Section 2026.5  Purpose and Scope

 

a)         Purpose

This Part describes the Director's authority to review rate filings pursuant to Section 355 of the Illinois Insurance Code. 

 

b)         Scope

This Part establishes the requirements for health insurance issuers offering health insurance coverage in the small group or individual markets to report information concerning unreasonable rate increases to the Director. This Part further establishes the process by which it will be determined whether the rate increases are unreasonable rate increases as defined in this Part.

 

Section 2026.10  Definitions

 

"Affordable Care Act" or "ACA" means the Patient Protection and Affordable Care Act (42 USC 18001 et seq.).

 

                        "Code" means the Illinois Insurance Code [215 ILCS 5].

 

"Department" means the Illinois Department of Insurance.

 

"Director" means the Director of the Illinois Department of Insurance.

 

"CMMS" means the Centers for Medicare and Medicaid Services.

 

"Federal Medical Loss Ratio Standard" means the applicable medical loss ratio standard for the State and market segment involved, determined under subpart B of 45 CFR 158.

 

"Health Insurance Coverage" has the meaning given that term in PHS Act section 2791(b)(1).

 

"Health Insurance Issuer" has the meaning given that term in PHS Act section 2791(b)(2).

 

"Individual Market" has the meaning given in PHS Act section 2791(e)(1)(A).  Coverage that would be regulated as individual market coverage, as defined in PHS Act section 2791(e)(1)(A), if it were not sold through an association, is subject to rate review as individual market coverage.

 

"PHS Act" means the Public Health Service Act (42 USC 201 et seq.).

 

"Product" means a package of health insurance coverage benefits with a discrete set of rating and pricing methodologies that a health insurance issuer offers in a state.

 

"Rate Increase" means any increase of the rates for a specific product offered in the individual or small group market.

 

"Rate Increase Subject to Review" means a rate increase that meets the criteria set forth in Section 2026.30.

 

"Secretary" means the Secretary of the Department of Health and Human Services.

 

"Small Group Market" has the meaning ascribed in PHS Act section 2791(e)(5); provided, however, that for the purpose of this definition, "50" employees applies in place of "100" employees in the definition of "small employer" in section 2791(e)(4).  "Coverage" that would be regulated as small group market coverage (as defined in section 2791(e)(5)) if it were not sold through an association is subject to rate review as small group market coverage.

 

"Unreasonable Rate Increase" means a rate increase that the Director determines under Section 2026.40 to be excessive, unjustified or unfairly discriminatory.

 

Section 2026.20  Applicability

 

a)         In General

The requirements of this Part apply to health insurance issuers offering health insurance coverage in the individual market and small group market, as defined in 45 CFR 154.103.

 

b)         Exceptions

The requirements of this Part do not apply to grandfathered health plan coverage as defined in 45 CFR 147.140 or to excepted benefits as described in PHS Act section 2791(c).

 

Section 2026.30  Rate Increases Subject to Review

 

A rate increase filed on or after January 1, 2014, or effective on or after January 1, 2014, is subject to review if, as required by 45 CFR 154.200:

 

a)         The rate increase is 10 percent or more and applicable to a 12-month period as calculated under subsection (b).

 

b)         A rate increase meets or exceeds the applicable threshold set forth in subsection (a) if the average increase for all enrollees weighted by premium volume meets or exceeds the applicable threshold.

 

c)         If a rate increase that does not otherwise meet or exceed the threshold under subsection (b) meets or exceeds the threshold when combined with a previous increase or increases during the 12-month period preceding the date on which the rate increase would become effective, then the rate increase must be considered to meet or exceed the threshold and is subject to review.  The review shall include a review of the aggregate rate increases during the applicable 12-month period.

 

Section 2026.40  Unreasonable Rate Increases

 

a)         When the Director reviews a rate increase, he or she will determine that the rate increase is an unreasonable rate increase if the increase is an excessive rate increase, an unjustified rate increase, or an unfairly discriminatory rate increase, as required and defined by 45 CFR 154.205.

 

b)         The rate increase is an excessive rate increase if the increase causes the premium charged for the health insurance coverage to be unreasonably high in relation to the benefits provided under the coverage (see 45 CFR 154.205(b)). In determining whether the rate increase causes the premium charged to be unreasonably high in relationship to the benefits provided, the Director will consider:

 

1)         Whether the rate increase results in a projected medical loss ratio below the federal medical loss ratio standard in the applicable market to which the rate increase applies, after accounting for any adjustments allowable under federal law;

 

2)         Whether one or more of the assumptions on which the rate increase is based is not supported by substantial evidence; and

 

3)         Whether the choice of assumptions or combination of assumptions on which the rate increase is based is unreasonable.

 

c)         The rate increase is an unjustified rate increase (as defined in 45 CFR 154.205(c)) if the health insurance issuer provides data or documentation to the Director in connection with the increase that is incomplete, inadequate or otherwise does not provide a basis upon which the reasonableness of an increase may be determined.

 

d)         The rate increase is an unfairly discriminatory rate increase (as defined in 45 CFR 154.205(d)) if the increase results in premium differences between insureds within similar risk categories that do not reasonably correspond to differences in expected costs.

