TO:

FROM:

RE:

DATE:

LOUISIANA DEPARTMENT OF I NSURANCE

JAMES J. DONELON

COMMISSIONER

DIRECTIVE 206

ALL HEALTH INSURANCE ISSUERS AND HEALTH MAINTENANCE ORGANIZATIONS

JAMES J. DONELON, COMMISSIONER OF INSURANCE

INSTRUCTIONS FOR SUBMISSION AND REQUIREMENTS RELATIVE TO HEALTH INSURANCE RATE FILING IN THE SMALL GROUP AND INDIVIDUAL MARKETS AND THE REVIEW OF RATES

APRIL 14, 2014

Directive 206 governs the requirement for filing health insurance rates with the Louisiana Department of Insurance (LDI) pursuant to La. R.S. 22:972 and §2794 of the Public Health Service Act (PHSA) and 45 CFR Part 154.

The LDI will review certain health insurance rates in the small group and individual health insurance markets effective January 1, 2014. For purposes of Directive 206 and for the effective implementation of state and federal law, a health insurance issuer or health maintenance organization (issuers) that files initial rates, or who implements any rate change, must file rates in accordance with Directive 206 and the attached "Small Group and Individual Health Insurance Rates: Disclosure and Review Requirements Checklist."

La. R.S. 22:972 currently provides in pertinent part that, "No policy of health and accident insurance shall be delivered or issued for delivery in this state, nor shall any endorsement, rider, or application which becomes a part of any such policy be used in connection therewith until a copy of the form and of the premium rates and of the classifications of risks pertaining thereto have been filed with the commissioner of insurance; ... " Currently when a new form is implemented by issuers, the corresponding rate must be filed with the LDI via the System for Electronic Rate and Form Filing (SERFF).

Federal law requires issuers seeking a rate increase at or above a certain threshold to publicly disclose and justify the proposed increase. The LDI will review rates at or above the threshold for reasonableness pursuant to Title 45 of the Code of Federal Regulations. Currently a threshold rate increase is one in which the average increase for the individual or all enrollees in a small group weighted by premium volume is ten percent or more. 45 CFR §§ 154.200(a) and (c). The threshold of ten percent is subject to change. 45 CFR §154.200(b). A rate increase that does not by itself meet or exceed the threshold will be considered a threshold rate increase if it meets or exceeds

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DIRECTIVE 206 April 14, 2014 Page 2

the threshold when combined with a previous increase or increases during the twelve (12) month period preceding the date on which the rate increase would become effective. 45 CFR §154.220(d).

Initial rates and other rate changes are subject to review for certain purposes, such as compliance with the restrictions on variations in premiums under Public Health Service Act §2701. Directive 206 also applies to issuers utilizing transitional relief as set forth in Bulletin No. 2013-07 (Revised). Note, pursuant to Bulletin No. 2013-07 (Revised), rates used in connection with transitional policies are subject to review. Therefore, all issuers are directed to file rates electronically through SERFF in compliance with Directive 206. Rates subject to the single risk pool requirement shall utilize the Unified Rate Review Template (URRT) and other applicable portions of the Rate Filing Justification. Rates for grandfathered and transitional policies should file rates in the manner utilized by the Centers for Medicare and Medicaid Services (CMS) in the Health Insurance Oversight System (HIOS) for rates not subject to the single risk pool requirement. By federal rule, issuers submitting Qualified Health Plan (QHP) applications shall submit URRT's and Actuarial Memoranda for review of all rates in the issuer's risk pool. The requirement for QHP's applies regardless of whether the rates for the QHP result in a rate change or not.

Effective March 29, 2013, 45 CFR §154.215(a) requires issuers to submit a Rate Filing Justification for all affected products in the individual or small group market. Under 45 CFR §154.215(b), a Rate Filing Justification has three parts:

1. Part I, the CMS unified rate review template (URRT). 2. Part II, a written description justifying the rate increase (only for those

requesting a rate increase). 3. Part Ill, rate filing documentation in the form of an actuarial memorandum.

45 CFR §154.215(c) requires issuers to submit the Rate Filing Justification to CMS and to the applicable state, if the applicable state accepts the submissions, which the LDI does, and hereby requires.

