7 - State Rating Bureau
The mission of the State Rating Bureau (SRB) consists of three primary functions:
- Monitoring insurance markets
- Developing technical reports and analyses for the Commissioner on emerging trends in support of the Division's regulatory responsibilities
- Reviewing policy forms, rules and rates filed by or on behalf of insurance companies to ensure that insurance coverage and rating practices are actuarially sound, comply with all laws and fair to consumers
The Bureau includes three major subdivisions - the Bureau of Managed Care, the Health Care Access Bureau, and the Policy Form Review Section. The State Rating Bureau participates on behalf of the Commissioner in numerous intra-governmental and public policy groups to evaluate policy options. The Bureau works closely with the Division's legal staff to develop regulatory guidance that clarifies rating and policy requirements. The Bureau communicates rate filing procedures through filing guidance letters, and assists in the development of guides and alerts that explain features of various insurance products to consumers.
7.2 2009 Goals
|•||Continue to facilitate the implementation of the reformed market for private passenger auto insurance by establishing guidelines that promote the entrance of new company entrants and a wider diversity of products and rates that improve the availability of choices for Massachusetts consumers.|
|•||Coordinate the Division's efforts to implement health insurance reform as identified in Chapter 58 of the Acts of 2006 and related statutes.|
Evaluate the market for small group health insurance, conduct examinations to evaluate the factors underlying the recent increases in small group premiums and propose policy options in conjunction with other state agencies to address the factors leading to increasing costs.
|•||Regulate insurance policy forms, rates and programs. Take steps to revise regulatory processes - including transition to electronic systems such as the System for Electronic Rate and Form Filing (SERFF) and Electronic Funds Transfer (EFT) - to promote more efficient and effective business practices and communications with consumers. These efforts are intended to reduce the average reviewing time for policy, form and rate filings to 120 days or less.|
7.3 Primary Activities
As the technical advisor to the Commissioner, the work of the State Rating Bureau covers many different areas of the insurance marketplace. In 2009, the State Rating Bureau performed reviews and analyses in the following areas of insurance:
- Private Passenger Automobile
- Workers' Compensation
- Medical Malpractice
- Policy Form Review
7.31 Private Passenger Automobile
Private passenger motor vehicle insurance accounted for over $3.7 billion in Massachusetts written premium dollars in calendar year 2008 - this is over twice the level of premiums collected for any other line of property and casualty insurance.
The State Rating Bureau is responsible for:
- Monitoring the market's transition to competitive rate regulation
- Monitoring the activities of the residual market administered through Commonwealth Automobile Insurers
- Reviewing all company and CAR form, rule and rate filings
- Reviewing statistical plan filings
Transition to Competitive Rate Regulation
Since the move to managed competition in the private passenger automobile insurance market on April 1, 2008, 11 new insurance companies have started writing private passenger auto insurance. Seven of these companies market their products through independent agents.
In order to review the impact of the changes on consumers over the first year, the Division commissioned a study measuring such variables as premium levels and consumer attitudes and experiences with the new system of purchasing automobile insurance. The study covers the time period from April, 2008, to April, 2009.
The survey included nine focus groups with consumers held around the Commonwealth, a preliminary survey of 1,100 consumers, a comprehensive 30-minute survey of more than 4,500 drivers and one-on-one interviews with over 50 insurance agents and executives. Minorities and drivers in urban areas were over-sampled to ensure that their experiences were accurately reflected and then weighted to represent their overall incidence on the insured driving population. The results, which are statistically valid and reliable with a confidence rate of 95 percent, documented a series of positive results.
Most consumers maintained their level of coverage when renewing their insurance policies. Those who changed their level of coverage were twice as likely to increase as to decrease their coverage levels. Many insureds opted to reinvest some of their premium savings into additional insurance coverage. African-American, Hispanic and Asian drivers were more likely than the overall population to increase their level of coverage.
Among the other findings:
- Sixty-nine percent of consumers continue to purchase coverage through agents, rather than purchase directly. This number is nearly twice the national average.
- Forty-two percent of the consumers surveyed were more satisfied with the auto insurance market in Massachusetts than a year ago and only 3 percent were less satisfied.
