Rule Chapter 940
SUMMARY OF COMMENTS AND STATEMENT
OF BASIS OF ADOPTED AMENDMENTS
Chapter 940 has been amended pursuant to the Notice of Rulemaking issued on October 14, 2011. Rule 940 was originally adopted in 2000 to establish written procedures and guidelines for insurers and HMOs filing individual and group health insurance rates and to set forth annual data reporting requirements to enable the Bureau to monitor the continued viability of Maine’s small group and individual health insurance markets.
In 2002, Rule 940 was amended to conform to statutory changes, to require small group rate filings to provide rates for representative plans in order to provide rate comparison information to the public, and to make several technical corrections to the original rule. In 2004, the rule was further amended to set forth filing standards for small group health insurance rates consistent with 2003 Public Law Chapter 469, which (1) amended Maine’s small group law, 24-A M.R.S.A. § 2808-B, and (2) requires all rate filings to reflect the impact of the operation of Dirigo Health. Later in 2004, the rule was further amended to permit certain blocks of small group policies, such as those issued through the Dirigo health plan, to be treated separately from a carrier’s other small group business for purposes of determining refunds under the guaranteed loss ratio option. In 2006, Rule 940 was further amended to make the small group credibility standard consistent with statutory changes enacted in 2005 and to clarify several provisions of the rule.
The purposes of the current amendments are to reflect changes in underlying Maine law enacted pursuant to 2011 Public Law Chapter 90, to provide consistency with federal rate review and medical loss ratio standards, to provide for data collection necessary for Bureau of Insurance compliance with federal data reporting standards, to eliminate data reporting that is no longer needed, and to clarify several provisions of the rule. Miscellaneous stylistic and technical revisions have also been made, and will not be discussed separately except when comments were submitted.
A public hearing was held on November 15, 2011. Pursuant to the Notice of Rulemaking, the public comment period was held open until November 28, 2011. Consumers for Affordable Health Care (“CAHC”) testified at the hearing. Written comments were received from CAHC, America's Health Insurance Plans (“AHIP”), Anthem Blue Cross and Blue Shield, Harvard Pilgrim Health Care, the Maine Bankers Association, and Unum.
Harvard Pilgrim supports the Proposed Amendments, and CAHC states its belief that they accurately reflect recent the Maine Legislature’s changes to the Insurance Code.
Sections 1 and 2. Purpose and Authority
Technical amendments have been made to Sections 1 and 2 to reflect the recent statutory changes. No comments were received on these sections, which are adopted as proposed.
Section 3. Applicability and Scope
Section 3 was amended to make the rule applicable to blanket policies, MEWAs, and captive insurers, and to clarify that some provisions apply to large group coverage. For the reasons discussed below, Section 3 is adopted as proposed.
Unum requests that the Bureau clarify which provisions of the rule apply to disability and supplemental products. (“Supplemental” in this context does not include Medicare supplement coverage, which is expressly excluded from the scope of this rule.) AHIP supported Unum’s comments.
In particular, Unum and AHIP request clarification that the new amendments apply solely to major medical insurance, and Unum objected to applying “federal rate review, MLR and data collection requirements to our non-medical products.” Those requirements of the Amended Rule do not apply to non-medical products, as discussed in more detail below. However, a statement that the amendments apply solely to major medical insurance would be overbroad for two reasons. First, some of the amendments do apply to disability and supplemental products (for example, the requirements that all filings be submitted electronically and include a completed checklist), and there are other amendments that are technical revisions of general applicability. Second, although most of the new substantive requirements apply only to medical products that are subject to Chapter 90 and the federal Affordable Care Act (ACA), not all such plans are “major medical coverage” within the meaning of 24‑A M.R.S.A. § 2694(5) and Bureau of Insurance Rule 755, § 6(F).
With respect to Section 3, Unum expresses concern that the change from “small group” to “group” may unintentionally sweep in group disability and supplemental products. This change is a clarification of the scope of the existing rule, not a substantive change. The provisions of Section 5 have always applied to large group products, including disability and supplemental products. Other sections do not apply by their terms. To clarify the scope of the other sections, we have added a definition of “small group” in Section 4 to make clear that the term does not refer to any disability or supplemental plans that fall outside the scope of Maine’s small group health insurance law. Following is a discussion of the applicability or inapplicability of each subsequent section to individual disability and supplemental products, including those group products subject to the individual rating laws:
- Section 6. Requirements for Individual and Small Group Rate Submissions Subject to Prior Approval: Subsection A clearly sets forth the limited applicability of this section.
