Puerto Rico Rate Filing Instruction Manual. Version 3.0

Transcription

1 Puerto Rico Rate Filing Instruction Manual Version 3.0 1

2 Table of Contents Overview... 3 Section I: Written Rate Filing Documentation... 4 General Description... 4 Base Period Experience... 4 Capitation Payments... 5 Claims Trends and Projection... 5 Past Experience, and any other alternative or additional data use... 5 Non-Benefit Expense Projections... 5 Administrative Costs... 5 Projected Gain/Loss Margins... 5 Premium Development Methodology... 5 Company Financial Condition... 6 Medical Loss Ratio... 6 Small Groups Affected... 6 Section II: Actuarial Certification... 6 Actuarial Memorandum... 6 Primary Rate Increase Drivers... 6 Base period Experience... 6 Claims Trends and Projection... 7 Non-benefit Expense Projections... 7 Actuarial Opinion... 7 Certification of Data Accuracy... 7 Section III: Public Information... 9 Bringing Transparency to the Market... 9 Presenting Clear Information to Consumers... 9 What needs to be made public... 9 Appendix A: Rate Filing Check List Appendix B Standardized Actuarial Certification

3 Overview This instruction manual supports implementation of the requirement of Ruling Letter NO: AV dated July 12, Under Section 2794 of the Public Health Service Act, as amended by Section 1003 of the Federal Patient Protection and Affordable Care Act ( PPACA ), disability insurers that write medical plans in Puerto Rico have the obligation to submit to the Office of the Commissioner of Insurance ( OCI, OCS ), for review and approval, any rate increase for non-grandfathered plans where the average increase is equal to or greater than ten percent (10%) of current rates, effective September 1, For Health Service Organizations all rate increases must be submitted to OCI no matter the amount of the increase. The purpose of this requirement is to allow the OCI (OCS) to determine whether the proposed rate increase for small group and individual markets is unreasonable. Rates that are subject to approval by the OCI (OCS) must be submitted at least sixty (60) days before the effective date. If there is an objection from the OCI (OCS), the time required for the objection to be answered will not be included in the 60 days and therefore may delay the implementation date. When a new product is introduced the policy forms and premium rates must be filed for approval. This manual should be used for filing rates for new products as well as for rate increases. The carrier MUST only use the rates filed and approved and none others. A complete rate filing must include all of the information required by Ruling Letter NO: AV, as applicable. The manual and templates do not supersede the regulations, they merely standardize and make explicit the information already required or allowed to be requested by those regulations. Carriers must use SERFF to submit their rate fillings as required by Ruling Letter AV of February 7, Carriers must fill out all the SERFF data elements, including Affordable Care Act ( ACA ) data elements, or the filing will be rejected as incomplete. Under the Affordable Care Act and rules that became effective on 9/1/2011, carriers with average rate increases of more than 10% per year must submit rate justification information to the Federal Center for Consumer Information and Insurance Oversight ( CCIIO ). The federal rate summary worksheet and Preliminary Justification also should be submitted to the Centers for Medicare & Medicaid Services ( CMS ) on the same date as the filing with the OCI (OCS). Please note that the information submitted to the OCI (OCS) should be consistent with the information submitted to the CCIIO and CMS. Consistent with ACA, the OCI (OCS) requires filings to include the following two parts: 1) Summary of the rate increase (Part I 1 - Unified Rate Review Template). 2) A written explanation of the rate increase (Part III Actuarial Memorandum). Additionally the OCI (OCS) requires carriers to provide the following: 1) Standardized IRIS (Insurance Rate Introspection System) Standardized Excel Data Submission Form (see Section I: Description of IRIS Standardized Excel Data Submission Form Data Elements). 2) Written rate filing documentation (see Section II: Rate Filing Documentation). 3

