Administrative History Effective date: March 15, 1982 (9:5 Md. R. 527) Regulation .02B amended effective November 6, 1995 (22:22 Md. R. 1657) —————— Chapter recodified from COMAR 09.30.57 to COMAR 31.10.14 effective September 7, 1998 (25:18 Md. R. 1439) Regulation .07 amended effective September 21, 2009 (36:19 Md. R. 1439) Authority Insurance Article, §§ 2-109 , 12-203 — 12-205 , and 15-109 , Annotated Code of Maryland

¶14

.01 Purpose. The purpose of this chapter is to establish minimum loss ratios with respect to specified disease policies in order to assure that the benefits provided in those policies are reasonable in relation to the premium charged and may be approved under the requirements of Insurance Article, §§ 12-203 — 12-205 , and 15-109 , Annotated Code of Maryland.

¶15

.02 Definitions. A. In this chapter, the following terms have the meanings indicated. B. Terms Defined. (1) "Claim reserve" means the sum of the present value of amounts not yet due on claims plus the reserve for future contingent benefits included in Exhibit 9, Part B of the Annual Statement. All numerical references to the Annual Statement in this regulation are to the National Association of Insurance Commissioners form for Life and Accident and Health insurers, current edition. (2) "Claims liability" means the amount included in Line 4a of Exhibit 11, Part 1 of the Annual Statement. (3) "Loss ratio" means the ratio of losses incurred to premiums earned on specified disease policies. (4) "Policy reserves" means the sum of the additional reserves plus the reserve for future contingent benefits included in Lines 2 and 3 of Exhibit 9, Part A of the Annual Statement. (5) "Premium reserve" means unearned premiums plus advance premiums plus reserve for dividends, refunds, and retrospective rate credits. (6) "Premiums written" means premiums due during the current year and is equal to premiums collected during the current year plus premiums uncollected at the end of the current year less premiums uncollected at the end of the previous year. (7) Specified Disease Policy. (a) "Specified disease policy" means a health insurance policy that provides: (i) Benefits only for a disease or diseases specified in the policy or for treatment unique to a specified disease or diseases; or (ii) Additional benefits for a disease or diseases specified in the policy or for treatment unique to a specified disease or diseases, provided the actuarial net premium for the additional benefits exceeds 33 percent of the actuarial net premium for all of the health insurance benefits provided in the policy. (b) If an insurer issues a health insurance policy to which a rider providing coverage for a specified disease or diseases may be added at the option of the policy owner and if the actuarial net premium for the benefits provided by the rider exceeds 33 percent of the actuarial net premium for all of the health insurance benefits provided by the policy including the rider, then either the policy to which the rider is attached, or the rider separately, shall be considered to be a "specified disease policy", whichever the insurer elects.

¶16

.03 Minimum Loss Ratio. A. In order to assure that benefits under specified disease policies are reasonable in relation to the premium charged, the insurer shall establish premiums for specified disease policies in accordance with generally accepted actuarial principles and practices so as to return to policyholders in the form of aggregate benefits provided under the policy during the period for which rates are computed at least 75 percent of the aggregate premiums earned in the case of group and blanket policies, and at least 60 percent of the aggregate premiums earned in the case of individual policies. B. Policies issued as a result of solicitation of individuals through the mail or mass media advertising, including both print and broadcast advertising, shall be considered individual policies for purposes of this regulation. C. The benefits provided in a specified disease policy shall be considered unreasonable in relation to the premium charged if the actual or anticipated loss ratio is less than 75 percent in the case of group and blanket policies, or less than 60 percent in the case of individual policies.

¶17

.04 Rate Filings. In filing a specified disease policy for approval, the insurer shall also file the premium rates proposed to be charged for the policy and shall include an actuarial memorandum based on credible data to show that the anticipated loss ratio under the policy will be not less than the ratios required by Regulation .03 of this chapter . The actuarial memorandum shall describe how the rates were determined and how the anticipated loss ratio was calculated and shall include a general description and the source of each assumption used in the memorandum. This filing as well as those required under Regulations .05 and .06 of this chapter shall assume a reasonable rate of interest to be earned on claim and policy reserves.

¶18

.05 Reports to the Commissioner. A. On or before June 30 of each calendar year, each insurer issuing specified disease policies in Maryland shall file with the Commissioner a report regarding the loss ratio being experienced under each specified disease policy form being issued by the insurer in this State. Experience with regard to substantially similar policy forms may be combined as if they were the same form. B. The report as to each policy form or combination of similar policy forms shall show for each of the 5 preceding calendar years, or for the preceding years since the policy form was first issued, the following information regarding experience on direct business (before reinsurance ceded or assumed) issued, delivered, or renewed in Maryland: (1) Premiums written; (2) Dividends, refunds, and retrospective rate credits paid or allowed; (3) Premiums written net of §B(2) of this regulation ; (4) Premium reserve at end of previous year; (5) Premium reserve at end of current year; (6) Premiums earned (§B(3) + (4) - (5)); (7) Claims paid; (8) Claims liability at end of current year; (9) Claim reserve at end of current year; (10) Policy reserves at end of current year; (11) Claims liability at end of previous year; (12) Claim reserve at end of previous year; (13) Policy reserves at end of previous year; (14) Losses incurred (§B(7) + (8) + (9) + (10) - (11) - (12) - (13)); (15) Loss ratio (§B(14) divided by (6)). C. If the amount of the insurer's specified disease business in Maryland is not sufficient to make the report credible from a statistical standpoint, upon application to and with the approval of the Commissioner, the insurer may make the report based on its entire national experience.

¶19

.06 Procedure for Rate Reduction. A. If the report referred to in Regulation .05 of this chapter with respect to a policy form or combination of similar policy forms indicates that the form or forms are not meeting the loss ratio requirements of Regulation .03 of this chapter , the insurer, within 30 days after the due date of the report, shall file for an appropriate reduction in premium to be effective not later than 90 days after the due date of the report. The filing shall include an actuarial memorandum as described in Regulation .04 of this chapter . If the insurer does not propose a reduced premium which in the opinion of the Commissioner meets the requirements of these regulations, the Commissioner shall afford the insurer a hearing upon due notice. If, as a result of the hearing, the Commissioner finds that the premium proposed to be charged by the insurer would not be likely to result in a loss ratio meeting the requirements of these regulations, he may withdraw approval of the affected policy form or forms in accordance with Insurance Article, §12-203(c)(5), Annotated Code of Maryland. B. If a reduced premium is required, the insurer may offer the policy owner the option of obtaining increased benefits instead of the reduction in premium. The proposed benefit increase should be filed in accordance with Regulation .04 of this chapter .

¶20

.07 Applicability. These regulations apply to all insurers to whom Insurance Article, §15-109, Annotated Code of Maryland , is applicable.

¶21

Previous Chapter 13 Return of Premium, Cash Surrender, or Other Nonforfeiture Benefits in Health Insurance Policies

¶22

Next Chapter 15 Substantial, Available, and Affordable Coverage Plan [Repealed]

¶23

This version of the laws and codes on this website is licensed under the CC BY-NC-SA 4.0 license with copyright held by the State of Maryland. This version of the laws and codes on this website will be dedicated to the public domain under the CC0 1.0 license 180 days after publication.

¶24

Please do not scrape. Instead, bulk download the CC BY-NC-SA-4.0 HTML or XML or CC0 HTML or XML . Powered by the non-profit Open Law Library .