(7) A copy of the notice of replacement and statement as to when and how that notice will be delivered.

(8) A list of States in which the policy is authorized for sale. If the policy was approved under a deemer provision in any State, the conditions involved must be specified.

(9) A copy of the loss ratio calculations, as specified in § 403.250.

(10) Loss ratio supporting data, as specified in § 403.256.

(11) A statement of actuarial opinion, as specified in § 403.258.

(12) A statement that the insuring organization will notify the policyholders in writing, within the period of time specified in § 403.245(c), if the policy is identified as a certified policy at the time of sale and later loses certification.

(13) A signed statement in which the president of the insuring organization, or a designee, attests that

(i) The policy meets the requirements specified in paragraph (a) of this section; and

(ii) The information submitted to HCFA for review is accurate and complete and does not misrepresent any material fact.

§ 403.235 Review and certification of policies.

(a) HCFA will review policies that the insuring organization voluntarily submits, except that HCFA will not review a policy issued in a State with an approved regulatory program under § 403.222.

(b) If the requirements specified in § 403.232 are met, HCFA will(1) Certify the policy; and

(2) Authorize the insuring organization to display the emblem on the policy, as provided for in § 403.231.

(c) If HCFA certifies a policy, it will inform all State Commissioners and Superintendents of Insurance of that

fact.

§ 403.239 Submittal of material to retain

certification.

(a) HCFA certification of a policy that continues to meet the standards will remain in effect, if the insuring organization files the following material with HCFA no later than the date

specified in paragraph (b) or (c) of this section

(1) Any changes in the material, specified in § 403.232(b), that was submitted for previous certification.

(2) The loss ratio supporting data specified in § 403.256(b).

(3) A signed statement in which the president of the insuring organization, or a designee, attests that

(i) The policy continues to meet the requirements specified in § 403.232(a);

and

(ii) The information submitted to HCFA for review is accurate and complete and does not misrepresent any material fact.

(b) Except as specified in paragraph (c) of this section, the insuring organization must file the material with HCFA no later than June 30 of each year. The first time the insuring organization must file the material is no later than June 30 of the calendar year that follows the year in which HCFA

(1) Certifies a new policy; or

(2) Certifies a policy that lost certification as provided in § 403.245.

(c) If the loss ratio calculation period, used to calculate the expected loss ratio for the last actuarial certification submitted to HCFA, ends before the June 30 date of paragraph (b) of this section, the insuring organization must file the material with HCFA no later then the last day of that rate calculation period.

§ 403.245 Loss of certification.

(a) A policy loses certification if(1) The insuring organization withdraws the policy from the voluntary certification program; or

(2) HCFA determines that-

(i) The policy fails to meet the requirements specified in § 403.232(a); or (ii) The insuring organization has failed to meet the requirements for submittal of material specified in § 403.239.

(b) If a policy loses its certification, HCFA will inform all State Commissioners and Superintendents of Insurance of that fact.

(c) If a policy that displays the emblem, or that has been marketed as a certified policy without the emblem,

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loses certification, the insuring organization must notify each holder of the policy, or of a certificate issued under the policy, of that fact. The notice must be in writing and sent by the earlier of

(1) The date of the first regular premium notice after the date the policy loses its certification; or

(2) 60 days after the date the policy loses its certification.

§ 403.248 Administrative review of HCFA

determinations.

(a) This section provides for administrative review if HCFA determines(1) Not to certify a policy; or

(2) That a policy no longer meets the standards for certification.

(b) If HCFA makes a determination specified in paragraph (a) of this section, it will send a notice to the insuring organization containing the following information:

(1) That HCFA has made such a determination.

(2) The reasons for the determination.

(3) That the insuring organization has 30 days from the date of the notice to

(i) Request, in writing, an administrative review of the HCFA determination; and

(ii) Submit additional information to HCFA for review.

(4) That, if the insuring organization requests an administrative review, HCFA will conduct the review, as provided for in paragraph (c) of this section.

(5) That, in a case involving loss of certification, the HCFA determination will go into effect 30 days from the date of the notice, unless the insuring organization requests an administrative review. If the insuring organization requests an administrative review, the policy retains its certification until HCFA makes a final determination.