- Under the new system, 87 percent more agencies are representing four or more companies, whereas under the old system many agencies represented only one or two insurance companies - this makes it easier for consumers to shop for the best policy at the lowest price for their needs.
- Approximately three out of four consumers indicated that they were aware of the new auto insurance system, and those who were aware were 60 percent more likely to have saved money than those who were not aware. Satisfaction levels measured by the survey were consistent across ethnicity, income, and place of residence.
- Approximately 53% of consumers said competitive pricing was fairer to consumers, compared to 5% who believed it was less fair.
Not all consumers availed themselves of the new system in the first year. Some believed shopping around would be time-consuming; they were skeptical that they would save money; they found it difficult to compare insurance policies from different companies; and, they believed they could not change insurance carriers before a policy had expired.
Overall, the study showed positive results for most Massachusetts drivers, but also highlighted that more outreach and education needs to be done to continue to afford all consumers the benefits of managed competition.
During 2009, State Rating Bureau and Legal Division staff worked closely to establish transparent regulatory policies to guide company practices in rating and underwriting. The Division issued regulation 211 CMR 97.00 regarding motor vehicle cancellation and non-renewal practices, and revised the requirements in regulation 211 CMR 94.00 regarding motor vehicle pre-insurance inspections.
The State Rating Bureau continued to work on consumer outreach to help maximize the benefits of competition in the market. The Division issued an Auto Insurance Consumer Bill of Rights, and numerous consumer alerts regarding new product options.
Residual Market Reform
The final year of transition to an assigned risk plan for the residual market began on April 1, 2009. In 2009, the residual market declined from 3.5% of the total market to 2.7% based on results through November 30.
The State Rating Bureau reviewed numerous proposed changes to the MAIP rules of operation to identify their impact on both the industry and consumers. Staff also worked closely with CAR to promulgate and communicate recent MAIP rule changes designed to ease the transition for specific insurance producers, and assisted in the preparation of a report to the Legislature concerning the effects of this transition on insurance producers.
Form, Rate and Rule Filings
All insurer rate and rule filings are reviewed by the Bureau prior to being placed on file to ensure compliance with all state laws and Division Bulletins. All companies are required to provide actuarial support for any change to base rates or other rating factors.
For policies with effective dates of April 1, 2009 through March 31, 2010, Division Bulletin 2008-11 required insurers to offer policy premiums for the minimum insurance coverage required by law that is less than or equal to the premium available through the residual market. This means that the premiums calculated from an insurer's filed rates and rating factors must produce a premium that is less than or equal to the premium calculated using the residual market's rates and rating factors. No company filed rates that produce policy premiums in excess of the residual market threshold for the minimum insurance coverage required by law.
For policies with effective dates of April 1, 2009 - March 31, 2010, insurers were first permitted to revise rating territory relativities in the calculation of premiums in the voluntary market. Rating territory relativity measures the percentage by which the average claim cost per insured car is higher or lower than the company's average cost per insured car. No insurer filed changes in excess of 10% during 2009, and many did not revise these relativities at all.
The chart below shows an index that reflects the maximum, minimum, and median change in premium for select cities and towns during 2009 that is attributable to changes in rating territory relativities made by the eight largest insurers. The premium change being measured is for a single operator, licensed 6 years with a clean driving record, on a vehicle that carries mostly minimum liability limits and no physical damage. The base index (1.00) is the change in premium for the city of Worcester. An index of .97 means the average premium change for the policy described above changed by 3% less than the change observed for the same policy in Worcester. Similarly, an index of 1.03 for a given town means that the average premium change for the policy was 3% higher than the change observed for the same policy in Worcester.
The chart illustrates how the median premium change in 2009 rate filings from the eight largest insurers remained virtually flat for communities across the Commonwealth. The handful of communities with the largest median increases only saw an increase of 2% in the average premium compared to the benchmark change in premium for Worcester. This flat median index applies to urban as well as rural areas, indicating that no single type of community was targeted with large increases or decreases.
