(2) A policy or plan of one or more labor organizations for members, former members, or any combination thereof.

(3) A policy or plan of the trustees of a fund established by one or more labor organizations, one or more employers, or any combination, for any one or combination of the following(i) Employees.

(ii) Former employees. (iii) Members.

(iv) Former members.

(4) A policy or plan of a profession, trade, or occupational association, if the association

(i) Is composed of individuals all of whom are actively engaged in the same profession, trade, or occupation;

(ii) Has been maintained in good faith for a purpose other than obtaining insurance; and

(iii) Has been in existence for at least two years before the date of its initial offering of a Medicare supplemental health insurance policy to its members.

(5) For purposes of the voluntary certification program, a policy issued to an employee or to a member of a labor organization as an addition to a franchise plan (a plan that enables members of the same entity to purchase an individual policy marketed to them under group underwriting procedures), if the plan is in existence on July 1, 1982.

§ 403.206 General standards for Medicare supplemental policies.

(a) For purposes of the voluntary certification program described in this subpart, a policy must meet

(1) The National Association of Insurance Commissioners (NAIC) model standards as defined in § 405.210; and (2) The loss ratio standards specified in § 403.215.

(b) Except as specified in paragraph (c) of this section, the standards specified in paragraph (a) of this section must be met in a single policy.

(c) In the case of a nonprofit hospital or a medical association where State law prohibits the inclusion of all benefits in a single policy, the standards specified in paragraph (a) of the section must be met in two or more

policies issued in conjunction with one another.

8 403.210 NAIC model standards.

(a) "NAIC model standards" means the National Association of Insurance Commissioners (NAIC) "Model Regulation to Implement the Individual Accident and Insurance Minimum Standards Act" (as amended and adopted by the NAIC on June 6, 1979, as it applies to Medicare supplemental policies). Copies of the NAIC model standards can be purchased from the National Association of Insurance Commissioners at 350 Bishops Way, Brookfield, Wisconsin 53004, and from the NIARS Corporation, 318 Franklin Avenue, Minneapolis, Minnesota 55404.

(b) The policy must comply with the provisions of the NAIC model standards, except as follows

(1) "Policy", for purposes of this paragraph, means individual and group policy, as specified in § 403.205. The NAIC model standards limit "policy" to individual policy.

(2) The policy must meet the loss ratio standards specified in § 403.215. [47 FR 32400, July 26, 1982; 49 FR 44472, Nov. 7, 1984]

(a) The policy must be expected to return to the policyholders, in the form of aggregate benefits provided under the policy

(1) At least 75 percent of the aggregate amount of premiums in the case of group policies; and

(2) At least 60 percent of the aggregate amount of premiums in the case of individual policies.

(b) For purposes of loss ratio requirements, policies issued as a result of solicitation of individuals through the mail or by mass media advertising are considered individual policies.

STATE REGULATORY PROGRAMS

§ 403.220 Supplemental Health Insurance Panel.

(a) Membership. The Supplemental Health Insurance Panel (Panel) consists of

(1) The Secretary or a designee, who serves as chairperson, and

30-156 0-90-2

(2) Four State Commissioners or Superintendents of Insurance appointed by the President. (The terms Commissioner or Superintendent of Insurance include persons of similar rank.)

(b) Functions. (1) The Panel determines whether or not a State regulatory program for Medicare supplemental health insurance policies meets and continues to meet minimum requirements specified in section 1882 of the Social Security Act.

(2) The chairperson of the Panel informs the State Commissioners and Superintendents of Insurance of all determinations made under paragraph (b)(1) of this section.

emblem on policies certified under the voluntary certification program.

(c) The manner in which the emblem may be displayed and the conditions and restrictions relating to its use will be stated in the letter with which HCFA notifies the insuring organization that a policy has been certified. The insuring organization must comply with these conditions and restrictions.

(d) If a certified policy is issued in a State that later has an approved regulatory program, as provided for in § 403.222, the insuring organization may display the emblem on the policy until the earliest of the following

(1) When prohibited by State law or regulation.

(2) When the policy no longer meets the requirements for Medicare supplemental policies specified in § 403.206.

(3) The date the insuring organization would be required to submit material to HCFA for annual review in order to retain certification, if the State did not have an approved program (see § 403.239).

§ 403.232 Requirements and procedures for obtaining certification.

(a) To be certified by HCFA, a policy must meet

(1) The NAIC model standards specified in § 403.210;

(2) The loss ratio standards specified in § 403.215; and

(3) Any State requirements applicable to a policy

(i) Issued in that State; or

(ii) Marketed in that State.

(b) An insuring organization requesting certification of a policy must submit the following to HCFA for review

(1) A copy of the policy form (including all the documents that would constitute the contract of insurance that is proposed to be marketed as a certified policy).

(2) A copy of the application form including all attachments.

(3) A copy of the uniform certificate issued under a group policy.

(4) A copy of the outline of coverage, in the form prescribed by the NAIC model standards.

(5) A copy of the Medicare supplement buyers' guide to be provided to all applicants if the buyers' guide is not the HCFA/NAIC buyers' guide.

(6) A statement of when and how the outline of coverage and the buyers' guide will be delivered and copies of applicable receipt forms.

(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.

§ 403.239 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 pericd, 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.

8 403.245 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, 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.

8 403.248 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.

8 403.254 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"