4 3) Actuarial Memorandum and Certification (see Section III: Actuarial Certification). 4) Rate Filing Checklist (see Appendix A: Rate Filing checklist). 5) Public form of the rate filing information to be placed on the OCI (OCS) website (see Section IV: Public Information for a description of the public form). 6) Rate Manual (if different from the rate manual already filed with the OCI (OCS) or if no rate manual has been filed with OCI (OCS)). 7) Benefits Map (if different from the Benefits Map already filed with the OCI (OCS) or not Benefits Map has been filed. Section I: Written Rate Filing Documentation In addition to the federal Part III Actuarial Memorandum, the carrier must provide a detailed description of the method used to develop the premium rates. This should include an explanation of the assumptions used and methodology used to develop the rates. It should also include more detail on any item that the carrier believes is driving the rate increase projections or would be of particular concern when reviewing the rate filing. The written statement must be submitted in Microsoft Word format (version 2010 or earlier). General Description Provide a description of: i. Type of Product ii. Benefits iii. Renewability iv. General Marketing Method v. Underwriting Method vi. Premium Classifications vii. Age Basis and Issue Age Describe the scope and reason for the rate increase including a description of how the rates were determined, all assumptions, and the source of all assumptions. Base Period Experience Provide an explanation of the base period experience used indicating the first incurred date included and the last incurred date included. The last paid date used should be provided, which indicates the paid through date for the base period experience. Provide an explanation of how incurred claims were estimated from paid claims including the average completion factor 1 used and an explanation of adjustments made to base period claims experience. If the base period data was not credible, explain what other data was used or blended with base period actual experience. 1 The average completion factor is the ratio of the incurred claims for a period of time to the paid claims for the same period as of the last paid date used for the base period experience. The incurred claims are the total claims that are expected to be paid in the base experience. The paid claims are the amounts that have actually been paid as of any point in time. As time goes on more claims are paid and the ratio is higher. 4

5 If contract reserves were established for these contracts, describe what they are for, how they were developed and how they impacted the rate development. Describe the treatment of large claims, claims pooling and reinsurance, if any. Capitation Payments Describe what is covered by any capitation payments. Claims Trends and Projection Provide an explanation of how base period experience was trended forward including the level of aggregation of the trends. Identify the source of each assumption used to project claims beyond utilization and cost trends. Explain the treatment of large claims and the impact of reinsurance. If there were changes in the benefits covered, provide a description of all benefit changes represented by benefit change factors on the Projection Factors Tab and Projected Costs Tab (description of benefits before and after). Past Experience, and any other alternative or additional data use If the experience for the product is too small to be considered credible, alternative claims experience can be used. Include detail description of all alternative experience data used and how it was combined with the products actual experience. Include a credibility analysis showing why additional experience was needed. Non-Benefit Expense Projections The methodology used to project non-benefit expenses, including gain/loss margins, should be explained. If a loss ratio approach was used, the carrier should explain how the target loss ratio was developed. Administrative Costs Identify the main factors that affect changes in administrative costs. Discuss how changes in projected administrative costs and profit are impacting the rate increase. If budgets were used, the carrier should explain when the budgets were developed and for what time period. Projected Gain/Loss Margins Provide an explanation of how the projected gain/loss margins were developed. Premium Development Methodology Describe the rating categories used. Include a description of the determination of family base rate (oldest adult, male age, female age) and the method for calculating rates for overage dependents. If rating factors (that is, permitted factors for age, etc.) are being changed, the documentation must discuss the methods and data used to determine the new rating factors and a summary of the effect of the change in rating factors on rates. 5

6 Company Financial Condition Describe the financial situation of the company, including surplus, if any. Medical Loss Ratio Describe how the medical loss ratio was calculated. Describe how the credibility adjustment was determined. Small Groups Affected The carrier should provide a list of all small groups affected by the proposed rate increase, the proposed increase for each group, the date of the group s contract renewal, and the effective date for each group 30 days prior to implementation on the OCI IRIS webpage. The list of small groups affected and renewal dates, will depend on the proposed effective date of the rate increase and the period of time that the carrier intends to use the proposed rates. If the carrier has not decided on the timing of the next rate increase, it should list all small groups that could be affected with renewal dates before the last possible date that it is anticipated that these rates will be replaced. Section II: Actuarial Certification 2 The Actuarial Certification must include an actuarial memorandum that documents the methodology used in developing the rates and an actuarial opinion signed by a qualified actuary providing an opinion that the rate filing was developed according to actuarial standards and principles and the laws of Puerto Rico. Actuarial Memorandum Actuarial Memorandum must provide a summary description of the method used to develop the rates, which is consistent with the detailed written documentation. This should include an explanation of the assumptions and methodologies used. It should include more detail on any item that the carrier believes is driving the rate increase projections or would be of particular concern when understanding the rate filing. Primary Rate Increase Drivers The carrier must provide a description of the reason for the rate increase and the major factors impacting the increase in the premium rates. Base period Experience Provide an explanation of the base period experience used and paid through date. Include an explanation of how incurred claims were estimated based on paid claims (Note, the completion factors must be included in the written filing documentation and an explanation of adjustments made or blend with actual experience when actual experience was not credible. This should be consistent with the detail provided in the detail written documentation. 2 See Appendix C 6