In addition, a spread between minimum and maximum changes in premium from company to company exists in nearly all of the communities. This means that no matter where one lives, there is likely a benefit to shopping around for the lowest price. While companies did vary their rates, the spread between minimum and maximum changes was limited to a relatively narrow band of 10% or less. These results paint the picture of a stable market for private passenger automobile insurance without geographic pockets of unprofitability that might result in volatile rate changes.
7.32 Health Insurance
Bureau of Managed Care
The Bureau of Managed Care (BMC) reviews health insurance company materials to determine whether their operations satisfy managed care protections required under M.G.L. c. 176O. These protections include those related to:
- Consumer Disclosures
- Evidences of Coverage
- Provider Contracts
- Network Directories
- Utilization Reviews
- Quality Assurance and Credentialing
- Internal Appeals Systems
In addition, the Bureau of Managed Care advises the Commissioner on emerging issues associated with health reform, company operations and administrative practices, managed care practices, and mandated health benefits.
Health Maintenance Organizations (HMO) provide the vast majority of all insured health plan coverage in Massachusetts. More than 2 million people receive health care coverage through an HMO plan from one of 10 companies. Relative market share during the 3 rd quarter of 2009 is shown by the chart to the right.
Managed Care Accreditation Reviews
The BMC is responsible for conducting a comprehensive review of all insured health plans with managed care systems every two years to determine compliance with the requirements of M.G.L. c. 176O. Companies that are not accredited are not permitted to manage care in Massachusetts. In the last review in 2008, the BMC completed the re-accreditation of 37 existing health insurance companies; the next review is scheduled to begin in July 2010. During 2009, the BMC completed the initial accreditation review of one company new to the market CeltiCare Health Plan of Massachusetts, Inc.
In addition, the BMC completed the review of 619 filings that were material changes to already completed accreditation filings. Most of the materials submitted were changes to existing health insurance evidences of coverage. As of January 1, 2009, carriers were required to submit all material changes via SERFF (System for Electronic Rate and Form Filing). The change from manual reporting to SERFF reporting may account for an apparent decrease in filings reviewed for the year.
During 2009, the BMC coordinated many of the Division's efforts to implement health reforms and mandates. The BMC worked closely with other state agencies - including the Commonwealth Health Insurance Connector Authority, Department of Public Health, Department of Mental Health, and the Executive Office of Health and Human Services - to revise regulations and develop bulletins and guidelines to assist consumers and insurance carriers in complying with the new policies.
Changes to both the state and federal requirements for mental health parity in 2009, the BMC worked closely with the Department of Mental Health (DMH) and the Department of Public Health's Office of Patient Protection (OPP) to develop a bulletin to explain the impact of the mental health parity laws. In addition, the Division and DMH issued a bulletin to provide guidance on mandated coverage for intermediate behavioral health services provided on other than an inpatient or outpatient basis.
Advisory Committee on Uniform Billing and Coding
The BMC coordinated meetings of the Advisory Committee on Uniform Billing and Coding. Representatives from local providers and payers make up this committee that is charged with providing recommendations to the BMC for the adoption of policies and procedures on uniform billing and coding of health claims. The advisory committee will hold additional meetings in 2010 to implement the recommendations and to make recommendations for future actions.
BMC staff investigated a company soliciting "too-good-to-be-true" health coverage via fax machine that was only available for a limited period of time. It became clear that the company operated under many different names and changed its phone number every few weeks. The BMC worked closely with the Legal Division to develop a "cease and desist" order to enjoin this company from soliciting business in Massachusetts.
The BMC also investigated a company offering coverage in the small group health insurance market that appeared to misrepresent the insurance features of the coverage, and lead certain employers to discriminate in the offer of coverage based on health condition. This type of discrimination is not permitted under federal law. The case was assigned to investigators both at the Division and at the federal Department of Labor.
The BMC also worked closely with the Attorney General's Office to develop ways to deal with unlicensed health plans and discount health plans. The Division and the Attorney General's Office issued parallel consumer alerts on this area of concern.
Health Care Access Bureau
In 2006, Massachusetts enacted a comprehensive health reform law in an effort to expand access to affordable health insurance. Chapter 58 of the Acts of 2006, The Massachusetts Health Reform Law, mandates that residents maintain an adequate level of health coverage - called minimum creditable coverage - or face significant tax penalties.
