Section 5: Filing of rates; determination of average composite rate; review of filings
Section 5. (a) (1) No later than seventy-five days after the commissioner has approved the standard benefits plans pursuant to section two and no later than May first of each year thereafter, each carrier shall submit a nongroup rate filing to the commissioner. Each carrier shall also submit a copy of its nongroup rate filing to the nongroup health insurance advisory board. The board may include information from nongroup rate filings in its annual consumer's guide.
(2) Nongroup rate filings shall contain the following information:
(i) the base premium rate to be charged within each rate basis type for each guaranteed issue health plan and for each closed plan;
(ii) the age, geographic and benefit level adjustments to be charged within each rate basis type for each guaranteed issue health plan and for each closed plan.
(iii) the composite rate for each guaranteed issue health plan;
(iv) the adjusted composite rate for each guaranteed issue health plan and documentation reasonably necessary to substantiate the adjustments made;
(v) a memorandum signed by an actuary certifying that the rates for each guaranteed issue health plan have been developed in accordance with section four, including the rate bands and multipliers specified therein and that the proposed rates are reasonable in relation to the benefits provided;
(vi) for each guaranteed issue health plan and each closed plan, the actual loss ratio for the previous year and the projected loss ratios for the present year and the year for which the rate is being filed. Loss ratio shall be defined as the ratio of the incurred costs for hospital, medical or health care services for the relevant period to the premium earned for that same period;
(vii) a comparison of current and proposed rates for each guaranteed issue health plan which shows premium cost components, including but not limited to the cost of prescription drugs administered on an outpatient basis, stated as a percentage of premium;
(viii) a copy of its annual report; and
(ix) for the filing in calendar year nineteen hundred and ninety-seven only, the total number of insured, the total number of policies issued, the total number of policies issued within each rate basis type, and the rates charged for each closed plan offered by the carrier as of August fifteenth, nineteen hundred and ninety-six.
(b) No later than forty-five days after carriers are required to submit their nongroup rate filings, the commissioner shall determine the average adjusted composite rate for each type of guaranteed issue health plan. The commissioner shall determine whether the adjusted composite rate filed by each carrier exceeds the average adjusted composite rate for that type of guaranteed issue health plan by more than two standard deviations. Carriers shall submit data reasonably necessary to substantiate the adjustments made. For purposes of this chapter, standard deviation shall be defined as the square root of the average of the squares of the differences between each adjusted composite rate and the average adjusted composite rate. The commissioner shall also examine the design of the benefits of each guaranteed issue health plan to determine if it complies with applicable laws and regulations and to determine whether its design may have the effect of minimizing the number of eligible individuals who will enroll in said plan. The commissioner shall also determine the average rate of closed plans in effect as of August fifteenth, nineteen hundred and ninety-six. The commissioner shall report this average rate to the board created under section seven.
(c) If a filing is the carrier's initial filing for a newly offered guaranteed issue health plan and if the adjusted composite rate for said plan exceeds the average adjusted composite rate for such type of plan by more than two standard deviations then the filing shall be subject to further review pursuant to subsection (e). No later than forty-five days after the date upon which the carriers are required to submit their initial filing of the rates for a newly offered guaranteed issue health plan after August fifteenth, nineteen hundred and ninety-six under subsection (a) and no later than June fifteenth of each year thereafter, the commissioner shall notify such carrier in writing that the filing is subject to further review pursuant to said subsection (e). No filing shall be subject to further review pursuant to said subsection (e) unless the commissioner has sent the notice required under this subsection within forty-five days of the date that the carriers are required to submit their rates under subsection (a) in the first year or by said June fifteenth of each year thereafter.
(d) In the case of a filing for an existing guaranteed issue health plan, if the adjusted composite rate for said plan exceeds the average adjusted composite rate for such type of plan by more than two standard deviations and the proposed composite rate also exceeds one hundred and ten percent of the carrier's current composite rate for such plan, then no later than said June fifteenth of each year, the commissioner shall notify such carrier in writing that the filing is subject to further review pursuant to subsection (e). No filing shall be subject to further review pursuant to said subsection (e) unless the commissioner has sent the required notice on or before said June fifteenth.
