SB0208

SENATE BILL 208

50th legislature - STATE OF NEW MEXICO - first session, 2011

INTRODUCED BY

Dede Feldman

AN ACT

RELATING TO HEALTH INSURANCE; AMENDING AND ENACTING SECTIONS OF THE NEW MEXICO INSURANCE CODE TO PROVIDE GREATER TRANSPARENCY AND NEW STANDARDS IN REVIEW OF APPLICATIONS FOR HEALTH INSURANCE PREMIUM RATE INCREASES; PROVIDING FOR PUBLIC HEARINGS AND ADMINISTRATIVE AND JUDICIAL REVIEW OF DETERMINATIONS IN HEALTH INSURANCE PREMIUM RATE REVIEW MATTERS.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF NEW MEXICO:

SECTION 1. A new section of the Public Regulation Commission Act is enacted to read:

"[NEW MATERIAL] HEALTH INSURANCE PREMIUM RATE REVIEW--HEARING EXAMINERS.--

A. The superintendent of insurance may appoint a hearing examiner to preside over hearings on reconsideration pursuant to Section 8 of this 2011 act. A hearing examiner shall provide the superintendent with a recommended decision on the matter assigned to the hearing examiner, including findings of fact and conclusions of law. The recommended decision shall be provided to the parties, and they may file exceptions to the decision prior to the final decision of the superintendent.

B. The commission shall appoint a hearing examiner to preside over hearings pursuant to Section 9 of this 2011 act. A hearing examiner shall provide the commission with a recommended decision on the matter assigned to the hearing examiner, including conclusions of law. The recommended decision shall be provided to the parties, and they may file exceptions to the decision prior to the final decision of the commission."

SECTION 2. A new section of Chapter 59A, Article 18 NMSA 1978 is enacted to read:

"[NEW MATERIAL] "BLOCK OF BUSINESS" DEFINED.--As used in Chapter 59A, Article 18 NMSA 1978, "block of business" means a particular policy or pool that provides health insurance, that an insurer issues to one or more individuals and that includes distinct benefits, services and terms."

SECTION 3. A new section of Chapter 59A, Article 18 NMSA 1978 is enacted to read:

"[NEW MATERIAL] CLOSED BLOCK OF BUSINESS.--As used in Chapter 59A, Article 18 NMSA 1978, "closed block of business" means a policy or group of policies that an insurer no longer markets or sells, or that has less than five hundred contracts in force in the state, or for which enrollment has decreased by more than twelve percent since the last rate filing relating to that block of business."

SECTION 4. Section 59A-18-13 NMSA 1978 (being Laws 1984, Chapter 127, Section 343, as amended) is amended to read:

"59A-18-13. APPROVAL OR DISAPPROVAL OF HEALTH INSURANCE FORMS.--

A. With policy, endorsement, rider and application forms and classification of risks filed by the insurer with the superintendent under Section 59A-18-12 NMSA 1978 as to health insurance, the insurer shall also file with the superintendent its premium rates applicable to such health insurance forms. An insurer shall not use any such form or premium rate that has not been approved by the superintendent or that is not in effect in accordance with Section 59A-18-14 NMSA 1978.

B. An increase in a health insurance premium shall not be effective without sixty days' written notice by the insurer to the policyholder. That notice shall include a summary of the form or classification of risks that the insurer files pursuant to Section 59A-18-12 NMSA 1978 in language that meets minimum language simplification standards pursuant to the Policy Language Simplification Law.

C. [All] The insurer shall file all filings [submitted] pursuant to this section [shall be filed] electronically. The superintendent may designate an entity to receive the electronic filings submitted pursuant to this section.

D. Within ten days of the filing, the superintendent shall make available on the division's web site and easily accessible to the general public all premium rates, forms, classifications of risks, filings made pursuant to Subsections E, F and G of this section and the summary that an insurer files pursuant to Section 59A-18-12 NMSA 1978 and this section.