- Section 7. Individual Rate Filings Subject to Pure Loss Ratio Standards: This section has always applied to individual disability and supplemental products.
- Section 8. Individual Health Plans Subject to Title 24-A M.R.S.A. § 2736-C: The limited applicability of this section is clear from the title and introductory sentence.
- Section 9. Small Group Health Plans Subject to Title 24-A M.R.S.A. § 2808‑B: The limited applicability of this section is clear from the title and introductory sentence.
- Section 10 Health Maintenance Organization (HMO) Rate Filings: The limited applicability of this section is clear from the title and introductory sentence.
- Section 11. Expenses and Investment Income: This section has always applied to individual disability and supplemental products.
- Section 12. Review Pursuant to the ACA: As stated in Subsection A, this new section applies only to rate filings that have been identified as “potentially unreasonable” in accordance with the ACA. Therefore the applicability is determined by federal law. It is the carrier’s responsibility to determine whether their products are subject to the ACA.
- Section 13. Rebates and Medical Loss Ratio Reporting: The applicability of each of the three subsections of this section is clear from the text. Here again, it is the carrier’s responsibility to determine whether their products are subject to the ACA.
- Section 14. MEWAs and Captives: This section only specifies which other sections of the rule are applicable to MEWAs and captives.
Section 4. Definitions
Definitions of “ACA,” “MLR,” and “premium” were added by the Proposed Amendments. The term “loss ratio” was changed to “pure loss ratio” for clarity, because there are now two different loss ratio formulas that might apply. As discussed under Section 3 above, we have added a definition of “small group” in the adopted Amendments.
Anthem questions the need for the definition of “pure loss ratio” since refunding requirements under both state and federal law are now based on a different definition. However, pure loss ratio standards still apply to many rate filings, as specified in Section 7.
The definition of “pure loss ratio” excludes reinsurance premiums paid to the Maine Guaranteed Access Reinsurance Association (MGARA), and reinsurance reimbursements from MGARA and the ACA transitional reinsurance program, from earned premiums and incurred claims, respectively. CAHC suggests that this requirement should be made a free-standing provision rather than part of the definition, so that it would be applicable to individual health plan rates filed on an “optional guaranteed loss ratio” basis. However, 24-A M.R.S.A. § 2736-C(2-B)(B) provides that the “optional guaranteed loss ratio” follows the federal MLR formula, which cannot be redefined in Rule 940. The federal Department of Health and Human Services will determine how MGARA is addressed for federal MLR purposes.
In reviewing this definition in response to the comments, we noted that the Proposed Amendments addressed ACA transitional reinsurance reimbursements, but did not address ACA transitional reinsurance assessments. Subsection G has been revised to clarify that ACA transitional reinsurance assessments are treated in the same manner as Dirigo and MGARA assessments.
Section 5. General Rate Submission Requirements
As now required by 24-A M.R.S.A. § 2412(2), filings must be made electronically using the SERFF system. Other updates have also been made to the filing procedures to reflect current technology and practice. The confidentiality provisions have also been updated to reflect current law and to clarify the applicable procedures.
The exception for single-case filings in Subsection A has been removed, because the underlying statute, 24-A M.R.S.A. § 2839, does not include any exception for single-case filings. Anthem suggests retaining this exception. However, the scope of the informational filing statute is not limited to community-rated products, and the rating issues raised by single-case form filings are not unique to those filings.
CAHC suggests removing the words “file and use” from first sentence of Paragraph B(3). However, this language is in the current rule and remains accurate and clarifies the language used in the statute.
Anthem suggests including similar language for individual rates when applicable. We have added a new Paragraph 4 to Subsection B for consistency, although Section 6 already makes clear that these filings are not subject to prior approval.
CAHC suggests that rate filings should include the new federally required description of benefits. Paragraph C(3) has been revised so that this document will also serve as the description of benefits for rate filing purposes, when applicable.
Section 6. Requirements for Individual and Small Group Rate Submissions Subject to Prior Approval
The scope of this section has been clarified, and has been updated to reflect changes in the applicable law since it was most recently amended. The requirement to address active life reserves in the filing has been clarified. No other substantive changes were proposed to Section 6.
Anthem notes that the authority for the guaranteed loss ratio option is in statute and therefore suggests that Paragraph A(1) include a cross-reference to the statute, rather than to Subsection 8(H) of the rule. However, while the authority is in statute, the procedures for making the election are in Subsection 8(H) of the rule. Furthermore, we believe the internal cross-reference is more helpful for understanding the organization of the rule.
