1.1 	A bill for an act
1.2 	relating to insurance; regulating the filing and use of individual health insurance 
1.3 	policy forms; establishing a minimum loss ratio guarantee; amending Minnesota 
1.4 	Statutes 2004, sections 62A.02, subdivision 3, by adding a subdivision; 62A.021, 
1.5 	subdivision 1.
1.6 	BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:

1.7 	Section 1. Minnesota Statutes 2004, section 62A.02, subdivision 3, is amended to read:
1.8 		Subd. 3.Standards for disapproval.  The commissioner shall, within 60 days after 
1.9 	the filing of any form or rate, disapprove the form or rate:
1.10 	(1) if the benefits provided are not reasonable in relation to the premium charged;
1.11 	(2) if it contains a provision or provisions which are unjust, unfair, inequitable, 
1.12 	misleading, deceptive or encourage misrepresentation of the health plan form, or otherwise 
1.13 	does not comply with this chapter, chapter 62L, or chapter 72A;
1.14 	(3) if the proposed premium rate is excessive or not adequate; or
1.15 	(4) the actuarial reasons and data submitted do not justify the rate.
1.16 	The party proposing a rate has the burden of proving by a preponderance of the 
1.17 	evidence that it does not violate this subdivision.
1.18 	In determining the reasonableness of a rate, the commissioner shall also review 
1.19 	all administrative contracts, service contracts, and other agreements to determine the 
1.20 	reasonableness of the cost of the contracts or agreement and effect of the contracts on the 
1.21 	rate.  If the commissioner determines that a contract or agreement is not reasonable, the 
1.22 	commissioner shall disapprove any rate that reflects any unreasonable cost arising out 
1.23 	of the contract or agreement.  The commissioner may require any information that the 
1.24 	commissioner deems necessary to determine the reasonableness of the cost.
2.1 	For the purposes of this subdivision, the commissioner shall establish by rule a 
2.2 	schedule of minimum anticipated loss ratios which shall be based on (i) the type or types 
2.3 	of coverage provided, (ii) whether the policy is for group or individual coverage, and 
2.4 	(iii) the size of the group for group policies. Except for individual policies of disability 
2.5 	or income protection insurance, the minimum anticipated loss ratio shall not be less 
2.6 	than 50 percent after the first year that a policy is in force.  All applicants for a policy 
2.7 	shall be informed in writing at the time of application of the anticipated loss ratio of the 
2.8 	policy.  "Anticipated loss ratio" means the ratio at the time of filing, at the time of notice 
2.9 	of withdrawal under subdivision 4a, or at the time of subsequent rate revision of the 
2.10 	present value of all expected future benefits, excluding dividends, to the present value 
2.11 	of all expected future premiums. When determining a loss ratio for the purposes of loss 
2.12 	ratio guarantee, the insurer shall divide the total of the claims incurred, plus preferred 
2.13 	provider organization expenses, case management, and utilization review expenses, plus 
2.14 	reinsurance premiums less reinsurance recoveries by the premiums earned less state and 
2.15 	local taxes less other assessments.
2.16 	If the commissioner notifies a health carrier that has filed any form or rate that it 
2.17 	does not comply with this chapter, chapter 62L, or chapter 72A, it shall be unlawful for 
2.18 	the health carrier to issue or use the form or rate.  In the notice the commissioner shall 
2.19 	specify the reasons for disapproval and state that a hearing will be granted within 20 days 
2.20 	after request in writing by the health carrier.
2.21 	The 60-day period within which the commissioner is to approve or disapprove the 
2.22 	form or rate does not begin to run until a complete filing of all data and materials required 
2.23 	by statute or requested by the commissioner has been submitted.
2.24 	However, if the supporting data is not filed within 30 days after a request by the 
2.25 	commissioner, the rate is not effective and is presumed to be an excessive rate.