(c) If the insuring organization requests an administrative review, HCFA will conduct the review as follows

(1) A HCFA official, not involved in the initial HCFA determination, will initiate and complete an administrative review within 90 days of the date

of the notice provided for in paragraph (b) of this section.

(2) The official will consider

(i) The original material submitted to HCFA for review, as specified in § 403.232(b) or § 403.239(a); and

(ii) Any additional information, that the insuring organization submits to HCFA.

(3) Within 15 days after the administrative review is completed, HCFA will inform the insuring organization in writing of the final decision, with an explanation of the final decision.

(4) If the final decision is that a policy lose its certification, the loss of certification will go into effect 15 days after the date of HCFA's notice informing the insuring organization of the final decision.

VOLUNTARY CERTIFICATION PROGRAM: LOSS RATIO PROVISIONS

§ 403.250 Loss ratio calculations: General provisions.

(a) Basic formula. The expected loss ratio is calculated by determing the ratio of benefits to premiums.

(b) Calculations. The insuring organization must calculate loss ratios according to the provisions of §§ 403.251, 403.253, and 403.254.

§ 403.251 Loss ratio date and time frame provisions.

(a) "Initial calculation date" means the first date of the period that the insuring organization uses to calculate the policy's expected loss ratio.

(1) The initial calculation date may be before, the same as, or after the date the insuring organization sends the policy to HCFA for review, except

(2) The initial calculation date must not be earlier than January 1 of the calendar year in which the policy is sent to HCFA.

(b) "Loss ratio calculation period" means the period beginning with the initial calculation date and ending with the last day of the period for which the insuring organization calculates the policy's scale of premiums.

(c) To calculate "present values", the insuring organization may ignore discounting (an actuarial procedure

that provides for the impact of a variety of factors, such as lapse of policies) for loss ratio calculation periods not exceeding 12 months.

§ 403.253

Calculation of benefits.

(a) General provisions. (1) Except as provided for in paragraph (a)(2) of this section, calculate the amount of "benefits" by

(i) Adding the present values on the initial calculation date of

(A) Expected incurred benefits in the loss ratio calculation period, to

(B) The total policy reserve at the last day of the loss ratio calculation period: and

(ii) Subtracting the total policy reserve on the initial calculation date from the sum of these values.

(2) To calculate the amount of "benefits" in the case of community or pool rated individual or group policies rerated on an annual basis, calculate the expected incurred benefits in the loss ration calculation period.

(b) Calculation of total policy reserve-(1) Option for calculation. The insuring organization must calculate "total policy reserve" according to the provisions of paragraph (b)(2) or (3) of this section.

(2) Total policy reserve: Federal provisions. (i) "Total policy reserve"

means the sum of

(A) Additional reserve; and

(B) The reserve for future contingent benefits.

(ii) "Additional reserve" means the amount calculated on a net level reserve basis, using appropriate values to account for lapse, mortality, morbidity, and interest, that on the valuation date represents

(A) The present value of expected incurred benefits over the loss ratio calculation period; less

(B) The present value of expected net premiums over the loss ratio calculation period.

(iii) "Net premium" means the level portion of the gross premium used in calculating the additional reserve. On the day the policy is issued, the present value of the series of those portions equals the present value of the expected incurred claims over the period that the gross premiums are computed to provide coverage.

(iv) "Reserve for future contingent benefits" means the amounts, not elsewhere included, that provide for the extension of benefits after insurance coverage terminates. These benefits

(A) Are predicated on a health condition existing on the date coverage ends;

(B) Accrue after the date coverage ends; and

(C) Are payable after the valuation date.

(3) Total policy reserve: State provisions. "Total policy reserve" means the total policy reserve calculated according to appropriate State law or regulation.

§ 403.254 Calculation of premiums.

(a) General provisions. To calculate the amount of “premiums”, calculate the present value on the initial calculation date of expected earned premiums for the loss ratio calculation period.

(b) Specific provisions. (1) "Earned premium" for a given period means(i) Written premiums for the period; plus

(ii) The total premium reserve at the beginning of the period; less— (iii) The total premium reserve at the end of the period.

(2) "Written premiums in a period"

(ii) Premiums due and uncollected at the end of that period; less

(iii) Premiums due and uncollected at the beginning of that period. (3) "Total premium reserve" means the sum of

(i) The unearned premium reserve; (ii) The advance premium reserve; and

(iii) The reserve for rate credits. (4) "Unearned premium reserve" means the portion of gross premiums due that provide for days of insurance coverage after the valuation date.

