Article 6. Medicare Supplement Policies - California Insurance Code Section 10192.14

10192.14.  (a) (1) (A) With respect to loss ratio standards, a
Medicare supplement policy form or certificate form shall not be
advertised, solicited, or issued for delivery unless the policy form
or certificate form can be expected, as estimated for the entire
period for which rates are computed to provide coverage, to return to
policyholders and certificate holders in the form of aggregate
benefits, not including anticipated refunds or credits, provided
under the policy form or certificate form at least 75 percent of the
aggregate amount of premiums earned in the case of group policies, or
at least 65 percent of the aggregate amount of premiums earned in
the case of individual policies.
   (B) Loss ratio standards shall be calculated on the basis of
incurred claims experience, and earned premiums shall be calculated
for the period and in accordance with accepted actuarial principles
and practices.
   (2) All filings of rates and rating schedules shall demonstrate
that expected claims in relation to premiums comply with the
requirements of this section when combined with actual experience to
date. Filings of rate revisions shall also demonstrate that the
anticipated loss ratio over the entire future period for which the
revised rates are computed to provide coverage can be expected to
meet the appropriate loss ratio standards.
   (3) For purposes of applying paragraph (1) of subdivision (a) and
paragraph (3) of subdivision (d) of Section 10192.15 only, policies
issued as a result of solicitations of individuals through the mail
or by mass media advertising, including both print and broadcast
advertising, shall be deemed to be individual policies.
   (b) (1) With respect to refund or credit calculations, an issuer
shall collect and file with the commissioner by May 31 of each year
the data contained in the applicable reporting form required by the
commissioner for each type of coverage in a standard Medicare
supplement benefit plan.
   (2) If on the basis of the experience as reported the benchmark
ratio since inception (ratio 1) exceeds the adjusted experience ratio
since inception (ratio 3), then a refund or credit calculation is
required. The refund calculation shall be done on a statewide basis
for each type in a standard Medicare supplement benefit plan. For
purposes of the refund or credit calculation, experience on policies
issued within the reporting year shall be excluded.
   (3) For the purposes of this section, with respect to policies or
certificates advertised, solicited, or issued for delivery prior to
January 1, 2001, the issuer shall make the refund or credit
calculation separately for all individual policies, including all
group policies subject to an individual loss ratio standard when
issued, combined and all other group policies combined for experience
after January 1, 2001. The first report pursuant to paragraph (1)
shall be due by May 31, 2003.
   (4) A refund or credit shall be made only when the benchmark loss
ratio exceeds the adjusted experience loss ratio and the amount to be
refunded or credited exceeds a de minimis level. The refund shall
include interest from the end of the calendar year to the date of the
refund or credit at a rate specified by the secretary, but in no
event shall it be less than the average rate of interest for 13-week
Treasury notes. A refund or credit against premiums due shall be made
by September 30 following the experience year upon which the refund
or credit is based.
   (c) An issuer of Medicare supplement policies and certificates
shall file annually its rates, rating schedule, and supporting
documentation including ratios of incurred losses to earned premiums
by policy duration for approval by the commissioner in accordance
with the filing requirements and procedures prescribed by the
commissioner and this code. The supporting documentation shall also
demonstrate in accordance with actuarial standards of practice using
reasonable assumptions that the appropriate loss ratio standards can
be expected to be met over the entire period for which rates are
computed. The demonstration shall exclude active life reserves. An
expected third-year loss ratio that is greater than or equal to the
applicable percentage shall be demonstrated for policies or
certificates in force less than three years.
   As soon as practicable, but prior to the effective date of
enhancements in Medicare benefits, every issuer of Medicare
supplement policies or certificates shall file with the commissioner,
in accordance with applicable filing procedures, all of the
   (1) (A) Appropriate premium adjustments necessary to produce loss
ratios as anticipated for the current premium for the applicable
policies or certificates. The supporting documents necessary to
justify the adjustment shall accompany the filing.
   (B) An issuer shall make premium adjustments necessary to produce
an expected loss ratio under the policy or certificate to conform to
minimum loss ratio standards for Medicare supplement policies and
that are expected to result in a loss ratio at least as great as that
originally anticipated in the rates used to produce current premiums
by the issuer for the Medicare supplement policies or certificates.
No premium adjustment that would modify the loss ratio experience
under the policy other than the adjustments described in this section
shall be made with respect to a policy at any time other than upon
its renewal date or anniversary date.
   (C) If an issuer fails to make premium adjustments acceptable to
the commissioner, the commissioner may order premium adjustments,
refunds, or premium credits deemed necessary to achieve the loss
ratio required by this section.
   (2) Any appropriate riders, endorsements, or policy forms needed
to accomplish the Medicare supplement policy or certificate
modifications necessary to eliminate benefit duplications with
Medicare. The riders, endorsements, or policy forms shall provide a
clear description of the Medicare supplement benefits provided by the
policy or certificate.
   (d) The commissioner may conduct a public hearing to gather
information concerning a request by an issuer for an increase in a
rate for a policy form or certificate form issued before or after the
effective date of January 1, 2001, if the experience of the form for
the previous reporting period is not in compliance with the
applicable loss ratio standard. The determination of compliance is
made without consideration of any refund or credit for the reporting
period. Public notice of the hearing shall be furnished in a manner
deemed appropriate by the commissioner.

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Last modified: February 16, 2015