2.26 	Sec. 2. Minnesota Statutes 2004, section 62A.02, is amended by adding a subdivision 
2.27 	to read:
2.28 		Subd. 3a.Individual policy forms file and use; minimum loss ratio guarantee.
 2.29 	(a) Notwithstanding subdivisions 2, 3, 4a, 5a, and 6, premium rates may be used upon 
2.30 	filing with the department of an individual policy form if the filing is accompanied by the 
2.31 	individual policy form filing and a minimum loss ratio guarantee.  Insurers may use the 
2.32 	filing procedure specified in this subdivision only if the affected individual policy forms 
2.33 	disclose the benefit of a minimum loss ratio guarantee.  Insurers may amend individual 
2.34 	policy forms to provide for a minimum loss ratio guarantee.  If an insurer elects to use the 
2.35 	filing procedure in this subdivision for an individual policy form or forms, the insurer shall 
3.1 	not use a filing of premium rates that does not provide a minimum loss ratio guarantee 
3.2 	for that individual policy form or forms.
3.3 	(b) The minimum loss ratio must be in writing and must contain at least the 
3.4 	following:
3.5 	(1) an actuarial memorandum specifying the expected loss ratio that complies with 
3.6 	the standards as set forth in this subdivision;
3.7 	(2) a statement certifying that all rates, fees, dues, and other charges are not 
3.8 	excessive, inadequate, or unfairly discriminatory;
3.9 	(3) detailed experience information concerning the policy forms;
3.10 	(4) a step-by-step description of the process used to develop the experience loss 
3.11 	ratio, including demonstration with supporting data;
3.12 	(5) guarantee of specific lifetime minimum loss ratio that must be greater than or 
3.13 	equal to the following, taking into consideration adjustments for duration:
3.14 	(i) 65 percent for policies issued to individuals or for certificates issued to members 
3.15 	of an association that does not offer coverage to small employers;
3.16 	(ii) 65 percent for policies issued to small groups of two to ten employees or for 
3.17 	certificates issued to members of an association that offers coverage to small employers; 
3.18 	and 
3.19 	(iii) 70 percent for policies issued to small groups of 11 to 50 employees;
3.20 	(6) a guarantee that the actual Minnesota loss ratio for the calendar year in which the 
3.21 	new rates take effect, and for each year thereafter until new rates are filed, will meet or 
3.22 	exceed the minimum loss ratio standards referred to in clause (5), adjusted for duration;
3.23 	(7) a guarantee that the actual Minnesota lifetime loss ratio shall meet or exceed the 
3.24 	minimum loss ratio standards referred to in clause (5); and 
3.25 	(8) if the annual earned premium volume in Minnesota under the particular policy 
3.26 	form is less than $2,500,000, the minimum loss ratio guarantee must be based partially on 
3.27 	the Minnesota earned premium and other credible factors as specified by the commissioner.
3.28 	(c) The actual Minnesota minimum loss ratio results for each year at issue must 
3.29 	be independently audited at the insurer's expense and the audit must be filed with the 
3.30 	commissioner not later than 120 days after the end of the year at issue.
3.31 	(d) The insurer shall refund premiums in the amount necessary to bring the actual 
3.32 	loss ratio up to the guaranteed minimum loss ratio.
3.33 	(e) A Minnesota policyholder affected by the guaranteed minimum loss ratio shall 
3.34 	receive a portion of the premium refund relative to the premium paid by the policyholder. 
3.35 	The refund must be made to all Minnesota policyholders insured under the applicable 
3.36 	policy form during the year at issue if the refund would equal $10 or more per policy.  The 
4.1 	refund must include statutory interest from July 1 of the year at issue until the date of 
4.2 	payment.  Payment must be made not later than 180 days after the end of the year at issue.
4.3 	(f) Premium refunds of less than $10 per insured must be aggregated by the insurer 
4.4 	and paid to the Minnesota state treasury.
4.5 	(g) Subdivisions 2 and 3 do not apply if premium rates are filed with the department 
4.6 	and accompanied by a minimum loss ratio guarantee that meets the requirements of 
4.7 	this subdivision.  Such filings are deemed approved.  Assessments by the reinsurance 
4.8 	association created in chapter 62L and all types of taxes, surcharges, or assessments 
4.9 	created on or after the effective date of this act may be included in establishing premium 
4.10 	rates filed with the commissioner under this section. The insurer shall identify any 
4.11 	assessment allocated.
