Senate Bill No. 485

(By Senators Helmick and Ross)

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[Introduced March 24, 1997; referred to the Committee
on Banking and Insurance.]
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A BILL to amend and reenact sections two and four, 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.

Be it enacted by the Legislature of West Virginia:
That sections two and four, 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-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 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 of this chapter or article sixteen-c of this chapter;
(5) Accident and sickness policies which provide benefits for loss of income due to disability;
(6) Major medical policies;
(7) Dental policies;
(8) Vision policies.
(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 the insurer earns five hundred thousand two million 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, earns nationally.
(c) "Successive experience period" means the experience period beginning on the first day following the end of the preceding experience period.
(d) "Annual loss ratio" is the ratio of earned premiums received by premiums for the insurer on a given form during the experience period compared to the incurred losses paid out actual incurred claims by for the insurer on the same form during the same experience period and expressed in percentage of earned premiums paid out premium. For policies where premiums are calculated using level premium pricing methods, the change in contract reserves shall be included in actual incurred claims.
(e) "Premium correction" means either a premium refund, a reduction in premium or an increase in benefits.
§33-16E-4. Premium corrections.
(a) Beginning on the first day of July, one thousand nine hundred ninety-four, any insurer offering a limited benefits policy of certificate which was not delivered or issued for delivery in West Virginia prior to the effective date of this article shall make premium refunds corrections to policyholders and certificate holders if it fails to return to such policyholders and certificate holders in the form of annual loss ratios under the policy or certificate:
(1) At least sixty-five percent of the earned premiums in the case of a group policy or certificate; and
(2) At least fifty-five percent of the earned premiums in the case of an individual policy.
(b) Any insurer offering a limited benefits policy or certificate which was in force in West Virginia on the effective date of this article shall make premiums refunds premium corrections to policyholders and certificate holders if it fails to return to such policyholders and certificate holders in the form of annual loss ratios under the policy or certificate a percentage of the earned premium which is the anticipated loss ratio originally filed by the insurer with the insurance commissioner less five percent.
(c) With respect to a policy form or certificate form which has been in force or offered by an insurer either in West Virginia or nationally for more than five years, refunds premium corrections to West Virginia policyholders or certificate holders 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.
(d) With respect to a policy form or certificate form which has been in force or offered by an insurer for more than five years, refunds to West Virginia policyholders or certificate holders made pursuant to the requirements of this section and based upon national annual earned premium volume shall be calculated by:
(1) Multiplying the mandated 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 certificate holders 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.
(e) (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 corrections, if any, that must be made pursuant to subsection (a) of this section.
(f) (e) Refunds Premium corrections shall be made to all West Virginia policyholders and certificate holders who are insured under the applicable policy form or certificate as of the last day of the experience period. Such refund premium correction 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 during the third quarter of the year following the experience period for which a refund premium correction is determined to be due.
(g) (f) Refunds Premium corrections of less than ten dollars shall be aggregated and held by the insurer in a policyholders' and certificate holders' liability fund and shall be used to offset any future rate increases.



NOTE: The purpose of this bill is to require contract reserves be included in the calculation of loss ratios and to limit the risk pool on calculations to West Virginia experience. The bill also revises the threshold dollar amount for determining the experience period. The bill further expands the options for making premium corrections if the loss ratio does not meet the target percentage established by law.


Strike-throughs indicate language that would be stricken from the present law, and underscoring indicates new language that would be added.