Circular Letter No. 11 (1994)

August 1, 1994


All Insurers, Other Than Article 43 Corporations and Article 44 HMOs, Licensed to Write Accident and Health Insurance


Accident and Health Insurance Conversion Coverage

Circular Letters No. 6 (1993) and No. 14 (1993) noted that carriers may request an increase of up to 50% in premium, rates for statutory major medical conversion policies, to be effective beginning July 1, 1994, provided submission of the information requested in those circular letters accompanies or precedes the rate filing. Although it is possible that loss ratios (at least before open enrollment) have been quite high for major medical conversion policies, that hypothesis must be supported by actual data believed to be representative of aggregate industrywide experience in order for us to determine an appropriate increase in the rates. Also, in order for us to approve a given carrier's request for such increase, the company must have submitted the requested information.

Unfortunately, we have so far received information from very few carriers, despite the deadline of April 30, 1994 for submission of experience given in Circular Letter No. 6 (1993). Also, almost all of the submissions we have received are incomplete or are lacking in other respects, such as use of questionable assumptions. Therefore, we are reminding those carriers that have not yet made submissions to do so immediately. Although carriers with less than 100 statutory policies and/or certificates in force as of December 31, 1993 need not submit the requested experience data and other information, they must file a statement that they fall below the threshold of 100. Carriers at or above the threshold must, of course, submit the requested experience data and other information. The information being supplied should be complete, and must be accompanied by an actuary's certification that any assumptions used meet generally accepted actuarial standards

Carriers that have already sent information should amend their submissions if necessary to comply with the above requirements, and must in any case provide the aforementioned actuary's certification

Attached is a form to be used by carriers in making their original or amended submissions. All rows and columns should be filled in, unless the requested information does not apply to the company, in which case an explanation must be provided. The company should submit two versions of the form -- one for the New York City area, as defined in Sec. 361.2(l)(4) of Regulation 146, and one for the rest of the state --unless it is not possible to separate the experience in that manner.

Although it is clearly too late now for any rate increase to be effective beginning July 1, 1994, as originally contemplated, we are hopeful that the industry's adherence to the requirements discussed above will enable us to determine whether a rate increase is warranted and can be accomplished before the end of 1994.

Those companies that do not submit either properly completed forms and the actuarial certification, or a statement that they fall below the threshold of 100 statutory policies and/or certificates, by October 3, 1994, may be considered to have committed a willful violation of law or regulation.

Finally, please note that beginning with the submission due March 1, 1995 for calendar year 1994 experience, all carriers, regardless of the volume of their conversion business, will be required to provide conversion experience annually, along with their submissions for the New York Supplements to the annual statement. The data required will be largely the same as that on the attached form, but in somewhat greater detail. Our goal in asking for this information is to enable us to make quicker determinations of the need for rate increases in the future. More details will follow later this year.

Submissions pursuant to this circular letter should be directed to:

David Schwartz
Supervising Actuary
Accident and Health Rating Section
New York Insurance Department
Agency Building One
Empire State Plaza
Albany, NY 12257
(telephone 518-473-7725)