(5) "Advance premium reserve" means premiums received by the insuring organization that are due after the valuation date.

(6) "Reserve for rate credits" means rate credits on a group policy that

(i) Accrue by the valuation date of the policy; and

(ii) Are paid or credited after the valuation date.

§ 403.256 Loss ratio supporting data. (a) For purposes of requesting HCFA certification under § 403.232, the insuring organization must submit the following loss ratio data to HCFA for review

(1) A statement of why the policy is to be considered, for purposes of the loss ratio standards, an individual or a group policy.

(2) The earliest age at which policyholders can purchase the policy.

(3) The general marketing method and the underwriting criteria used for the selection of applicants to whom coverage is offered.

(4) What policies are to be included under the one policy form, by the dates the policies are issued.

(5) The loss ratio calculation period. (6) The scale of premiums for the loss ratio calculation period.

(7) The expected level of earned premiums in the loss ratio calculation period.

(8) The expected level of incurred claims in the loss ratio calculation period.

(9) A description of how the following assumptions were used in calculating the loss ratio.

(i) Morbidity. (ii) Mortality.

(iii) Lapse.

(iv) Assumed increases in the Medicare deductible.

(v) Impact of inflation on reimbursement per service.

(vi) Interest.

(vii) Expected distribution, by age and sex, of persons who will purchase the policy in the coming year.

(viii) Expected impact on morbidity by policy duration of—

(A) The process used to select insureds from among those that apply for a policy; and

(B) Pre-existing condition clauses in the policy.

(b) For purposes of requesting continued HCFA certification under

§ 403.239(a), the insuring organization must submit the following to HCFA

(1) A description of all changes in the loss ratio data, specified in paragraph (a) of this section, that occurred since HCFA last reviewed the policy.

(2) The past loss ratio experience for the policy, including the experience of all riders and endorsements issued under the policy. The loss ratio experience data must include earned premiums, incurred claims, and total policy reserves that the insuring organization calculates

(i) For all years of issue combined; and

(ii) Separately for each calendar year since HCFA first certified the policy.

§ 403.258 Statement of actuarial opinion. (a) For purposes of certification requests submitted under § 403.232(b) and subsequent review as specified in § 403.239(a), "statement of actuarial opinion" means a signed declaration in which a qualified actuary states that the assumptions used in calculating the expected loss ratio are appropriate and reasonable, taking into account actual policy experience, if any, and reasonable expectations.

(b) "Qualified actuary" means

(1) A member in good standing of the American Academy of Actuaries;

or

(2) A person who has otherwise demonstrated his or her actuarial competence to the satisfaction of the Commissioner or Superintendent of Insurance of the domiciliary State of the insuring organization.

PART 405-FEDERAL HEALTH INSURANCE FOR THE AGED AND DISABLED

Sec.

Subpart A-Hospital Insurance Benefits

405.100 Scope.

405.150 Payment for services furnished; general.

405.152 Payment for services furnished; nonparticipating hospital furnishing emergency services.

405.153 Payment for services; hospital outside the United States. 405.157 Payment to entitled individual for emergency services furnished after 1967. 405.158 Payment to entitled individual; determination of amount payable for services furnished by a nonparticipating hospital.

405.160 Payment to participating hospital for inpatient hospital services; conditions for payment.

405.162 Prohibition against payment for inpatient hospital services furnished

after utilization review finding that further services are not medically necessary.

405.163 Prohibition against payment for inpatient hospital services furnished after 20th consecutive day by a hospital which has failed to make timely utilization review. 405.165 Payment for posthospital SNF

care.

405.166 Prohibition against payment for posthospital SNF care after a utilization review finding that further care is not medically necessary.

405.167 Prohibition against payment for posthospital SNF care furnished by a facility that fails to make timely utilization review (UR).

405.170 Payment for home health services;

conditions.

405.191 Emergency services; finding that an emergency existed and/or has ceased. 405.192 Emergency services; finding of ac

cessibility.

405.195 Procedures for determining whether providers of services are liable for certain noncovered services.

405.196 Procedures for home health agencies in handling cases.