Anthem suggests that the “60 day window” in the existing language of Subsection D be changed to 30 days with an option to extend it another 30 days. The requirement that rates be filed 60 days before the effective date, unless the Superintendent waives this requirement, is in statute (24-A M.R.S.A. §§ 2736 and 2808‑B) and therefore cannot be changed by rule. Subsection D also currently provides that “Every effort will be made to process filings within 60 days.” In response to Anthem’s concern, we are changing that time period to 30 days, and making the same change to the parallel provisions in Paragraph 9(D)(3) and proposed Paragraph 8(H)(4). While the Bureau is often able to process filings within 30 days, there are factors that can make this impossible in certain situations, including delays in receiving responses to the Bureau’s inquiries to the carrier. Also, in cases where a public hearing is held, a 30-day turn-around is not feasible.
In addition, in Subsection A, the credibility standards for both direct and association coverage have been clarified to indicate that they are based on all of the carrier’s small group health plans.
Section 7. Individual Rate Filings Subject to Pure Loss Ratio Standards
The scope of Section 7 has been amended to exclude individual health plan filings when the carrier has elected the guaranteed loss ratio option and rate review is not required under the ACA, because newly enacted 24-A M.R.S.A. § 2736-C(2-B) exempts those filings from prior review. The definitions of “guaranteed renewable” and “non-cancelable” were also amended to clarify that coverage may nevertheless be terminated at age 65 or upon eligibility for Medicare.
As proposed, Section 7 would also have been amended to apply the rate revision procedures of Subsection C to small group filings for non-credible blocks of business. However, that proposal has been reconsidered in response to Anthem’s comment questioning why Sections 6 and 7 are separate when they appear to apply to the same filings. Currently, Section 6 applies to all filings subject to prior approval, while Section 7 applies only to individual filings. The reason for the proposed expansion of the scope of Section 7 was to clarify the review process under the 75% pure loss ratio standard. However, that is already addressed in Subparagraph 9(E)(1), so there is no need to make small group filings subject to Section 7. Therefore, proposed Paragraph A(2) has been removed and the reference to individual filings has been restored to the title.
The introductory paragraph of the existing language of Section 7 states that the provisions that have now been consolidated in Subsection B “apply to individual policies other than those subject to the 65% loss ratio requirement of Title 24-A M.R.S.A. §2736-C. Subsection C applies to all individual policies.” What this means is that Subsection C provides that all individual filings are subject to prior approval under the applicable prospective pure loss ratio standard. For individual health plans issued on or after December 1, 1993, Subsection B does not apply and the minimum pure loss ratio is set by statute at 65% pursuant to 24 A M.R.S.A. § 2736‑C(5). Otherwise, it is set by the table in Paragraph B(3).
This scope provision has been restructured to accommodate the new exception for those guaranteed loss ratio filings that are exempt from prior review, and thus are not subject to any prospective minimum loss ratio standard. The general applicability clause now appears in Paragraph A(1), while the 65% standard for individual health plans has been moved to Paragraph B(1) as an exception. Anthem objects to the breadth of Paragraph A(1), observing, correctly, that its effect is to apply the minimum pure loss ratio standards of Subsection B applicable to individual health plans issued before December 1, 1993, which are not subject to the 65% pure loss ratio standard. Anthem observes further that the standards of Subsection B are not found in 24-A M.R.S.A. § 2736-C. However, that does not make them inapplicable to individual health plans. They implement the requirement in § 2736-A that rates not be excessive, inadequate or unfairly discriminatory. The provision Anthem objects to continues the existing requirement that the minimum loss ratio standards in Paragraph B(3) apply to all “individual policies other than those subject to the 65% loss ratio requirement,” and it is adopted as proposed. However, carriers with both pre- and post-1993 individual health plans are not required to make separate filings if their pre-1993 policies meet the 65% loss ratio standard, because that will automatically meet the standards in Subsection B.
Section 8. Individual Health Plans Subject to Title 24-A M.R.S.A. § 2736-C
This section has been amended to clarify its applicability to certain association policies, and to reflect the new rating standards established by Chapter 90 and the ACA, the new guaranteed loss ratio option for individual health plans, and the impact of MGARA and the ACA transitional reinsurance, risk adjustment, and risk corridor programs.