The LDI staff will review all filings for administrative completeness. If the filing is administratively complete, the LDI will refer it to a contracted actuarial firm to conduct the substantive review regarding the reasonableness of the rate increase and/or the compliance with rating restrictions under the Affordable Care Act (ACA). The actuarial review will conclude with the actuary providing the LDI an explanation that details the assessment of the reasonableness or unreasonableness of the rate increase and compliance with ACA rating restrictions.

As with other filings, the LDI will make every reasonable effort to notify issuers if the LDI or the reviewing actuary has questions about the filing, and will give issuers an

DIRECTIVE 206 April 14, 2014 Page 3

opportunity to correct any deficiencies identified during reviews. Within five days of making its determination, the LDI will provide the determination to CMS, in accordance with 45 CFR §154.21 O(b)(2). The LDI will notify the issuer of its determination at the same time the LDI provides the determination to CMS. The LDI's notice of determination will include a brief explanation of how the LDI arrived at the determination. A determination that a threshold rate increase is unreasonable triggers additional disclosure requirements in connection with the implementation of such rates. 45 CFR §154.230.

An issuer must submit every individual and small group rate increase or rate change to the LDI, and CMS if applicable, before it is implemented. 45 CFR §154.220(b). An issuer may not implement the rate until the LDI determines whether the threshold rate increase is reasonable or unreasonable and/or determines whether the rates comply with ACA rating restrictions. Rate filings must be submitted no later than June 27, 2014. The LDI will make every reasonable effort to complete its review within ninety (90) days of receiving the filing and prior to the signing of QHP certification agreements beginning on October 14, 2014.

In order to complete a timely review of rates, issuers are strongly encouraged to complete and submit the additional rate template designed by LDI actuaries, and to submit that template no later than June 27, 2014. The additional template is designed for the purposes of guaranteeing a timely review of rates pursuant to applicable law. Issuers are reminded that if an issuer has at least one QHP in a single risk pool, the review of rates must be complete by the time QHP issuers must sign certification agreements. For non-QHP issuers, the review of rates must be complete prior to Open Enrollment, or else the issuer may not utilize the limited Open Enrollment period. Thus, issuers are encouraged to utilize the additional template to ensure a timely review. The additional rating template can be found in SERFF under Submission Requirements , or an issuer may request an electronic version from the LDI.

Directive 206 is effective upon issuance. All issuers are directed to conduct themselves accordingly, bringing their business practices into compliance with the purpose and intent of Directive 206. Questions regarding Directive 206 may be sent electronically to healthrates@ldi.la.gov or by telephone to (225) 219-4770.

Baton Rouge, Louisiana, the 14th day of April, 2014.

SMALL GROUP AND INDIVIDUAL HEALTH INSURANCE RATES: DISCLOSURE AND REVIEW REQUIREMENTS CHECKLIST

Item Reference Description of Requirement Document, Form, Attachment or Exhibit. Specify Page, Paragraph or Section*

1 45 CFR § 154.301(a)(3)(i) Documentation sufficient to allow Louisiana Department of Insurance (LDI) to assess the reasonableness of the assumptions used by the health insurer to develop the proposed rates and the validity of the historical data underlying the assumptions.

2 45 CFR § 154.301(a)(3)(ii) Documentation sufficient to allow the LDI to assess the health insurer' s data related to past projections and actual experience, as they relate to the proposed rates.

3 45 CFR § 154.301(a)(3)(iii) Documentation sufficient to allow LDI to assess the reasonableness of assumptions used by the health insurer to estimate the rate impact of the reinsurance and risk adjustment programs under sections 1341 of the Affordable Care Act (ACA).

4 45 CFR § 154.301(a)(3)(iv) Documentation sufficient to allow LDI to assess the health insurer' 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.

45 CFR § 154.301(a)(4) All of the following documentation in items number 5-19 as it relates to development of the proposed rates, unless not applicable:

5 45 CFR § 154.301(a)(4)(i) The impact of medical trend changes by major service categories.

6 45 CFR § 154.301(a)(4)(ii) The impact of utilization changes by major service categories.

7 45 CFR § 154.301(a)(4)(iii) The impact of cost-sharing changes by major service categories, including actuarial values.