The Health Care Access Bureau (HCAB) is responsible for monitoring the market for health insurance coverage - concentrating on the availability and affordability of coverage. Members of HCAB represent the Commissioner on a number of health insurance committees and task forces, including:
- Health Care Quality and Cost Council
- HealthyMass Compact
- Interagency Analytic Work Group
- Long-Term Care Financing Advisory Committee
During 2009, the HCAB worked actively with the Bureau of Managed Care and with other state agencies, including the Executive Office of Health and Human Services, the Connector, and the Division of Health Care Finance and Policy, to implement reforms created under Chapter 58 of the Acts of 2006 and Chapter 305 of the Acts of 2008 and to examine ways to address health care cost and quality concerns.
Access: Merger of Small Group/Individual Markets
One pillar of Chapter 58 was the July 1, 2007 merger of the small group and individual markets and development of Young Adult Plans to provide more coverage options for individuals in Massachusetts. The HCAB examined the number of people covered in individual plans before and after the merger and found that coverage in individual health plans increased by 33,031 from 2006 to 2008.
Settlement with HealthMarkets
In late August, the Division reached an agreement with HealthMarkets, Inc. (the parent company of MEGA Life and Health Insurance Company and Mid-West National Insurance Company of Tennessee) calling for the company to cease writing any new health insurance coverage in Massachusetts after September 30, 2009. The company would begin non-renewing the existing 27,000 covered members shortly after ceasing sales. Under this agreement, HealthMarkets agreed to pay $2 million to the Commonwealth.
The Division has closely monitored HealthMarkets' actions over the past two-and-a-half years under an agreement signed in December 2006, which included the $850,000 in claim payments. Under the new agreement, HealthMarkets has agreed to reconsider additional claims denied up through August 2009, giving its customers the potential for reimbursement for previously denied claims.
Informational Hearings on Small Employer Rate Increases
During the first quarter of 2009, Governor Patrick requested that the Division of Insurance investigate the reasons underlying the rising cost of health coverage impacting Massachusetts' small businesses. The Division initiated a special examination permitting the Health Care Access Bureau's actuary to explore the methods by which the state's HMOs:
- Evaluate historical claims experience
- Project future price and utilization trends
- Develop administrative expense and contribution to surplus factors in calculating their small group health insurance rates
On October 20, 2009, among other actions, Governor Patrick directed the Division to schedule informational hearings to examine health premium increases, concentrating on the small group market and actions that companies are taking to address costs. The Division invited each small group health carrier, as well as hospitals and provider groups, to come to these hearings to explain their own systems and the reasons their prices were increasing.
The Division held Introductory Hearings in the first week of November in Lowell, Springfield, Boston, Bridgewater and Worcester to listen to public comments on the questions upon which it should concentrate. In the next seven weeks, the Division instructed the 10 health carriers participating in Massachusetts's small group health insurance market to respond to a series of questions regarding a range of issues
The Division invited each of the state's hospitals and health care provider trade associations to attend hearings and provide testimony. Material presented will be used by the Health Care Access Bureau to report on the findings of the hearings with policy options to address ongoing inefficiencies in the marketing and delivering of health benefits.
Special Sessions on Group Health Insurance Cooperatives
On October 19, 2009, Governor Patrick also directed the Division to schedule special sessions with stakeholders to discuss the development of open-access purchasing cooperatives for insured health coverage. The Governor noted that the creation of group purchasing cooperatives would allow small businesses and individuals to combine their purchasing power and seek out lower premiums. He directed that such cooperatives should not have membership restrictions and should be able to choose and sponsor their own health products and health promotion programs. The Division held six sessions and asked all interested parties to attend, as well as to forward any relevant materials to the Division by December 28 regarding their positions on group purchasing cooperatives.
At these sessions, sharp divisions developed between those representing small businesses and all other participants. While the small business community is eager to permit cooperatives to emerge in Massachusetts, there continued to be unified opposition to cooperatives from certain employer groups, health plans and health advocacy groups because of a concern that they will increase administrative costs, unfairly split the market between those who are healthy and the less healthy, and not bring down overall health costs. The Health Care Access Bureau is currently developing a report to summarize the proceedings so that policymakers may understands the positions of those in favor and opposed to this option.
