806 KAR 38:070. Health maintenance organization subscriber fee filings

Link to law: http://www.lrc.ky.gov/kar/806/038/070.htm
Published: 2015

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      806 KAR 38:070.

Health maintenance organization subscriber fee filings.



304.38-050, 304.38-070


KRS 304.38-150


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


      (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.


"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



"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


      (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


      (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.)