7 Claims Trends and Projection Provide a high level explanation of how projected claims were developed from base period experience. This should include an explanation of how base experience was trended forward describing the level of aggregation of trends. Identify the source of each assumption used to project claims beyond utilization and cost trends. Explain the treatment of large claims and the impact of reinsurance. If there were changes in the benefits covered, provide a description of all benefit changes represented by benefit change factors (description of benefits before and after). Non-benefit Expense Projections The methodology used to estimate non-benefit expenses, including gain/loss margins, should be explained. If a loss ratio approach was used, the carrier should explain how the target loss ratio was developed. If budgets were used, the carrier should explain how the budgets were developed and for what time period. Actuarial Opinion The Actuarial Opinion provides a certification indicating that the rates were developed according to actuarial standards and principles and the laws of Puerto Rico and should contain a statement to the effect. The preparing actuary should certify that the proposed rates: 1) Were developed according to all current Actuarial Standards of Practice (ASOPs); 2) Only use permitted rating classifications; 3) Do not discriminate unfairly between risk involving essentially the same hazards and expense elements or between risks in the application of like charges and credits; 4) Are adequate to fund the benefits and associated administrative expenses; 5) Are not excessive; and 6) Are reasonable in relationship to the benefits. Additionally, if the rate filing is for coverage offered to small groups, the preparing actuary should certify that: 1) Rates were developed based on an estimate adjusted community and can only vary the adjusted community calculation by age, tobacco use, and family composition; 2) The adjustment for age mentioned in the preceding paragraph will use the federal age curve; 3) The adjustment for tobacco mentioned in the preceding paragraph will use the tobacco rating ration lower than 1.5:1 in accordance with the Federal Tobacco use ratio. 4) Pricing for identical groups only vary by plan design and do not reflect differences due to the nature of the groups supposed to select health plans in particular or by geographic area. The actuarial certification must be signed and dated by a qualified actuary. Certification of Data Accuracy This certification certifies the validity, accuracy and completeness of the contents of Part I Unified Rate Review Template, Part III Actuarial Memorandum, Written Filing Documentation and the Rate Manual. It should be signed by the person in charge of the preparation, revision or supervision of 7

8 the worksheet data information corresponding to the submitted rate increase filing. (See Appendix C) 8

9 Section III: Public Information Every carrier must provide a written summary of the rate filing to be displayed on the OCI (OCS) public website. The OCI will also have a facility (IRIS) to report rate increases for a group on the OCI (OCS) website. Bringing Transparency to the Market In keeping with the goal of both OCI (OCS) and the Affordable Care Act to bring transparency to health insurance rates, many of the items submitted to OCI (OCS) will be made public both on the OCI (OCS) website and on HealthCare.gov. This will ensure that consumers will have access to information concerning changes in their insurance rates. The OCI (OCS) requests that carriers provide a document with information to be displayed on the OCI (OCS) website. The following describes the information that should be included. Presenting Clear Information to Consumers Carriers include the proposed increases and the justification for them in the written summary. Information about rate increases should be displayed in a simple and easy-to-understand format. Information should include a description of the factors driving rate increases, along with a justification for implementing a rate increases determined to be unreasonable. This should provide basic background information that helps consumers understand the carrier s decision, and present information about the rate increase. What needs to be made public OCI (OCS) will allow individual carriers to decide specifically what they include in the public document. Based on what will be made public on HealthCare.gov, at minimum carriers must provide: Average Rate Increase; Effective date of the rate increase; Number of people affected; A description of why the rates are going up; A description of how the insurance premiums are being used; Last three rate increases; and Written explanation of the rate increase. Examples of all of the public information available can be found on 9

10 Appendix A: Rate Filing Check List 10

11 INSERT RATE FILING CHECKLIST HERE 11

12 12

13 Appendix B Standardized Actuarial Certification 13

14 GOVERNMENT OF PUERTO RICO OFFICE OF THE COMMISSIONER OF INSURANCE Certification Standardized Excel Worksheet/Written Filing Documentation/Rate Manual I hereby certify that I was in charge of the preparation, revision or supervision of the worksheet data information corresponding to the submitted rate increase filing. In addition, I certify that the submitted information is accurate, true and complete. I also acknowledge responsibility for the validity, accuracy and completeness of the contents of the Written Filing Documentation and the Rate Manual. Signature Title Carrier Date 14 B5 Tabonuco Street, Suite 216 PMB 356 Guaynabo, PR Phone: (787) Fax: (787)