H. B. 2086


(By Delegate Walters)
[Introduced January 19, 1995; referred to the
Committee on Banking and Insurance.]




A BILL to amend and reenact sections one, two, three, four, five, six and seven, article sixteen-e, chapter thirty-three of the code of West Virginia, one thousand nine hundred thirty-one, as amended, all relating to the regulation of limited benefits insurance policies generally; changing effective date for application of the article; amending and adding definitions; amending provisions related to premium rate increase requests and loss ratio requirements; amending provisions regarding premium refunds, calculation of refunds and payments; amending provisions related to statement of actual loss ratios to be filed with the insurance commissioner; amending provisions involving notice of cancellation; and amending provisions concerning prohibition against preexisting conditions, waiting periods, elimination periods and probationary periods in replacement policies or certificates.

Be it enacted by the Legislature of West Virginia:
That sections one, two, three, four, five, six and seven, article sixteen-e, chapter thirty-three of the code of West Virginia, one thousand nine hundred thirty-one, as amended, be amended and reenacted, all to read as follows:
ARTICLE 16E. LIMITED BENEFITS ACCIDENT AND SICKNESS INSURANCE

POLICIES AND CERTIFICATES.

§33-16E-1. Scope of article.

The provisions of this article shall apply to all limited benefits policies and certificates in force on the effective date of this article, as well as to any limited benefits policy or certificate delivered or issued for delivery in this state after the effective date hereof delivered or issued for delivery in this state after the first day of January, one thousand nine hundred ninety-six.
§33-16E-2. Definitions.

For purposes of this article:
(a) "Limited benefits policy or certificate" means any individual or group accident and sickness insurance policy that is not required to offer or provide all benefits mandated by any other applicable provision of this chapter: Such policies include, but are not limited to, accident and sickness disability, accident only, sickness only disability, sickness only, accident only disability, hospital indemnity, specified disease, and travel accident insurance policies Provided, That the following types of policies and certificates are excluded from the definition of "limited benefits policy or certificate" for purposes of this article:
(1) Credit accident and sickness insurance;
(2) Long-term care insurance;
(3) Medicare supplement insurance; and
(4) Minimum benefits accident and sickness insurance issued pursuant to section fifteen, article fifteen or article sixteen-c of this chapter;
(5) Noncancelable or guaranteed renewable accident and sickness, and accident and sickness policies which provide benefits for loss of income due to disability;
(6) Major medical type insurance; and
(7) Accident insurance.
(b) "Experience period" means the period beginning on the first day of the calendar year during which a premium rate first takes effect and ending on the last day of the calendar year during which in which a policy form was issued and ending five years later: Provided, That during that time period the insurer earns five hundred thousand dollars in premiums on the form in West Virginia or, if the annual premium earned on the form in West Virginia is less than five hundred thousand dollars, the insurer earns five hundred thousand dollars on that form nationally. If the insurer earns less than five hundred thousand dollars on that form during that five-year time period, the experience period will continue until that dollar amount is reached.
(c)"Successive experience period" means the experience period Any successive experience period shall commence beginning on the first day following the end of the preceding experience period.
(c) "Aggregate loss ratio" means the actual claims incurred plus a provision for future aging and deterioration of claim levels included in premiums calculated using level premium methods divided by the amount of earned premiums where the premiums and claims are for the entire experience period.
§33-16E-3. Premium rate increase requests; loss ratio

requirements.

(a) To be eligible to make a premium rate increase request for any policy sold after the first day of July January, one thousand nine hundred ninety-three ninety-six, any insurer offering a limited benefits policy form or certificate form in West Virginia shall be expected to return to policyholders and certificateholders in the form of five-year aggregate loss ratios under the policy form or certificate form:
(1) At least seventy-five percent of the earned premiums in the case of a group policy or certificate;
(2) At least sixty-five sixty percent of the earned premiums in the case of an individual policy; and
(3) At least fifty-five percent of the earned premiums in the case of an individual or group accident and sickness disability policy or certificate.
The loss ratio for individual policies or certificates shall be adjusted in accordance with the following formula, where
R = the loss ratio from the table;
A = the average premium per individual policy;
R' = the adjusted loss ratio;
I = (CPI-U, Year N-1) divided by one hundred three and nine-tenths;
N-1 is the calendar year immediately preceding the calendar year (N) in which the rate filing is submitted to the insurance commissioner; and
CPI-U is the consumer price index for all urban consumers, for all items and for all regions of the United States combined, as determined by the United States Department of Labor, Bureau of Labor Statistics. The CPI-U for any year is the value in September of that year:
R' = (A-25I) multiplied by R and divided by A.
R' cannot be more than ten percentage points less than R.
(b) With respect to a policy form or certificate form which has been offered by an insurer in West Virginia or nationally for five years or less the insurer may use the anticipated loss ratio filed with and approved by the commissioner for that form to determine compliance with the requirements of this section.
(c) (b) For purposes of this section, any limited benefits policies and certificates policy or certificate issued as a result of solicitation of individuals through the mail or mass media advertising, including both print and broadcast advertising, shall be treated as an individual policies policy.
§33-16E-4. Premium refunds; calculation of refunds; payments.

