Section 1358.145 Of Article 3.5. Additional Requirements For Medicare Supplement Contracts From California Health And Safety Code >> Division 2. >> Chapter 2.2. >> Article 3.5.
1358.145
. (a) The calculation of actual or expected loss ratios
shall be pursuant to the formula in subdivision (a) of Section
1358.14, and pursuant to definitions, procedures, and other
provisions as may be deemed by the director, with due consideration
of the circumstances of the particular issuer, to be fair,
reasonable, and consistent with the objectives of this chapter.
(b) Each issuer shall submit to the department a copy of the
calculations for the actual or expected loss ratio as required by
Section 1358.14. The calculations shall include the following data:
the actual loss ratio for the entire period in which the contract has
been in force, as well as for the immediate past three years and for
each year in which the contract has been in force, the scale of
prepaid or periodic charges for the loss ratio calculation period, a
description of all assumptions, the formula used to calculate gross
prepaid or periodic charges, the expected level of earned prepaid or
periodic charges in the loss ratio calculation period, and the
expected level of incurred claims for reimbursement, including paid
claims and incurred but not paid claims, in the loss ratio
calculation period. The calculations shall be accompanied by an
actuarial certification, consisting of a signed declaration of an
actuary who is a member in good standing of the American Academy of
Actuaries in which the actuary states that the assumptions used in
calculating the expected loss ratio are appropriate and reasonable,
taking into account that the calculations are in accordance with the
provisions of subdivision (a) and the provisions referred to therein.
In addition, the director may require the issuer to submit actuarial
certification, as described above, by one or more unaffiliated
actuaries acceptable to the director.
(c) Notwithstanding the calculations required by subdivision (b),
contracts shall be deemed to comply with the loss ratio standards if,
and shall be deemed not to comply with the loss standards unless:
(1) for the most recent year, the ratio of the incurred losses to
earned prepaid charges for contracts that have been in force for
three years or more is greater than or equal to the applicable
percentages contained in this section; and (2) the expected losses in
relation to charges over the entire period for which the contract is
rated comply with the requirements of this section. An expected
third-year loss ratio that is greater than or equal to the applicable
percentage shall be demonstrated for contracts in force less than
three years.