Affordability: Actuarial Reports
Mercer Consulting conducted a 2009 update to a 2007 study that examined the features of health plans bought by large employers in Massachusetts. The consultants found that Massachusetts survey respondents are dropping closed network HMO plan options but have been slower to drop HMOs than respondents from the Northeast and the US as a whole.
Health Care Quality and Cost Council
Staff from the HCAB represented the Commissioner on the 14-member Health Care Quality and Cost Council created under Chapter 58. The Council is responsible for creating and maintaining a website that presents the cost of certain procedures by health care provider and for examining ways to improve quality and address increases in overall health care costs.
In 2009, Council activities focused primarily on the collection of claims data from all licensed health insurance plans, analyzing that data and developing a website that illustrates the relative quality and cost of receiving a procedure, supply or service from one health care provider as opposed to another. The Council also completed and released its Roadmap to Cost Containment report, which outlines 11 key strategies to contain cost growth in health care and improve the quality of health care. The website - http://hcqcc.hcf.state.ma.us - that was created and launched in 2008 continues to be updated periodically with new measures and refreshed data.
Long-Term Care Insurance:
Examination of Market for Coverage
HCAB staff completed a report that examined the market for long-term care insurance in Massachusetts in order to understand the products purchased in the individual and group markets, and the ways that carriers offer products in order to identify trends that may require action in the future. Among the findings of the report is that the number of Massachusetts residents with long-term care insurance coverage increased by 20.6% from 2004 to 2008.
Among group and individual coverage in Massachusetts, individual coverage increased slightly as a percentage of the total from 2004 to 2008, while group coverage decreased slightly as a percentage of the total from 2004 to 2008.
Between 2001 and 2008, the average premium for individual coverage in Massachusetts increased, while the average premium for group coverage in Massachusetts decreased for the same time period.
Long Term Care Insurance:
Standards Insurance Regulators Use to Review Filings
Over the past decade, the regulation of long-term care insurance rates has become increasingly difficult. Some insurance companies have been requesting large premium increases to fund the payment of future claims. In response to questions raised by consumers about differing ways that New England states review long-term care insurance rates, the Division commissioned Gorman Actuarial to survey 30 other state insurance regulators' processes to identify tools currently being used in reviewing rate filings. An electronic copy of the report is available in the Publications and Reports section of the Division's website: www.mass.gov/doi.
The report noted that the 30 states differ in their approach to reviewing filings, with the variations in rate filing review apparently being influenced by the state's size, insurance department resources, department policy and consideration of decisions made in other states. States that are more likely to deny or limit the level of rate increase refer to the following reasons when denying or reducing requested rate increases:
- Seven of the states have formal rate increase limits. Many also follow what other states approve and limit the rate increase approved so that they are not cross-subsidizing other states.
- A number of regulators do not want consumers to pay for incorrect assumptions the companies made when first setting rates. Some believe that long-term care insurance companies should absorb the risks involved when pricing a new product and others have not allowed rate increases to be based on changes to initial actuarial assumptions.
- Some states place more weight on a plan's current actual claims rather than on projected future claims. They indicated that they will not approve rate increases if a product is currently more profitable than was expected when rates were originally set.
- Many states consider the number of policies affected. If the number is small and has relatively little impact on an insurance company's bottom line, such states are more inclined to deny the rate increase.
- Many states will disapprove a requested increase if not enough time has passed since the last approved rate increase.
The report also noted that Massachusetts was one of the few states that had still not enacted the NAIC Model Act for Long-Term Care Insurance and that the authority granted under that act would improve the Division's power to review filings in a manner similar to what is done in other states. The Division's response to the Gorman report was to develop a Policy Filing Guidance to require long-term care insurance carriers to submit much more information with any rate increase filing, including a history of rate increases received from other states, so that this information may be used in the review.