4.12 	(h) The policy form filing of an insurer using the filing procedure with a minimum 
4.13 	loss ratio guarantee will disclose to the enrollee, member, or subscriber an explanation of 
4.14 	the lifetime loss ratio guarantee, and the actual loss ratio, and any adjustments for duration.
4.15 	(i) The insurer who elects to use the filing procedure with a minimum loss ratio 
4.16 	guarantee shall notify all policyholders of the refund calculation, the result of the refund 
4.17 	calculation, the percentage of premium on an aggregate basis to be refunded, if any, any 
4.18 	amount of the refund attributed to the payment of interests, and an explanation of amounts 
4.19 	less than $10.

4.20 	Sec. 3. Minnesota Statutes 2004, section 62A.021, subdivision 1, is amended to read:
4.21 		Subdivision 1.Loss ratio standards.  (a) Notwithstanding section 62A.02, 
4.22 	subdivision 3, relating to loss ratios, and except as otherwise authorized by section 
4.23 	62A.02, subdivision 3a, for individual policies or certificates,health care policies or 
4.24 	certificates shall not be delivered or issued for delivery to an individual or to a small 
4.25 	employer as defined in section 62L.02, unless the policies or certificates can be expected, 
4.26 	as estimated for the entire period for which rates are computed to provide coverage, to 
4.27 	return to Minnesota policyholders and certificate holders in the form of aggregate benefits 
4.28 	not including anticipated refunds or credits, provided under the policies or certificates, (1) 
4.29 	at least 75 percent of the aggregate amount of premiums earned in the case of policies 
4.30 	issued in the small employer market, as defined in section 62L.02, subdivision 27, 
4.31 	calculated on an aggregate basis; and (2) at least 65 percent of the aggregate amount 
4.32 	of premiums earned in the case of each policy form or certificate form issued in the 
4.33 	individual market; calculated on the basis of incurred claims experience or incurred health 
4.34 	care expenses where coverage is provided by a health maintenance organization on a 
4.35 	service rather than reimbursement basis and earned premiums for the period and according 
5.1 	to accepted actuarial principles and practices.  Assessments by the reinsurance association 
5.2 	created in chapter 62L and all types of taxes, surcharges, or assessments created by Laws 
5.3 	1992, chapter 549, or created on or after April 23, 1992, are included in the calculation of 
5.4 	incurred claims experience or incurred health care expenses. The applicable percentage 
5.5 	for policies and certificates issued in the small employer market, as defined in section 
5.6 	62L.02, increases by one percentage point on July 1 of each year, beginning on July 1, 
5.7 	1994, until an 82 percent loss ratio is reached on July 1, 2000.  The applicable percentage 
5.8 	for policy forms and certificate forms issued in the individual market increases by one 
5.9 	percentage point on July 1 of each year, beginning on July 1, 1994, until a 72 percent loss 
5.10 	ratio is reached on July 1, 2000.  A health carrier that enters a market after July 1, 1993, 
5.11 	does not start at the beginning of the phase-in schedule and must instead comply with the 
5.12 	loss ratio requirements applicable to other health carriers in that market for each time 
5.13 	period.  Premiums earned and claims incurred in markets other than the small employer 
5.14 	and individual markets are not relevant for purposes of this section.
5.15 	(b) All filings of rates and rating schedules shall demonstrate that actual expected 
5.16 	claims in relation to premiums comply with the requirements of this section when 
5.17 	combined with actual experience to date.  Filings of rate revisions shall also demonstrate 
5.18 	that the anticipated loss ratio over the entire future period for which the revised rates 
5.19 	are computed to provide coverage can be expected to meet the appropriate loss ratio 
5.20 	standards, and aggregate loss ratio from inception of the policy form or certificate form 
5.21 	shall equal or exceed the appropriate loss ratio standards.