E. For each block of business included in the proposed premium rate increase, filings shall be accompanied by the following to the extent that this information is not already included in the actuarial memorandum:

(1) a summary, in language that meets minimum language simplification standards pursuant to the Policy Language Simplification Law, that explains the rationale for the proposed rate increase;

(2) a brief description of the type of policy benefits, renewability, general market methods and age limits on issuance, if any;

(3) a brief description of how the revised rates were determined, including the general description and source of each assumption used;

(4) for blocks of business in existence for at least three years, the rating history for the three years preceding the date of filing, including any premium increases for those blocks of business;

(5) an estimated percentage of the premium that the applicant expects to set aside in reserves;

(6) innovations in health care quality that advance the delivery of patient care, with documentation of expenses incurred for that purpose;

(7) for blocks of business in existence for at least three years, the measurable cost-containment efforts that the applicant has undertaken within the three years preceding the date of filing;

(8) the expected medical loss ratio and, for blocks of business in existence for at least three years, the medical loss ratio for the three years preceding the date of filing, accompanied by supporting information as to how the blocks of business will meet the requirements for medical loss ratio in state and federal law;

(9) if medical costs, including utilization and compensation rates, are alleged to justify a premium rate increase, the filing shall identify in the aggregate the types of expenditures in those categories that support the premium rate increase in the geographic area covered;

(10) for blocks of business in existence for at least three years, premium revenues, claims history, losses and reserves for the three years preceding the date of filing, accompanied by supporting documentation;

(11) in the aggregate, the ages, genders, tobacco use and geographic location of and claims history for individuals enrolled in the block of business potentially affected by a proposed rate increase;

(12) whether the insurer has ceased to actively offer or sell to new applicants a block of business for which it seeks a rate increase; and

(13) other information that the superintendent deems necessary to aid the review.

F. Regarding an insurer's overall operations for the three years preceding the date of filing, the insurer shall file:

(1) details regarding executive compensation;

(2) a list detailing which blocks of business are open and which are closed to new enrollment;

(3) an estimate of the insurer's profitability;

(4) the insurer's risk-based capital report filed pursuant to the Risk-Based Capital Act and, to the extent this information is not included in that report, reserves and surpluses for product lines sold in the state, including earnings on the reserves during that period and a reasonable estimate of the expected earnings on any surplus;

(5) for blocks of business in existence for at least three years, innovations in health care quality that advance the delivery of patient care, with documentation of expenses incurred for that purpose for the three years preceding the date of filing;

(6) for blocks of business in existence for at least three years, measurable cost-containment efforts that the applicant has undertaken within the three years preceding the date of filing; and

(7) other information that the superintendent deems necessary to aid the review.

G. The filing shall include the last year's annual and quarterly financial statements that the insurer has filed with the division.

H. On the date that the superintendent posts a form, classification of risks or other filing pursuant to Subsection D of this section, the superintendent shall open a thirty-day public comment period for policyholders and the general public, during which the policyholders and the general public may make comments online or in writing. The superintendent shall post on the division's web site in a manner easily accessible to the public all comments made during the thirty-day public comment period."

SECTION 5. Section 59A-18-14 NMSA 1978 (being Laws 1984, Chapter 127, Section 344, as amended) is amended to read:

"59A-18-14. GROUNDS, PROCEDURE FOR DISAPPROVAL.--

A. The superintendent shall review any filing, except any filing related to a health insurance, managed care or health maintenance organization policy, plan or contract, made pursuant to Section 59A-18-12 or 59A-18-13 NMSA 1978 within sixty days of the filing date. The superintendent shall approve any form or rate if [he] the superintendent finds that it complies with the Insurance Code and shall disapprove any form or rate only on [any] one or more of the following grounds:

(1) if the form is in any respect in violation of or does not comply with the Insurance Code;

(2) if the form contains, or incorporates by reference where such incorporation is otherwise permissible, any inconsistent, ambiguous or misleading clauses or exceptions and conditions [which] that deceptively affect the risk purported to be assumed in the general coverage of the contract, or [which encourages] that encourage misrepresentation of the policy or its benefits;

(3) if the benefits offered are unreasonably restricted in relation to the premium charged;

(4) if the form has [any] a title, heading or other indication of its provisions [which] that is misleading or if the form is printed in such type or manner of reproduction as to be difficult to read; or

(5) if purchase of the form is being solicited by advertising, communication or dissemination of information [which] that is deceptive or misleading.