(e) If a carrier's rate filing for a guaranteed issue health plan is subject to further review pursuant to subsection (c) or (d), then the commissioner shall give the carrier twenty-one days to submit additional evidence that shows either that the rate filed is reasonable in relation to the benefits provided, or that its adjusted composite rate would not have exceeded the average adjusted composite rate for that type of guaranteed issue health plan by more than two standard deviations if its adjusted composite rate had been further adjusted for the case mix of persons insured in that carrier's nongroup health plans in operation as of August fifteenth, nineteen hundred and ninety-six, whom the carrier anticipates will be covered in its guaranteed issue health plan during the period of the proposed rates. The case mix adjustment shall be based upon the diagnosis related group grouper selected by the center for health information and analysis established under chapter 12C and associated diagnosis related group weights calculated from Massachusetts data, and shall measure the differential case mix compared to the case mix of all privately insured persons discharged from hospitals from the commonwealth, as determined by said center of health care finance and policy. The commissioner shall have the authority to review and make any necessary changes to this methodology to ensure that the methodology used is consistent with the most current knowledge and methodologies used for such purposes. The commissioner shall have the authority to request that the carrier submit additional information reasonably necessary to make his determination. The commissioner shall have the authority to conduct an informational public hearing if he deems it reasonably necessary to make his determination. No later than ten days after the commissioner has received further information from the carrier, the commissioner shall make a written determination (1) as to whether the adjusted composite rate filed, further adjusted for case mix if the carrier so proposes, would not have exceeded the average adjusted composite rate for that type of guaranteed issue health plan by more than two standard deviations or (2) in the case of an adjusted composited rate that exceeds the average adjusted composite rate by more than two standard deviations either because the rate, although further adjusted for case mix would still have exceeded the two standard deviation test or because the carrier dose not propose an adjustment for case mix, as to whether the rate filed is reasonable in relation to the benefits provided. If the commissioner determines either that the adjusted composite rate, further adjusted for case mix, would not have exceeded the average adjusted composite rate for that type of guaranteed issue health plan by more than two standard deviations under clause (1) of the preceding sentence or that the rate is reasonable under clause (2) of the preceding sentence, he shall notify the carrier that the rate is approved. If the commissioner determines that the adjusted composite rate or that rate further adjusted for case mix, if the carrier so proposes, would have exceeded the average adjusted composite rate for that type of guaranteed issue health plan by more than two standard deviations and that the rate is not reasonable, he shall notify the carrier that the rate is disapproved and that the carrier has the right to request an adjudicatory hearing pursuant to chapter thirty A within twenty-one days of the commissioner's decision. Said hearing shall be conducted within thirty days of the carrier's request. The commissioner shall issue a written decision within thirty days of the conclusion of the hearing. The rate shall be effective not earlier than thirty days subsequent to the commissioner's written decision. A carrier aggrieved by said written decision may, within twenty days of said decision, file a petition in the supreme judicial court for Suffolk county for a review of such decision. Review by the supreme judicial court on the merits shall be limited to the record of the proceedings before the commissioner and shall be based upon the standards set forth in paragraph (7) of section fourteen of chapter thirty A.
(f) A carrier whose rate filing is subject to further review or who has exercised its right to an administrative hearing shall, for purposes of section two, be deemed to be offering guaranteed issue health plans and shall be allowed to continue to offer health benefit plans to eligible small businesses, provided that it is exercising good faith in its participation in said further review or hearing.
(g) A carrier whose initial rate filing is subject to further review or who has exercised its right to a hearing may implement an interim composite rate no greater than the average proposed composite rate, provided that it is exercising good faith in its participation in said further review or hearing.
(h) The commissioner shall promulgate regulations to enforce this section.
(i) Nothing in this section shall be construed to limit the commissioner's authority to disapprove rates pursuant to chapter one hundred and seventy-five, one hundred and seventy-six A, one hundred and seventy-six B, one hundred and seventy-six G, or one hundred and seventy-six I.