§6215-A. Reserves

Link to law: http://legislature.maine.gov/legis/statutes/24-A/title24-Asec6215-A.html
Published: 2015

§6215-A. Reserves






A provider shall establish and maintain the following reserves: [1995, c. 625, Pt. A, §29 (NEW).]








1. Mortgage debt. 
A liquid amount equal to the aggregate amount of all principal and interest payments
due during the fiscal year on any mortgage loan or other long-term financing of the
facility, which reserve may be held by a lender, mortgagee or trustee for bondholders
in a debt service reserve fund or similar fund, including, without limitation, any
reserve fund of the Maine Health and Higher Educational Facilities Authority established
pursuant to Title 22, chapter 413;


[
1995, c. 625, Pt. A, §29 (NEW)
.]








2. Operating reserve. 
A liquid amount equal to 20% of the total cash operating expenses, other than principal
and interest payments on any mortgage loan or other long-term financing of the facility,
projected for the forthcoming 12-month period, which reserve may be held by the provider
in an operating fund; provided, however, that the percentage of the total cash operating
expenses must be increased from 20% to 25% in the case of a provider who offers an
extensive health care guarantee. For purposes of this section, "extensive health
care guarantee" means a term in a continuing care agreement requiring the provision
of health care to the subscriber on a prepaid basis for more than one year; and


[
1995, c. 625, Pt. A, §29 (NEW)
.]








3. Reserve liabilities; actuarial value. 
Each provider shall establish and maintain reserve liabilities that place a sound
value on the provider's liabilities under its contracts with subscribers. The reserve
must equal the excess of the present value of future benefits promised under the continuing
care agreement over the present value of future revenues and any other available resources,
based on conservative actuarial assumptions. The provider shall provide every 3 years
to the superintendent an actuarial valuation or statement of actuarial opinion as
to the adequacy of the reserve, signed by a qualified actuary, that, based on reasonable
assumptions, the continuing care retirement community's assets, including the present
value of estimated future maintenance fees and any other available resources, are
at least equal to the present value of estimated future liabilities.


Unless otherwise approved by the superintendent, the actuarial opinion must be based
on reasonable assumptions with the following provisions and margins.





A. The liabilities of a continuing care retirement community must include, but not
be limited to:



(1) An amount equal to the present value of future health care expenses guaranteed
pursuant to the continuing care contract; and






(2) The liabilities under this section must be calculated for the continuing care
retirement community population existing on the valuation date under assumptions that,
in the actuary's opinion, fairly represent the expected value of future costs and
population decrements adjusted by the margins specified in paragraph B. [1995, c. 625, Pt. A, §29 (NEW).]













B. Margins required to be included in the valuation assumptions to be added to the
actuary's best estimate assumptions are as follows.



(1) Health care costs per resident or per health care facility bed must be assumed
to increase at a rate at least one percentage point higher than the general inflation
rate.






(2) A mortality margin of 5% must be subtracted from that assumed for active residents
and 10% subtracted from those in the health care facilities.






(3) A health care utilization margin of 5% must be added to the assumed rates at
which residents require permanent transfer to a health care facility.






(4) The discount rate used to calculate present values may not be more than 2 1/2
percentage points higher than the rate used in the valuation of long-term life insurance
contracts to be issued in the year of valuation in this State.






(5) All other assumptions must include margins that are adequate in the opinion of
the actuary. [1995, c. 625, Pt. A, §29 (NEW).]










[
1995, c. 625, Pt. A, §29 (NEW)
.]






The superintendent may adopt reasonable rules further defining the standards contained
in this section. [1995, c. 625, Pt. A, §29 (NEW).]





SECTION HISTORY

1995, c. 625, §A29 (NEW).
Read Entire Law on legislature.maine.gov