B. If the superintendent disapproves any [such] form during the sixty-day review period, [he] the superintendent shall give the insurer written notice of the disapproval, stating the grounds [therefor] for the disapproval.

C. After expiration of the sixty-day review period referred to in Section 59A-18-13 NMSA 1978 or at any time after having approved a form, the superintendent may, after a hearing thereon, disapprove a form or withdraw a previous approval on any of the grounds stated in Subsection A of this section. The superintendent's order issued on such hearing shall state the grounds for disapproval or withdrawal of previous approval and the date, not less than twenty days after the date of the order, when disapproval or withdrawal of approval shall become effective."

SECTION 6. A new section of Chapter 59A, Article 18 NMSA 1978 is enacted to read:

"[NEW MATERIAL] HEALTH INSURANCE FILINGS--GROUNDS AND PROCEDURE FOR DISAPPROVAL.--

A. The superintendent shall review any health insurance, managed care or health maintenance organization filing made pursuant to Section 59A-18-12 or 59A-18-13 NMSA 1978 within sixty days of the filing date. The superintendent shall consider and issue findings on the merits of the filing. The superintendent shall issue findings and shall approve any form or rate on the following grounds:

(1) the form or rate is in full compliance with the Insurance Code;

(2) the form or rate does not contain, or incorporate by reference, any inconsistent, ambiguous or misleading clauses or exceptions and conditions that deceptively affect the risk purported to be assumed in the general coverage of the contract, or that encourage misrepresentation of the policy or its benefits;

(3) the form does not have a title, heading or other indication of its provisions that is misleading;

(4) the form is not printed in such type or manner of reproduction as to be difficult to read;

(5) purchase of the form is not being solicited by advertising, communication or dissemination of information that is deceptive or misleading;

(6) the proposed rate is actuarially sound and is supported by the actuarial memorandum submitted;

(7) the proposed rate is reasonable, not excessive or inadequate and not unfairly discriminatory; and

(8) the proposed rate is based upon reasonable administrative expenses.

B. In order to determine whether the proposed rates are reasonable, actuarially sound and based on reasonable administrative expenses, the superintendent shall consider:

(1) the insurer's financial position, including profitability, surplus, reserves, executive compensation and investment savings;

(2) historical and projected administrative costs, including market expenses, broker commissions and advertising and medical expenses;

(3) the historical and projected loss ratio between the amounts spent on direct services and earned premiums;

(4) any anticipated change in the number of enrollees if the proposed rate is approved;

(5) changes to covered benefits or health benefit plan design;

(6) innovations in health care quality that advance the delivery of patient care, with documentation of expenses incurred for the purpose of these innovations;

(7) measurable cost-containment efforts that the insurer has undertaken since the insurer's last rate filing for the same block of business;

(8) the need for the proposed change in order to maintain the insurer's solvency or to maintain rate stability and prevent excessive rate increases in the future;

(9) the absence of significant premium differences among covered individuals in similar risk categories;

(10) any public comment received pursuant to Subsection H of Section 59A-18-13 NMSA 1978 that pertains to the considerations set forth in this subsection;

(11) whether the proposed change applies to a closed block of business and how the closed block of business is pooled in relation to all appropriate blocks of business that are not closed;

(12) the affordability and equity of the premium structure, given community needs and the insurer's mission; increases in executive compensation during the preceding three years; and increases in reserves and surplus over the preceding three years;

(13) the insurer's statement of purpose or mission in its corporate charter or mission statement;

(14) the insurer's compliance with all federal and state requirements for pooling risk and for participation in risk adjustment programs in effect under federal and state law;

(15) the reliability and accuracy of the information provided in order to assure a meaningful review; and

(16) other considerations that arise from the information that the insurer submits.

C. The insurer shall have the burden of proving, by a preponderance of the evidence, that a rate increase is reasonable according to the grounds set forth in Subsection A of this section.