No changes were proposed to Subsection B, which restricts the ability of carriers to charge rates for different benefit plans that exceed the maximum possible difference in benefits. Anthem objects to this provision, calling it an “outdated requirement that creates a hindrance to rating appropriately.” However, rate differentials that materially exceed this standard are only prohibited by Subsection B if the carrier cannot demonstrate that the rate differential is not based on differences in health status, which is prohibited under Maine law, or demographics, which should already be fully reflected elsewhere in the carrier’s rating plan to the extent permitted by law. While we appreciate Anthem’s concerns that pricing should reflect each product’s own experience, those concerns are likely to be addressed in significant part by the MGARA reinsurance program, which will take effect this year, and by the ACA risk adjustment program that takes effect in 2014.
In Subparagraph D(1)(c), Anthem objects to the limitation on geographic rating to a range of 1.5 to 1, pointing out that the statute only specifies an upper limit of 1.5 on the “rating factor” and suggesting that the Legislature would have used the term “ratio,” as it did elsewhere in the statute, if that were its intent. However, the Legislature did not specify any different meaning for “rating factor” either, nor does Anthem, despite its assertion that “The language of the statute is quite clear.” If a carrier is allowed to use any combination of rating factors as long as the highest factor does not exceed 1.5, a carrier could use any geographic rating plan it chose, by setting its base rate equal to 2/3 of the rate for its highest-cost area. For example, it could charge $3,000 in its highest-cost area while charging only $300 in its lowest-cost area by setting its base rate at $2,000 and using a rating factor of 1.5 in the highest-cost area and a factor of 0.15 in the lowest-cost area. Although Anthem states that the statutory language is “consistent with the provisions of the Affordable Care Act,” those provisions do not require any limits at all on geographic rating. We believe the Legislature clearly intended some limit on geographic rating in Maine. In order for the requirement to be meaningful, the rating factors must be confined to a limited range. Subparagraph D(1)(c) is therefore adopted as proposed.
Paragraph H(4) has been revised to say the Bureau will make every effort to process filings within 30 days, as discussed under Section 6 above.
In addition, in Paragraph H(2), the credibility standard has been clarified to indicate that it is based on all of the carrier’s individual health plans.
Section 9. Small Group Health Plans Subject to Title 24-A M.R.S.A. § 2808-B
This section has been amended to clarify its applicability to certain association policies, and to reflect the new rating standards established by Chapter 90 and the ACA, the new “credible block of business” standard for exemption from prior approval, the repeal of the representative plan filing requirement, and the impact of the ACA risk adjustment, and risk corridor programs.
Paragraph D(3) has been revised to say the Bureau will make every effort to process filings within 30 days, as discussed under Section 6 above.
Currently, the Superintendent has the discretion to authorize carriers to establish separate community rates for association and trustee groups in the small group market meeting certain statutory criteria. Paragraph B(6) (formerly numbered B(4)) provides rate filing standards for such plans. (Similar statutory provisions apply in the individual market, but are not specifically referenced in Rule 940.) The ACA will require all of a carrier’s non-grandfathered plans in each market to be treated as a single risk pool beginning January 1, 2014. Therefore, a new Subparagraph B(6)(c) has been added stating that on and after that date, “Pursuant to the ACA ... the separate community rate for the association or trustee group will only apply to grandfathered employers within the association.” New Subparagraph B(3)(b) applies a similar sunset to closed blocks of pre-Chapter-90 small group business, as does new paragraph D(2) of Section 8 for closed blocks in the individual market. Both Anthem and the Maine Bankers Association request that to the extent the Bureau has any flexibility under the ACA, different community rates for association plans be allowed after January, 1 2014. The provisions in question are expressly tied to the ACA, and thus will be revisited if the ACA is amended or is interpreted to allow this practice.
In addition, in Paragraphs B(5) and D(1), and the introductory paragraph of Subsection E, the credibility standard has been clarified to indicate that it is based on all of the carrier’s small group health plans, and Paragraph E(1) has been clarified to indicate that the 75% minimum loss ratio standard for non-credible blocks is a pure loss ratio standard.
Sections 10 and 11. Health Maintenance Organization (HMO) Rate Filings and Expenses and Investment Income (formerly “Special Requirements for Large Blocks”)
No substantive changes were made to Sections 10 and 11. No comments were received on these sections, which are adopted as proposed.
Section 12. Review Pursuant to the ACA
This section is new, and addresses procedures for review of potentially unreasonable rates when required by the ACA.
Anthem notes that Subsection B provides that a rate increase will be determined to be unreasonable “if the carrier provides data or documentation that is incomplete, inadequate, or otherwise does not provide a basis to determine whether the increase is reasonable.” It suggests either deleting this language or amending it to allow a determination of unreasonableness on those grounds only if the carrier fails to provide the information after a request from the Bureau. We have revised this provision as suggested.