(a) Beginning on the first day of July, one thousand nine hundred ninety-four, any insurer offering a limited benefits policy or certificate in West Virginia shall make premium refunds to policyholders and certificateholders if it fails to return to such policyholders and certificateholders in the form of annual loss ratios under the policy or certificate For forms issued after the first day of January, one thousand nine hundred ninety-six, refunds shall be made to policyholders and certificateholders if the aggregate loss ratio over the experience period exceeds the ratios stated below. The refund shall be an amount which when added to the claims will equal the following ratios:
(1) At least sixty-five percent of the earned premiums in the case of a group policy or certificate;
(2) At least fifty-five fifty percent of the earned premiums in the case of an individual policy; and
(3) At least forty-five percent of the earned premiums in the case of an individual or group accident and sickness disability policy or certificate.
The loss ratio for individual policies shall be adjusted in accordance with the formula set forth in section three of this article.
(b) With respect to a policy form or certificate form which has been offered by an insurer either in West Virginia or nationally for more than five years, refunds to West Virginia policyholders or certificateholders made pursuant to the requirements of this section and based upon annual earned premium volume in West Virginia shall be calculated by multiplying the anticipated loss ratio by the applicable earned premium during the experience period and subtracting from that result the actual incurred claims during the experience period A refund calculation is required for each experience period.
(c) With respect to a policy form or certificate form which has been offered by an insurer for more than five years, refunds to West Virginia policyholders or certificateholders made pursuant to the requirements of this section and based upon national annual earned premium volume shall be calculated by:
(1) Multiplying the anticipated loss ratio by the applicable earned premium during the experience period and subtracting from that result the actual incurred claims during the experience period; and
(2) Multiplying the results of subdivision (1) of this subsection by the total earned premium during the experience period from all West Virginia policyholders or certificateholders eligible for refunds; and
(3) Dividing the results of subdivision (2) of this subsection by the total earned premium during that period in all states on the policy form.
(c) If the premium from West Virginia for the experience period is less than five hundred thousand dollars, then the refund shall be reduced by the ratio of West Virginia premiums to the national premium.
(d) With respect to a policy form or certificate form which has been offered by an insurer in West Virginia or nationally for five years or less, the insurer may use the anticipated loss ratio filed with and approved by the commissioner to determine the amount of premium refunds, if any, that must be made pursuant to subsection (a) of this section.
(e) (d) Refunds A refund shall be made to all any West Virginia policyholders policyholder and or certificateholders certificateholder who are is insured under the applicable policy form or certificate as of the last day of the experience period. Such The refund shall include interest, at the current accident and health reserve interest rate established by the national association of insurance commissioners, from the end of the experience period until the date of payment. Payment shall be made at the latest during the third quarter of the year following the experience period for which a refund is determined to be due.
(f) (e) Refunds of less than ten dollars shall be aggregated and held by the insurer in a policyholders' and certificateholders' liability fund and shall be used to offset any future rate increases.
§33-16E-5. Statement of actual loss ratios to be filed with

commissioner; form; examinations.

(a) Every insurer offering limited benefits policy forms or certificate forms which have been in effect for five years or more in West Virginia subject to the provisions of this article shall file with the commissioner, on or before the first day of September of each year following the end of an experience period, a statement of the actual loss ratios for each policy form or certificate form issued in this state subject to this article. Such The statement shall be made under the oath of the insurer's president or other authorized officer on a form prescribed by the commissioner.
(b) The commissioner shall have the authority to examine the records and files of any insurer offering limited benefits policy forms or certificate forms in West Virginia to determine compliance with the provisions of this article.
§33-16E-6. Notice of cancellation or nonrenewal.

No insurer may cancel or nonrenew a limited benefits policy or certificate unless written notice of such the cancellation or nonrenewal is forwarded to the policyholder or certificateholder not less than sixty six days prior to the expiration date of the policy or certificate. This section shall not apply when the policy or certificate terminates due to nonpayment of premium.
§33-16E-7. Prohibition against preexisting conditions, waiting

periods, elimination periods and probationary periods in replacement policies or certificates.

(a) If a limited benefits policy or certificate replaces another limited benefits policy or certificate providing similar coverage, benefits or benefit amounts, the replacing insurer shall waive any time periods applicable to preexisting conditions, waiting periods, elimination periods and probationary periods in the new limited benefits policy or certificate to the extent that such the time period was spent under the original policy or certificate. If a limited benefits policy or certificate is replaced by another limited benefits policy or certificate with greater benefits or amounts of coverage, this restriction shall only apply to the extent that the coverages are the same, and not to any excess or greater coverage.
(b) If a limited benefits policy or certificate replaces another limited benefits policy or certificate providing which provides similar coverage benefits or benefit amounts that and has been in effect for at least six months, the replacing policy may not provide any time periods period applicable to preexisting conditions, waiting periods, elimination periods and or probationary periods.


NOTE: The purpose of this bill is to change existing provisions related to the regulation of limited benefits insurance policies. The bill changes the effective date of the article to coincide with the several amendments involved. It
amends sections addressing: Definitions; premium rate increase requests; loss ratios requirements; premium refunds; calculation of refunds and payments; requirement that a statement of actual loss ratios be filed with the insurance commissioner; notice of cancellation; and the prohibition against preexisting conditions, waiting periods, elimination periods and probationary periods in replacement policies or certificates.
Strike-throughs indicate language that would be stricken from the present law, and underscoring indicates new language that would be added.