D. The superintendent shall give notice approving or disapproving a rate filing or, with the written consent of the insurer, modifying a rate filing submitted pursuant to this section no later than sixty days after the close of the public comment period provided pursuant to Subsection H of Section 59A-18-13 NMSA 1978. The notice shall state the grounds for the decision, specifically addressing the considerations set forth in Subsection B of this section and shall be posted on the web site of the insurance division in a manner easily accessible by covered individuals and the general public and provided in writing to:

(1) an aggrieved party to a matter pursuant to this section;

(2) when feasible, persons that have commented on the filing pursuant to Subsection H of Section 59A-18-13 NMSA 1978; and

(3) persons that have requested notification.

E. After expiration of the sixty-day review period pursuant to Subsection A of this section or at any time after having approved a form or rate, the superintendent may, after a hearing thereon, disapprove a form or rate or withdraw a previous approval on any of the grounds stated in Subsection A of this section. The superintendent's order issued on the hearing shall state the grounds for disapproval or withdrawal of previous approval and the date, not less than twenty days after the date of the order, when disapproval or withdrawal of approval shall become effective.

F. An aggrieved party, including a covered individual, an insurer applicant, any entity that the superintendent deems to represent the interest of a covered individual or the attorney general may file a request for a hearing to reconsider with the superintendent pursuant to the provisions of Section 8 of this 2011 act. The hearing request shall be filed within thirty days after the issuance of the superintendent's order approving, disapproving or modifying a rate filing pursuant to this section."

SECTION 7. A new section of Chapter 59A, Article 18 NMSA 1978 is enacted to read:

"[NEW MATERIAL] POOLING OF CLOSED BLOCKS OF BUSINESS.--For the purpose of determining the premium rate of any policy within a closed block of business, an insurer shall pool the experience of a closed block of business with all appropriate blocks of business that are not closed. An insurer shall not apply a rate penalty or surcharge beyond that which reflects the experience of a pool combined in accordance with this section."

SECTION 8. A new section of Chapter 59A, Article 18 NMSA 1978 is enacted to read:

"[NEW MATERIAL] RATE REVIEW CASES--HEARING ON RECONSIDERATION--EVIDENCE--HEARING EXAMINER--BURDEN--FINDINGS.--

A. When appearing before the superintendent in a hearing on reconsideration of the superintendent's decision in a rate review matter as provided in Subsection F of Section 6 of this 2011 act, the attorney general shall represent the interests of covered individuals as a whole.

B. When the attorney general appears in a rate review case, the attorney general may obtain an independent actuarial analysis of the proposed increase in premium rates. The actuarial analysis shall be performed by an actuary who has experience in health insurance and who is a member of the academy of actuaries.

C. A hearing conducted pursuant to the provisions of this section shall be a formal hearing conducted pursuant to the provisions of Sections 59A-4-15, 59A-4-16, 59A-4-19, 12-8-10 through 12-8-13 and 12-8-15 NMSA 1978 and may be conducted by a hearing examiner that the superintendent appoints pursuant to Subsection A of Section 1 of this 2011 act.

D. The burden of proof to show that a premium increase is reasonable shall be on the insurer, who shall prove this by a preponderance of the evidence.

E. In addition to complying with the provisions of Section 59A-4-16 NMSA 1978, the superintendent shall give notice of the hearing:

(1) on the division's web site in an easily accessible manner;

(2) in a newspaper of general circulation in this state;

(3) once in the New Mexico register;

(4) to all aggrieved parties to matters considered pursuant to this section or Section 6 of this 2011 act;

(5) when feasible, to persons that have commented on the filing pursuant to Subsection H of Section 59A-18-13 NMSA 1978; and

(6) to persons that have requested notification.

F. The superintendent shall publish the following information regarding the matter to be heard pursuant to Subsection E of this section:

(1) the names of the person or persons requesting the hearing;

(2) the provisions of the Insurance Code at issue;

(3) the amount of the proposed rate increase; and

(4) the date, time and location of the hearing.

G. Within thirty days of the hearing on reconsideration, the superintendent shall issue an order with the superintendent's ruling on reconsideration and findings to support the ruling. If the superintendent finds the proposed premium rates to be unreasonable, not actuarially sound or not based on reasonable administrative expenses, the superintendent shall determine rates that comply with the grounds set forth in Section 6 of this 2011 act and order the insurer to apply these rates."

