rate schedule increase, without submission of the certification required in Subsection (2)(b)(i), if: (i) in the opinion of the commissioner, accepting a lower premium rate schedule increase is in the best interest of Utah insureds;(ii) the actuarial memorandum discloses the rate increase necessary to provide the certification required in Subsection (2)(b)(i); and(iii) the rate increase filing satisfies each requirement of this section.(b) The commissioner may condition the acceptance of the premium rate schedule increase under Subsection (4)(a) upon: (i) the disclosure, to the affected policyholder, of the premium rate schedule increase necessary to provide the certification required in Subsection (2)(b)(i); and(ii) the extension of a contingent nonforfeiture benefit upon lapse to policyholders who would have been eligible for contingent nonforfeiture benefit upon lapse based on the premium rate schedule increase necessary to provide certification required in Subsection (2)(b)(i).(6)(a) For each rate increase that is implemented, an insurer shall annually file a report with the commissioner for the next three years updated projections, as provided in Subsection (2)(c)(i), and include a comparison of actual results to projected values.(b) The commissioner may extend the period to more than three years if actual results are not consistent with projected values from prior projections.(c) For a group insurance policy that meets the conditions in Subsection (13), the projections required by this Subsection (6) shall be provided to the policyholder in lieu of filing with the commissioner.(7)(a) If any premium rate in the revised premium rate schedule is greater than 200% of the comparable rate in the initial premium schedule, lifetime projections, under Subsection (2)(c)(i), shall be filed every five years following the end of the required period in Subsection (6).(b) For a group insurance policy that meets the conditions in Subsection (13), the projections required by Subsection (6) shall be provided to the policyholder in lieu of filing with the commissioner.(8)(a) If the commissioner determines that the actual experience following a rate increase does not adequately match the projected experience and that the current projections under moderately adverse conditions demonstrate that incurred claims will not exceed proportions of premiums specified in Subsection (3), the commissioner may require the insurer to implement: (i) premium rate schedule adjustments; or(ii) other measures to reduce the difference between the projected and actual experience.(b) To determine whether the actual experience adequately matches the projected experience, Subsection (2)(c)(v) shall be considered, if applicable.(9) If the majority of the policies or certificates to which the increase applies are eligible for the contingent benefit upon lapse, the insurer shall file: (a) a plan, subject to commissioner approval, for improved administration or claim processing designed to eliminate the potential for further deterioration of the policy form requiring further premium rate schedule increases, or both, or to demonstrate that appropriate administration and claims processing have been implemented or are in effect, otherwise the commissioner may impose the conditions in Subsection (10); and(b) the original anticipated lifetime loss ratio and the premium rate schedule increase calculated according to Subsection (3) had the greater of the original anticipated lifetime loss ratio or 58% been used in the calculations under Subsections (3)(a)(i) and (3)(a)(iii).(10)(a) The commissioner shall review, for each policy included in the filing, the projected lapse rates and past lapse rates during the 12 months following each increase to determine if significant adverse lapsation has occurred or is anticipated, for a rate increase filing that:(i) the rate increase is not the first rate increase requested for the specific policy form or forms;(ii) the rate increase is not an exceptional increase; and(iii) the majority of the policies or certificates to which the increase applies are eligible for the contingent benefit upon lapse.(b) In the event significant adverse lapsation has occurred, is anticipated in the filing, or is evidenced in the actual results as presented in the updated projections provided by the insurer following the requested rate increase, the commissioner may determine that a rate spiral exists.(i) Following the determination that a rate spiral exists, the commissioner may require the insurer to offer, without underwriting, to each in force insured subject to the rate increase, the option to replace existing coverage with one or more reasonably comparable products being offered by the insurer or its affiliates. The offer shall:(A) be subject to the approval of the commissioner;(B) be based on actuarially sound principles, but not be based on attained age; and(C) provide that maximum benefits under any new policy accepted by an insured shall be reduced by comparable benefits already paid under the existing policy.(ii) The insurer shall maintain the experience of all the replacement insureds separate from the experience of insureds originally issued the policy forms. In the event of a request for a rate increase on the policy form, the rate increase shall be limited to the lesser of:(A) the maximum rate increase determined based on the combined experience; or(B) the maximum rate increase determined based only on the experience of the insureds originally issued the form plus 10%.(11) If the commissioner determines that an insurer exhibits a persistent practice of filing inadequate initial premium rates for long-term care insurance, the commissioner may, in addition to Subsection (10), prohibit the insurer from: (a) filing and marketing comparable coverage for a period of up to five years; or(b) offering any other similar coverages and limit marketing of new applications to the products subject to recent premium rate schedule increases.(12) Subsections (1) through (11) do not apply to a policy when the long-term care benefits provided by the policy are incidental, if the policy complies with the following provisions: (a) the interest credited internally to determine cash value accumulations, including long-term care, if any, are guaranteed not to be less than the minimum guaranteed interest rate for cash value accumulations without long-term care set forth in the policy;(b) the portion of the policy that provides insurance benefits other than long-term care coverage meets the nonforfeiture requirements as applicable in:(i) Section 31A-22-408; or(c) the policy meets the disclosure requirements of Subsections 31A-22-1409(7) and 31A-22-1409(8) and Section 31A-22-1410;(d) the portion of the policy that provides insurance benefits other than long-term care coverage meets the following requirements, as applicable:(i) policy illustrations under Rule R590-177; and(ii) disclosure requirements under Rule R590-133; and(e) an actuarial memorandum is filed with the commissioner that includes: (i) a description of the basis on how the long-term care rates were determined;(ii) a description of the basis for the reserves;(iii) a summary of the type of policy, benefits, renewability, general marketing method, and limits on ages of issuance;(iv) a description and a table of each actuarial assumption used, and for expenses, an insurer shall include percent of premium dollars per policy and dollars per unit of benefits, if any;(v) a description and a table of the anticipated policy reserves and additional reserves to be held in each future year for active lives;(vi) the estimated average annual premium per policy and the average issue age;(vii)(A) a statement as to whether underwriting is performed at the time of application; (B) the statement shall indicate whether underwriting is used and, if used, shall include a description of the type or types of underwriting used, such as medical underwriting or functional assessment underwriting; and(C) for a group policy, the statement shall indicate whether the enrollee or any dependent will be underwritten and when underwriting will occur; and(viii) a description of the effect of the policy provision on the required premiums, nonforfeiture values, and reserves on the underlying insurance policy, both for active lives and those in long-term care claim status.(13) Subsections (8) and (10) do not apply to a group policy when:(a) the policy insures 250 or more persons, and the policyholder has 5,000 or more eligible employees of a single employer; or(b) the policyholder, and not the certificate holders, pays a material portion of the premium that is not less than 20% of the total premium for the group in the calendar year before the year a rate increase is filed.(14)(a) An exceptional increase is subject to the same requirements as other premium rate schedule increases.(b) The commissioner may request that an independent actuary, or a professional actuarial body, review the basis for an insurer's request for an exceptional increase.(c) The commissioner, in determining that the necessary basis for an exceptional increase exists, shall determine any potential offsets to higher claims costs.Utah Admin. Code R590-148-24
Adopted by Utah State Bulletin Number 2024-21, effective 10/22/2024