7.33 Home Insurance
Home insurance covers the cost of damage to one's home, as well as personal liability claims that may be filed against the owner of the home. The State Rating Bureau is responsible for:
- Monitoring the market for coverage
- Reviewing the activities of the residual market administered through the Massachusetts Property Insurance and Underwriting Association (FAIR Plan)
- Reviewing all company and FAIR Plan form, rule and rate submissions
Commissioner's Report on Home Insurance
In 2009, State Rating Bureau staff completed a report (required under M.G.L. c. 175, §§ 4A and 4B) that examines the market for home insurance, the causes of home insurance loss, trends in cancellations/ non-renewals and emerging trends in the availability of coverage - especially in coastal areas. A copy is available in the Publications and Reports section of the Division's website www.mass.gov/doi.
Among the findings of the report is that the number of Massachusetts home insurance policies written between 2006 and 2008 increased by approximately 29,000 policies.
Among the three major types of coverage (condominium, homeowner's and tenant), the biggest relative change occurred in the market for tenant coverage, with 15,000 additional tenant policies written in 2008 compared to 2006.
Between 2006 and 2008, the average premium for tenant policies decreased, but the average premiums for condominium and homeowners insurance policies increased from $387 per policy to $425 per policy and from $954 to $1,065 per policy respectively.
Availability of Coverage
In Massachusetts, the FAIR Plan provides coverage for home insurance when a homeowner cannot locate coverage from licensed home insurance companies. Beginning in 2003, the number of policies covered under the FAIR Plan increased dramatically as licensed companies began nonrenewing their coastal exposures in the Cape, Islands and southern Bristol and Plymouth Counties. While the figure remains quite high, we believe we have seen the FAIR Plan's overall market share plateau. By the end of 2008, the FAIR Plan had decreased slightly from a high of 204,101 policies in 2007 to 201,348.
By the end of 2008, the FAIR Plan had proven to still be the largest home insurer, writing 15.4% of all 2008 home insurance premium in Massachusetts.
FAIR Plan Rate Hearing
On October 29, 2009, the FAIR Plan submitted a rate filing requesting new rates that would, on average, increase statewide homeowner multi-peril rates by 1.9%, without any changes to the rates in the Cape and Islands area. State Rating Bureau staff actively participated in the rate hearing that began on December 15, 2009 to consider the actuarial merits of the filed rates, cross-examining FAIR Plan witnesses, and participating in negotiations with the FAIR Plan to negotiate a settlement to the proceeding. On January 14, 2010, the Commissioner approved a stipulation agreed upon by the FAIR Plan, Attorney General's Office and the State Rating Bureau that resulted in nearly a 1% decrease for home insurance policies statewide. In addition to the statewide average decrease, the stipulation eliminated a proposed 2.4% increase for policies in the Cape and Islands.
In the preceding FAIR Plan rate hearing, the FAIR Plan submitted a rate filing on March 21, 2008, requesting an average increase of 13.2%, with a 25% rate increase for the Cape and Islands area. The Commissioner decided on May 8, 2008 that the MPIUA failed to meet its burden of proof in the proceeding and the request was disapproved. The chart in the margin chronicles the FAIR Plan rates changes from 1996 through the 2010 decision.
7.34 Workers' Compensation
Workers' compensation insurance covers lost wages, medical costs and rehabilitation costs associated with work related accidents or illnesses. With few exceptions, employers are required to purchase workers' compensation coverage for their employees.
SRB staff review all industry bureau and individual company rate, rule, and form filings - including rate deviation filings. The coverage and rates are established according to the processes established under M. G. L. c. 152. Industry filings are coordinated through the Workers' Compensation Rating and Inspection Bureau of Massachusetts (WCRIB) - an entity licensed as a Rating Organization under M. G. L. c. 174A. The WCRIB also acts as the Division's Statistical Agent and Pool Administrator.
The WCRIB made no changes to the industry-wide rates in 2009. Approximately 50 carrier groups submitted downward deviation filings to the 2008 rates in 2009, with over 20 individual companies offering discounts of at least 20%. Many companies also made individual filings of various non-standard rating plans, rules and forms. The SRB promulgated several bulletins affecting workers' compensation rate filings, including one regarding coverage to repatriate American workers hurt abroad. The following chart illustrates the history of industry-wide rate changes approved by the Division since 1994.