5.22 	(c) A health carrier that issues health care policies and certificates to individuals 
5.23 	or to small employers, as defined in section 62L.02, in this state shall file annually its 
5.24 	rates, rating schedule, and supporting documentation including ratios of incurred losses 
5.25 	to earned premiums by policy form or certificate form duration for approval by the 
5.26 	commissioner according to the filing requirements and procedures prescribed by the 
5.27 	commissioner.  The supporting documentation shall also demonstrate in accordance with 
5.28 	actuarial standards of practice using reasonable assumptions that the appropriate loss ratio 
5.29 	standards can be expected to be met over the entire period for which rates are computed.  
5.30 	The demonstration shall exclude active life reserves.  If the data submitted does not 
5.31 	confirm that the health carrier has satisfied the loss ratio requirements of this section, 
5.32 	the commissioner shall notify the health carrier in writing of the deficiency.  The health 
5.33 	carrier shall have 30 days from the date of the commissioner's notice to file amended rates 
5.34 	that comply with this section.  If the health carrier fails to file amended rates within the 
5.35 	prescribed time, the commissioner shall order that the health carrier's filed rates for the 
5.36 	nonconforming policy form or certificate form be reduced to an amount that would have 
6.1 	resulted in a loss ratio that complied with this section had it been in effect for the reporting 
6.2 	period of the supplement.  The health carrier's failure to file amended rates within the 
6.3 	specified time or the issuance of the commissioner's order amending the rates does not 
6.4 	preclude the health carrier from filing an amendment of its rates at a later time.  The 
6.5 	commissioner shall annually make the submitted data available to the public at a cost not 
6.6 	to exceed the cost of copying.  The data must be compiled in a form useful for consumers 
6.7 	who wish to compare premium charges and loss ratios.
6.8 	(d) Each sale of a policy or certificate that does not comply with the loss ratio 
6.9 	requirements of this section is an unfair or deceptive act or practice in the business of 
6.10 	insurance and is subject to the penalties in sections 72A.17 to 72A.32.
6.11 	(e)(1) For purposes of this section, health care policies issued as a result of 
6.12 	solicitations of individuals through the mail or mass media advertising, including both 
6.13 	print and broadcast advertising, shall be treated as individual policies.
6.14 	(2) For purposes of this section, (i) "health care policy" or "health care certificate" 
6.15 	is a health plan as defined in section 62A.011; and (ii) "health carrier" has the meaning 
6.16 	given in section 62A.011 and includes all health carriers delivering or issuing for delivery 
6.17 	health care policies or certificates in this state or offering these policies or certificates 
6.18 	to residents of this state.
6.19 	(f) The loss ratio phase-in as described in paragraph (a) does not apply to individual 
6.20 	policies and small employer policies issued by a health plan company that is assessed less 
6.21 	than three percent of the total annual amount assessed by the Minnesota Comprehensive 
6.22 	Health Association.  These policies must meet a 68 percent loss ratio for individual 
6.23 	policies, a 71 percent loss ratio for small employer policies with fewer than ten employees, 
6.24 	and a 75 percent loss ratio for all other small employer policies.
6.25 	(g) Notwithstanding paragraphs (a) and (f), the loss ratio shall be 60 percent for a 
6.26 	health plan as defined in section 62A.011, offered by an insurance company licensed under 
6.27 	chapter 60A that is assessed less than ten percent of the total annual amount assessed 
6.28 	by the Minnesota Comprehensive Health Association.  For purposes of the percentage 
6.29 	calculation of the association's assessments, an insurance company's assessments include 
6.30 	those of its affiliates.
6.31 	(h) The commissioners of commerce and health shall each annually issue a 
6.32 	public report listing, by health plan company, the actual loss ratios experienced in the 
6.33 	individual and small employer markets in this state by the health plan companies that the 
6.34 	commissioners respectively regulate.  The commissioners shall coordinate release of these 
6.35 	reports so as to release them as a joint report or as separate reports issued the same day. 
6.36 	The report or reports shall be released no later than June 1 for loss ratios experienced for 
7.1 	the preceding calendar year.  Health plan companies shall provide to the commissioners 
7.2 	any information requested by the commissioners for purposes of this paragraph.