Section 13. Rebates and Medical Loss Ratio Reporting
This section is new, and sets forth the requirements for MLR reporting and payment of rebates.
Proposed Subsection A states: “All reporting forms relating to MLR and rebates under the ACA that are required to be filed with the U.S. Department of Health and Human Services must be submitted to the Superintendent on or before the date required under the ACA.” Anthem points out that the ACA does not require submission to the Superintendent and therefore does not specify a date. We have clarified this sentence to require submission to the Superintendent by the earlier of the day the forms are filed with the federal government or the date they are required to be filed with the federal government as modified by any extension of time granted by the federal government or by the Superintendent.
Section 14. MEWAs and Captives
This section is new, and designates the requirements of the rule that apply to MEWAs and captive insurers.
Anthem questions the need for this section, asserting that MEWAs and captive insurers are already subject to 24-A M.R.S.A. § 2808-B. This is inaccurate. While 24-A M.R.S.A. § 6603(1)(H) provides that MEWAs “may issue only health care benefit plans that comply with the requirements of section 2808-B with regard to rating practices, coverage for late enrollees and guaranteed renewal,” it does not make the entire section applicable. Similarly, while 24-A M.R.S.A. § 6702(4)(B) makes captives subject to “the requirements for community rating and guaranteed issuance and renewal for association members pursuant to section 2808-B,” it does not make the entire section applicable. Anthem further suggests that Sections 1 through 4, 6, and 13 of the rule should apply to these entities. Sections 1 through 4 are general provisions that relate to the rest of the rule. They were not separately referenced in proposed Section 14 because they do not contain requirements in and of themselves. Subsection F has been revised to clarify that those sections apply to the extent relevant, as does Section 15. Section 6 does not apply because rates for these entities are not subject to prior approval. Section 13 does apply, as stated in Subsection D.
CAHC points out a cross-referencing error in subsection B. We have corrected it.
Section 15. Effective Date
No comments were received on this Section 15, which has been amended to add a “placeholder” sentence establishing an effective date for the 2012 Amendments. As authorized by 5 M.R.S.A. § 8052(6), the Amendments are effective five days after the filing of the adopted amendments with the Secretary of State.
Appendix A. Annual Data Collection
Appendix A, Annual Data Collection, has been amended to remove references to standardized and representative plans and to delete Table 1 (Small Group Plan Designs), Table 2 (Individual Plan Designs), and the “Group descriptions for pricing purposes.” These amendments are adopted as proposed. CAHC suggests that the tables and group descriptions be retained. However, these tables are no longer useful and therefore requiring carriers to provide this information is unnecessarily burdensome. Table 1 and the “Group descriptions for pricing purposes” were previously used to provide comparative information in the Bureau’s consumer guide for small employers. However, there was so much variation in benefits among carriers that the rate comparison was not meaningful. Even if consumers looked at the accompanying information on the benefit variations, they had no basis to evaluate their rating impact and thus had no meaningful way to factor benefit differences into their comparison of the rates. Furthermore, the rates shown were community rates and the comparison could be quite different for a particular group once the rating factors for age, industry, and geographic area, which differ among different carriers, were applied. We found that small employers generally looked to brokers for competitive quotes from multiple carriers that better fit their particular situation. This provides them more meaningful information because it is specific to the group in question. Table 2 related to the annual data report, but it did not appear that anyone was using this data for any purpose. The Bureau’s individual rate brochure includes a detailed benefit comparison that is more useful to consumers.
Appendix B. Small Group Experience Reporting Form for Guaranteed Loss Ratio Option
Appendix B has been deleted because the small group guaranteed loss ratio option has been repealed, and reporting for rebate purposes has been superseded by the ACA reporting requirements. No comments were received on the deletion.
Comparison of Existing, Proposed, and Adopted Rule
A copy of the amended rule is attached to the electronic version of this Basis Statement, showing changes, and is available on request to those receiving this Basis Statement in paper form. In the color version of the comparison text, changes adopted as proposed are shown in red, and changes adopted after the Bureau’s review of the comments are shown in blue. Changes are indicated by the following font styles:
Existing text that has been retained: plain text.
New text added as proposed: underline.
Existing text deleted as proposed: strikethrough.
Subsequently added text: double-underline.
Subsequently deleted text: double-strikethrough.
Restored text that was proposed to be deleted: italics.
Proposed additions that were not adopted: underline and strikethrough.