A survey by the Oregon Department of Consumer & Business Services published in March, 2009 compared average worker's compensation rates paid by employers in the most common industrial classifications. The results of this survey showed that the average premium paid by Massachusetts businesses was among the lowest in the nation - only Indiana and North Dakota had a lower index rate.
In addition, as can be seen from the calendar year information displayed below, in spite of the many rate reductions and downward company deviations over the last two decades, workers' compensation insurance continues to be profitable in Massachusetts.
Statistical Plan and Residual Market Changes
During 2009, the State Rating Bureau, in coordination with the WCRIB, worked out a number of simplifying revisions to the Massachusetts Statistical Plan, including one that eliminates the requirement that companies report estimates of "incurred but not reported" losses. Staff also worked out a data remediation plan for one of the state's largest carriers to ensure that the data used to determine appropriate industry-wide rates will be based on accurate loss and premium information. This company has now been approved by the Division to handle Pool as well as voluntary risks because of its marked improvement.
With assistance from the WCRIB staff, the SRB worked out a number of new reports that showed deficiencies in the reporting of data in connection with large deductible policies, and approved a number of changes to the manual of rules regarding retrospectively rated policies. The State Rating Bureau also assisted the WCRIB transition to a paperless rate and form filing system to go along with our year-old electronic Pool application system for residual market employers.
Monitoring the Workers' Compensation Residual Market
Workers' compensation companies are permitted to decline risks which then obtain coverage through the Massachusetts Workers' Compensation Assigned Risk Pool. The Division monitors whether companies are increasing the number of risks covered through the pool. In spite of regular rate reductions, the proportion has declined steadily since 2005.
7.35 Medical Malpractice Insurance
Medical malpractice insurance covers medical malpractice claims and the expenses associated with defending alleged medical malpractice. The State Rating Bureau is responsible for the following:
- Monitor the Market for Coverage
- Analyze and Collect Data
- Review the Activities of the Residual Market Pool
- Review all Company-filed Form, Rule and Rate Filings
For 2009, staff completed "Medical Malpractice Insurance in the Massachusetts Market 2008" report, which is available in the Publications and Reports section of the Division's website www.mass.gov/doi.
On December 30, 2008, Chapter 444 of the Acts of 2008 amended the medical malpractice statutes to require that medical malpractice coverage offered to physical therapists and physical therapist assistants be available on a "take-all-comers" basis beginning March 30, 2009. A list of licensed companies writing physical therapists and physical therapist assistants as well as other categories of health care providers on a "take all comers" basis can be found on the Division's website.
7.36 Life Insurance
The Division issued two bulletins during the past year to clarify coverage for life insurance policies.
Discretionary Group Life Insurance - Bulletin 2009-07
Prior to the issuance of this bulletin, life insurance companies in Massachusetts were only permitted to offer policies on an individual basis or through employer or other groups permitted under group insurance laws. This bulletin established filing requirements for products to be offered to discretionary groups which would be considered provided that the Division deems that offering coverage through such discretionary group would:
- Not be contrary to the best interests of the public
- Result in economies of acquisition or administration
- Offer benefits that are reasonable in relation to the premiums charged
The Division identified that a discretionary group would satisfy the above criteria provided that:
- Discretionary group members have group conversion rights if a member leaves or is no longer eligible for the discretionary group or if the discretionary group terminates; and,
- The group is one of the classes of groups outlined in the bulletin that pertained to classes of plaintiffs, groups of independent contracts, members of a credit union, groups of former employees of an employer, or the trustees of any charitable or religious association.
Carriers are permitted to file other groups for consideration on a case-by-case basis.
War Exclusions within Life Insurance - Bulletin 2009-10
This bulletin clarifies that the limitation on war exclusions within life insurance policies applies to persons other than those known to be members of the armed services. Policies held by members of the military are subject to a different set of regulatory standards under 211 CMR 27.00 (Military Sales Practices). This bulletin defines war as a "declared war, and armed aggression by one or more countries resisted on orders of any other country, combination of countries or international organization" and it limits all exclusions related to war to a cause of "death while the insured is serving in the military, or within six months after termination of service in the military forces."