SECTION 9. A new section of Chapter 59A, Article 18 NMSA 1978 is enacted to read:

"[NEW MATERIAL] RATE REVIEW APPEALS--PUBLIC REGULATION COMMISSION--HEARING--HEARING EXAMINER--FINDINGS.--

A. A hearing conducted pursuant to the provisions of this section shall be a formal hearing conducted: (1) in accordance with Sections 8-8-16 through 8-8-18 NMSA 1978;

(2) by a hearing examiner that the commission appoints pursuant to Subsection B of Section 1 of this 2011 act; and

(3) as a hearing on the record as a whole.

B. The commission shall evaluate the record of evidence according to whether the record as a whole provides substantial evidence on the whole record that a premium increase is reasonable, actuarially sound and based on reasonable administrative expenses.

C. The commission shall give written notice of the hearing not less than thirty days in advance of the hearing. The notice shall state the date, time and place of the hearing and specify the matters to be considered at the hearing.

D. On the division's web site in an easily accessible manner, in a newspaper of general circulation in this state and once in the New Mexico register, the commission shall give notice of the hearing by publishing the following information regarding the matter to be heard on appeal:

(1) the names of the person or persons requesting the hearing;

(2) the provisions of the Insurance Code at issue;

(3) the amount of the proposed rate increase; and

(4) the date, time and location of the hearing.

E. The commission shall provide notice of the hearing in writing and posted on the web site of the division in a manner easily accessible by covered individuals and the general public. The notice shall state the date, time and place of the hearing and specify the matters to be considered at the hearing. This notice shall be provided not less than thirty days in advance:

(1) to all aggrieved parties to matters considered pursuant to this section or Section 6 or 8 of this 2011 act;

(2) when feasible, to persons that have commented on the filing pursuant to Subsection H of Section 59A-18-13 NMSA 1978; and

(3) to persons that have requested notification.

F. After the commission's review of the superintendent's ruling on reconsideration of the proposed rate increase, the commission shall issue an order:

(1) remanding the case to the superintendent for redetermination only if it determines that the action is: (a) arbitrary, capricious or an abuse of discretion;

(b) not supported by substantial evidence in the record taken as a whole; or

(2) affirming the superintendent's ruling on reconsideration of the proposed rate increase if the commission determines that the action appealed is free from the errors specified under Subparagraphs (a) through (c) of Paragraph (1) of this subsection."

SECTION 10. A new section of Chapter 59A, Article 18 NMSA 1978 is enacted to read:

"[NEW MATERIAL] JUDICIAL REVIEW OF COMMISSION'S RULING.--Not later than sixty days after the commission's order issued pursuant to Subsection F of Section 9 of this 2011 act, an aggrieved party may file a petition in the court of appeal for judicial review of the commission's ruling. The appeal shall be on the record made in proceedings before the superintendent. The filing for appeals shall include a notice of appeal to the court of appeals and a copy of the commission's order issued pursuant to Subsection F of Section 9 of this 2011 act. If the court finds that the commission's action is not supported by substantial evidence in the record as a whole, the court shall hold the ruling unlawful and set it aside."

SECTION 11. A new section of the New Mexico Insurance Code is enacted to read:

"[NEW MATERIAL] SUPERINTENDENT OF INSURANCE--RULEMAKING--COMPLIANCE WITH FEDERAL LAW.--The superintendent shall promulgate rules to implement the provisions of this 2011 act, including rules:

A. to define terms used regarding applications that insurers submit in rate filing matters;

B. to meet criteria for adequate rate review in accordance with federal law; and

C. that the superintendent deems appropriate to carry out the provisions of this 2011 act."

SECTION 12. Section 59A-4-20 NMSA 1978 (being Laws 1984, Chapter 127, Section 67, as amended) is amended to read:

"59A-4-20. APPEAL TO COURT.--

A. A party may appeal from an order of the superintendent made after an informal hearing or an administrative hearing. The appeal shall be taken to the district court pursuant to the provisions of Section 39-3-1.1 NMSA 1978.

B. This section shall not apply as to matters arising pursuant to Chapter 59A, Article 17 NMSA 1978 or to health insurance, managed care and health maintenance organization rate review matters pursuant to Sections 6 and 8 of this 2011 act."

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