8 45 CFR § 154.301(a)(4)(iv) The impact of benefit changes, including essential health benefits and non-essential health benefits.

9 45 CFR § 154.301(a)(4)(v) The impact of changes in enrollee risk profile and pricing, including rating limitations for age and tobacco use under Section 2701 of the Public Health Service Act.

10 45 CFR §154.301(a)(4)(vi) The impact of any overestimate or underestimate of medical trend for prior year periods related to the rate increase.

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SMALL GROUP AND INDIVIDUAL HEALTH INSURANCE RATES: DISCLOSURE AND REVIEW REQUIREMENTS CHECKLIST

Item Reference Description of Requirement Document, Form, Attachment or Exhibit. Specify Page, Paragraph or Section*

11 45 CFR § 154.301(a)(4)(vii) The impact of changes in reserve needs.

12 45 CFR § 154.301(a)(4)(viii) The impact of changes in administrative costs related to programs that improve health care.

13 45 CFR § 154.301(a)(4)(ix) The impact of changes in other administrative costs.

14 45 CFR § 154.301(a)(4)(x) The impact of changes in applicable taxes, licensing or regulatory fees.

15 45 CFR § 154.301(a)(4)(xi) Medical loss ratio.

16 45 CFR § 154.301(a)(4)(xii) The health insurer's capital and surplus .

17 45 CFR § 154.301(a)(3)(xiii) The impacts of geographic factors and variations.

18 45 CFR § 154.301(a)(3)(xiv) The impact of changes within a single risk pool to all products or plans within the risk pool.

19 45 CFR § 154.301(a)(3)(xv) The impact of reinsurance and risk adjustment payments and charges under sections 1341 and 1343 ofthe ACA.

45 CFR § 156.80 Documentation sufficient to allow LDI to assess compliance with applicable single risk pool requirements as required below:

20 45 CFR § 156.80(a) and (b) The claims experience considered for the proposed rates is the claims experience of a single risk pool of all of the health insurer' s non-grandfathered ACA individual and/or small group enrollees in Louisiana, on and off ofthe Exchange.

21 45 CFR § 156.80(d)(l) For the policy year for which these rates are proposed, the insurer has established one, market-wide index rate for the single risk pool of the individual and/or small group market.

22 45 CFR § 156.80( d)( 1) The health insurer had adjusted the index rate referred to in Item Number 21 on a market-wide basis based on the total expected market-wide payments and charges under the risk adjustment and reinsurance programs in the state and Exchange user fee.

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Item

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SMALL GROUP AND INDIVIDUAL HEALTH INSURANCE RATES: DISCLOSURE AND REVIEW REQUIREMENTS CHECKLIST

Reference Description of Requirement Document, Form, Attachment or Exhibit. Specify_Pa2e, Para2raph or Section*

45 CFR § 156.80(d)(l) The health insurer' s premium rates for all of the health insurer' s plans in the individual and/or small group market use only the applicable market-wide adjusted index rate and permitted plan-level adjustments, if any.

*Filer must fill out every row. A filer that uses "Not Applicable" or "N/A" for any row must explain why the

requirement does not apply or indicate where the reviewer can find the explanation in the filing.

CERTIFICATION OF HEALTH INSURANCE RATES: PPACA REQUIREMENTS CHECKLIST

I, _________________ , am a member of the American Academy of Actuaries. I hereby

attest that:

(I) I am a member ofthe American Academy of Actuaries, in good standing, and have the education and

experience necessary to prepare the rates proposed in this filing;

(2) to the best of my knowledge and belief, this rate filing conforms to all of the applicable requirements

(3) this filing contains no provision(s) previously disapproved or required to be corrected by the Louisiana

Department of Insurance;

(4) the methods, procedures, assumptions, and data used are provided with sufficient clarity that another

actuary can make an objective appraisal of the reasonableness of the rates developed;

(5) the proposed rates comply with all of the applicable provisions of state and federal law, rules, and

regulations; and

(6) the proposed rates were developed in accordance with the appropriate Actuarial Standards of practice and the profession ' s Code of Professional Conduct.

outlined above;

Signature of Qualified Actuary _______________ _

Date _______________ _

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