7.37 Credit Insurance
Credit insurance is offered with many non-mortgage loans and credit card applications. Depending on the coverage, these products will pay all or some portion of outstanding loan balances in the event of the death, disability or involuntary unemployment of the covered person. Insurance companies offering these policies must issue special disclosures that make the covered persons aware that they are not required to purchase the coverage to obtain the loan or credit. Insurers must also comply with special statutory loss ratio requirements.
The Division compiled an annual report on credit insurance based upon information submitted annually by the individual carriers. In the course of reviewing the data, the State Rating Bureau determines whether companies continue to satisfy the statutorily required minimum loss ratio for credit life (50%), credit accident and sickness (55%), and credit involuntary unemployment insurance (60%).
Based upon this review, State Rating Bureau staff contacted companies whose rates fell below the those statutory minimums to revise their premiums. The charts in the margin illustrate the number of rate deviations filings received during 2009, highlighting the number who changed their rates because their loss ratios fell below the statutory minimum.
In general, the level of coverage issued in Massachusetts has continued to drop as other non-insurance debt relief products ( e.g., debt cancellation products) are available from banking institutions. Between 2006 and 2008, total reported incurred credit insurance premium for Massachusetts fell from $38 to $28 million as shown below.
7.38 Policy Form Review
The Policy Form Review Section is responsible for reviewing property & casualty, life & annuity, and accident & sickness filings made by insurance companies to ensure they are consistent with Massachusetts laws. The focus of these reviews is on consumer protection, adequate reserving for claims, and justification of rates.
Based on changes made, as well as bulletins and guidelines issued in 2008, Policy Form Review has been able to better manage workflow, increase productivity, and manage reporting more accurately. Submissions are now received exclusively through the System for Electronic Rate and Form Filing (SERFF), a national platform developed by the NAIC. The Division also now uploads filings that we are obligated to maintain under the public records law into SERFF, eliminating the time consuming process of finding a paper record of something that may have come into the Department years previously. SERFF also allows for more flexible reporting, having several built-in reports, as well as ad hoc reporting capabilities. This change has had a massive impact on the way that the Unit handles its workload.
Another change made due to the move to SERFF is the reporting of review time. Under the previous system, times reported were based only on the time that the unit actively reviewed a filing. Since SERFF provides a seamless, real time review process, there is no differentiation between when a filing is with a reviewer and when it is with a filer. In order to provide some continuity in reporting, the 60 day time service traditionally reported was expanded to include an additional 60 days for the filer to complete their revisions. Several months of parallel reporting showed that these numbers were statistically comparable.
In addition to adopting SERFF for managing filings, the Division issued Bulletin 2008-19, clarifying the Division's fee structure. The Bulletin addressed what appeared to be an inconsistency between the way that various filers in different lines of business were paying fees to have their filings reviewed. Life Insurers, Individual Health Insurers, and Property and Casualty Insurers were all approaching their fee obligations differently, and the Bulletin was an effort to make those obligations clear and consistent across business lines. As a result, revenues from Policy Form Review fees increased from $677,562.00 in 2008 to $1,148,325.00 in 2009, an increase of 69.5%.
File Scanning Project
In 2009, the Unit undertook a project to scan all existing paper filings - both those pending review and those that the unit was required to maintain under Massachusetts' public records laws. The Division applied for and received approval for an electronic storage plan and permission to destroy our paper records once the upload was completed. Policy Form Review staff scanned and uploaded into SERFF approximately 1.2 million pages of data, representing close to 600 storage boxes of material. This data is now permanently housed in the SERFF databases, managed at no cost to the state by the NAIC. The effort to complete this project did have a modest affect on time service deadlines, particularly towards the end of the year, but this impact will abate now that the project is complete.
Additional Product Review
In addition to the review of policy form, rate and rule filings, the Unit reviews group marketing programs. The Division approved nearly 2,900 private passenger auto insurance group marketing plans and over 50 installment plans for use as of the end of 2009. These group marketing plans and installment plans are available to almost seven million eligible members; however, drivers can belong to multiple groups. The Division approved over 1,500 group marketing plans for home insurance in 2009.