New California health insurance rate review regulations could help insurers determine whether regulators will think a rate increase request is reasonable.
The California Department of Insurance developed the draft regulations to implement a new California rate review law created by state Senate Bill 1163.
The new law, which took effect Jan. 1, requires insurers to provide detailed information about proposed premium increases and to submit a certification from an outside actuary to the California department for review, officials say.
The California insurance commissioner can review the filing to determine whether it complies with state laws and can decide whether to describe new rates as unreasonable, but the commissioner does not have the authority to reject increases that the commissioner believes to be excessive, officials say.
The comment period for the draft regulation is set to end Thursday.
In the draft, officials describe the following factors that they plan to use when evaluating rate increase notices.
- The relationship of the projected aggregate medical loss ratio to the federal medical loss ratio standard in the market segment to which the rate applies, after accounting for any adjustments allowable under federal law….
- Whether the assumptions on which the rate increase is based are supported by substantial evidence.
- Whether the choice of assumptions or combination of assumptions on which the rate increase is based is reasonable.
- Whether the data or documentation provided to the Department in connection with the filed rate increase is incomplete, inadequate or otherwise does not provide a basis upon which the reasonableness of the rate may be determined.
- Whether the filed rates result in premium differences between insureds within similar risk categories that:
(A) Are otherwise not permissible under applicable California law; or
(B) Do not reasonably correspond to differences in expected costs.
- Whether the specific, itemized changes that led to the requested rate increase are substantially justified by credible experience data.
- The company's rate of return, evaluated on a return-on-equity basis, for the prior three years, and anticipated rate of return for the following year, taking into account investment income.
- The insurer's employee and executive compensation.
- The degree to which the increase exceeds the rate of medical cost inflation as reported by the U.S. Bureau of Labor Statistics Consumer Price Index for All Urban Consumers Medical Care Cost Inflation Index.
- For individual policies, whether the proposed rates comply with California Code of Regulations Title 10, Section 2222.12.
© Arc, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to TMSalesOperations@arc-network.com. For more information visit Asset & Logo Licensing.