806 KAR 38:070.
Health maintenance organization subscriber fee filings.
RELATES TO: KRS
304.38-050, 304.38-070
STATUTORY AUTHORITY:
KRS 304.38-150
NECESSITY, FUNCTION,
AND CONFORMITY: KRS 304.38-150 provides that the Executive Director of
Insurance may promulgate administrative regulations necessary for the proper
administration of KRS Chapter 304, Subtitle 38. KRS 304.38-050 requires, in
part that any schedule of fees or other periodic charges to be paid by
enrollees and submitted to the executive director is
to be accompanied by adequate supporting information to show that such charges
or fees are not excessive, inadequate, or unfairly discriminatory. This
administrative regulation establishes the minimum amount of supporting
information which may be considered adequate.
Section 1.
Definitions. (1) Terms defined in KRS 304.38-030 shall have the meanings stated
therein.
(2) "Uncovered
expenditures" are health care service costs that are covered by a health
maintenance organization and are rendered by providers not under contract with
the HMO. These are expenditures for health care services for which the HMO is
at risk.
(3)
"Actuary" means a member of the American Academy of Actuaries, a
qualified Health Service Corporation Actuary or a person who has demonstrated
to the executive director that his qualifications
are substantially equivalent to those required for such qualification.
(4) "Community
rating system" means a system of fixing rates of payments for health
services. Under such system, rates of payments may be determined on a
per-person or per-family basis and may vary with the number of persons in a
family, but except as otherwise authorized, such rates must be equivalent for
all individuals and for all families of similar composition.
(5) "Capitation
rates" are the per-person rates which form the basis of a community rating
system.
(6)
"Contingency reserve" means the unassigned funds held over and above
any known or estimated liabilities of the organization for the protection of
its enrollees against insolvency of the HMO.
Section 2. General
Principles. (1) Rates will be considered excessive if it appears that their use
will result in an unjustified accumulation of a contingency reserve in excess
of that prescribed in KRS 304.38-070.
(2) Rates will be
considered inadequate if it appears that their use will result in a contingency
reserve less than that prescribed in KRS 304.38-070.
(3) If the HMO's
contingency reserves fall outside of the range defined herein, the executive
director may require the HMO to submit new budget projections, a
revised estimate, certified by an actuary, of the appropriate contingency
reserve level and/or rate filings to correct the deficiencies.
(4) An unfairly
discriminatory rate is a rate for a person or class of persons which gives that
person or class an advantage or a disadvantage in comparison with others
involving essentially the same hazards, services, deductibles, copayments or
expense factors. Charges applicable to an enrollee shall not be individually determined
based on the status of his health.
(5) Community rating
is not mandated by these rules, but an HMO which proposes to use another rating
system should be prepared to demonstrate that its rating system does not
violate the principles of these rules.
(6) Any rate filing,
any demonstration of the need for additional contingency reserves, or
qualification of the HMO for waiver of the deposit requirements of KRS
304.38-070 shall take the following factors into account:
(a) Benefit type,
including the proportion of uncovered expenditures and the potential for loss
from uncollected copayments.
(b) Underwriting
classifications, such as individual enrollees, small groups, Medicare
complementary enrollees, etc., which may differ significantly in utilization
patterns.
(c) Risk
classification, including any characteristics which would cause delay in
implementation of rate increases and any limited risk arrangements.
(d) Concentration of
risk, such as the result of environmental hazards in a limited geographic area
or the existence of a single large group.
(e) Trends, which
should differ between uncovered expenditures and directly provided services and
between services and administrative charges.
(f) Competition,
which affects the degree to which fluctuation of actual-to-expected results may
be covered in rates charged and inversely the degree to which contingency
reserves must be relied upon to lessen the impact of such fluctuations.
(g) Catastrophes and
epidemics, to the extent not considered elsewhere, and to the extent not
covered by insurance or reinsurance.
(h) Mandated
benefits for which rating information may not exist.
(i) Provider
contracts, as they affect the level of uncovered expenditures.
(j) Health care
development. This should be explained as a budgetary item, and any reserve for
such development should be separate from the organization's contingency
reserve.
(k) Fluctuation in
asset values and investment income.
Section 3. Contents
of Rate Filing. Each rate filing shall include:
(1) A cover letter
outlining the scope and reason for the filing.
(2) A certification
by an actuary as to the appropriateness of the proposed charges.
(3) The capitation
rates for the plan affected and the formula to be used in deriving rates to be
charged from the capitation rates, if the filing is for community rates.
(4) The
organization's budget for the period for which rates are to be effective, which
should be in such form as to relate easily to the elements (capitations,
benefit variations, etc.) of the proposed rates.
(5) Sufficient
recent financial data to support the proposed budget and any trends.
(6) Any other
supporting information which the organization may wish to include or which the executive
director deems necessary to determine whether the proposed rates
should be approved or disapproved. (9 Ky.R. 754; eff. 2-2-83; TAm eff. 8-9-2007.)