 

Section 2026.50  Submission of Rate Filing Justification

 

a)         If any product is subject to a rate increase, a health insurance issuer must submit a Rate Filing Justification for all products in the single risk pool, including new or discontinuing products, to the Director on a form and in a manner prescribed by the Secretary in 45 CFR 154.215(a).

 

b)         The Rate Filing Justification must consist of the following Parts (as required in 45 CFR 154.205(b)):

 

1)         Unified rate review template (Part I), as described in subsection (d).

 

2)         Written description justifying the rate increase (Part II), as described in subsection (e).

 

3)         Rating filing documentation (Part III), as described in subsection (f).

 

c)         A health insurance issuer must complete and submit Parts I and III of the Rate Filing Justification described in subsections (b)(1) and (b)(3) to the Director as required by 45 CFR 154.215(c). If a rate increase is subject to review, the health insurance issuer must also complete and submit to the Director Part II of the Rate Filing Justification described in subsection (b)(2).

 

d)         Content of unified rate review template (Part I): The unified rate review template must include the following, as determined appropriate by the Director and in accordance with 45 CFR 154.215(d):

 

1)         Historical and projected claims experience.

 

2)         Trend projections related to utilization, and service or unit cost.

 

3)         Any claims assumptions related to benefit changes.

 

4)         Allocation of the overall rate increase to claims and non-claims costs.

 

5)         Per enrollee per month allocation of current and projected premium.

 

6)         Three year history of rate increases for the product associated with the rate increase.

 

e)         Content of written description justifying the rate increase (Part II): The written description of the rate increase must include a simple and brief narrative describing the data and assumptions that were used to develop the rate increase and must include the following as required by 45 CFR 154.215(e):

 

1)         Explanation of the most significant factors causing the rate increase, including a brief description of the relevant claims and non-claims expense increases reported in the rate increase summary; and

 

2)         Brief description of the overall experience of the policy, including historical and projected expenses, and loss ratios.

 

f)         Content of rate filing documentation (Part III) as required by 45 CFR 154.215(f): The rate filing documentation must include an actuarial memorandum that contains the reasoning and assumptions supporting the data contained in Part I of the Rate Filing Justification. Parts I and III must be sufficient to conduct an examination satisfying the requirements of 45 CFR 154.301(a)(3) and (4) and to determine whether the rate increase is an unreasonable increase.

 

g)         If the level of detail provided by the issuer for the information under subsections (d) and (f) does not provide sufficient basis for the Director to determine whether the rate increase is an unreasonable rate increase, the Director will request the additional information necessary to make a determination, as allowed by 45 CFR 154.215(g).

 

Section 2026.60  Determination of an Unreasonable Rate Increase

 

a)         As required by 45 CFR 154.225(a), when the Director receives a Rate Filing Justification for a rate increase subject to review and the Director reviews the rate increase, the Director will make a timely determination whether the rate increase is an unreasonable rate increase, and submit that decision to CMMS.

 

b)         If the Director determines that the rate increase is unreasonable, CMMS will provide the Director's final determination and brief explanation to the health insurance issuer within five business days following CMMS receipt of the final determination.

 

c)         The Director's rate review process includes an examination of the following as required by 45 CFR 154.301(a)(3):

 

1)         The reasonableness of the assumptions used by the health insurance issuer to develop the proposed rate increase and the validity of the historical data underlying the assumptions;

 

2)         The health insurance issuer's data related to past projections and actual experience;

 

3)         The reasonableness of assumptions used by the health insurance issuer to estimate the rate impact of the reinsurance and risk adjustment programs under sections 1341 and 1343 of the Affordable Care Act; and

 

4)         The health insurance issuer's data related to implementation and ongoing utilization of a market-wide single risk pool, essential health benefits, actuarial values and other market reform rules as required by the ACA.

 

d)         As required by 45 CFR 154.301(a)(4), the examination must take into consideration the following factors, to the extent applicable to the filing under review:

 

1)         The impact of medical trend changes by major service categories;

 

2)         The impact of utilization changes by major service categories;

 

3)         The impact of cost-sharing changes by major service categories, including actuarial values;

 

4)         The impact of benefit changes, including essential health benefits and non-essential health benefits;

 

5)         The impact of changes in enrollee risk profile and pricing, including rating limitations for age and tobacco use under PHS Act section 2701;

 

6)         The impact of any overestimate or underestimate of medical trends for prior year periods related to the rate increase;

 

7)         The impact of changes in reserve needs;

 

8)         The impact of changes in administrative costs related to programs that improve health care quality;

 

9)         The impact of changes in other administrative costs;

 

10)         The impact of changes in applicable taxes, licensing or regulatory fees;

 

11)         Medical loss ratio;

 

12)         The health insurance issuer's capital and surplus;

 

13)         The impacts of geographic factors and variations;

 

14)         The impact of changes within a single risk pool to all products or plans within the risk pool; and

 

15)         The impact of reinsurance and risk adjustment payments and charges under sections 1341 and 1343 of the ACA.