COMMITTEE SUBSTITUTE

FOR

H. B. 4432

(By Delegate Michael)


(Originating in the House Committee on Banking and Insurance)


[March 2, 1994]


A BILL to amend and reenact sections two, three, four, six and seven, article sixteen-e, chapter thirty-three of the code of West Virginia, one thousand nine hundred thirty-one, as amended, relating to limited benefits accident and sickness insurance policies and certificates; defining "limited benefits policy or certificate"; repealing a certain premium rate increase request eligibility requirement; repealing a certain premium refund requirement relating to insurers offering a limited benefits policy or certificate; specifying timing of notice relating to cancellation or nonrenewal in the case of nonpayment of premium; and relating to replacement policies or certificates.
Be it enacted by the Legislature of West Virginia:

That sections two, three, four, six and seven, article sixteen-e, chapter thirty-three of the code of West Virginia, one thousand nine hundred thirty-one, as amended, be amended and reenacted, all to read as follows:
ARTICLE 16E. LIMITED BENEFITS ACCIDENT AND SICKNESS INSURANCE POLICIES AND CERTIFICATES.

§ 33-16E-2. Definitions.

For purposes of this article:

(a) "Limited benefits policy or certificate" means any individual or group accident and sickness insurance policy that is not required to offer or provide all benefits mandated by any other applicable provision of this chapter. Such policies include, but are not limited to, accident and sickness disability, accident only, sickness only disability, sickness only, accident only disability, hospital indemnity, specified disease, and travel accident insurance policies: Provided, That the following types of policies and certificates are excluded from the definition of "limited benefits policy or certificate" for purposes of this article:
(1) Credit accident and sickness insurance;
(2) Long-term care insurance;
(3) Medicare supplement insurance; and
(4) Minimum benefits accident and sickness insurance issued pursuant to section fifteen, article fifteen or article sixteen-c of this chapter; and
(5) Accident and sickness policies which provide benefits for loss of income due to disability.
(b) "Experience period" means the period beginning on the first day of the calendar year during which a premium rate first takes effect and ending on the last day of the calendar year during which the insurer earns five hundred thousand dollars in premiums on the form in West Virginia or, if the annual premium earned on the form in West Virginia is less than five hundred thousand dollars, earns nationally.
(c) "Successive experience period" means the experience period beginning on the first day following the end of the preceding experience period.
§ 33-16E-3. Premium rate increase requests; loss ratio requirements.

(a) To be eligible to make a premium rate increase request after the first day of July, one thousand nine hundred ninety-three, any insurer offering a limited benefits policy form or certificate form in West Virginia shall be expected to return to policyholders and certificateholders in the form of five-year aggregate loss ratios under the policy form or certificate form:

(1) At least seventy-five percent of the earned premiums in the case of a group policy or certificate; and
(2) At least sixty-five percent of the earned premiums in the case of an individual policy. and
(3) At least fifty-five percent of the earned premiums in the case of an individual or group accident and sickness disability policy or certificate.
(b) With respect to a policy form or certificate form which has been offered by an insurer in West Virginia or nationally for five years or less the insurer may use the anticipated loss ratio filed with and approved by the commissioner for that form to determine compliance with the requirements of this section.
(c) For purposes of this section, limited benefits policies and certificates issued as a result of solicitation of individuals through the mail or mass media advertising, including both print and broadcast advertising, shall be treated as individual policies.
§ 33-16E-4. Premium refunds; calculation of refunds; payments.

(a) Beginning on the first day of July, one thousand nine hundred ninety-four, any insurer offering a limited benefits policy or certificate in West Virginia shall make premium refunds to policyholders and certificateholders if it fails to return to such policyholders and certificateholders in the form of annual loss ratios under the policy or certificate:

(1) At least sixty-five percent of the earned premiums in the case of a group policy or certificate; and
(2) At least fifty-five percent of the earned premiums in the case of an individual policy. and
(3) At least forty-five percent of the earned premiums in the case of an individual or group accident and sickness disability policy or certificate.
(b) With respect to a policy form or certificate form which has been offered by an insurer either in West Virginia or nationally for more than five years, refunds to West Virginia policyholders or certificateholders made pursuant to the requirements of this section and based upon annual earned premium volume in West Virginia shall be calculated by multiplying the anticipated loss ratio by the applicable earned premium during the experience period and subtracting from that result the actual incurred claims during the experience period.
(c) With respect to a policy form or certificate form which has been offered by an insurer for more than five years, refunds to West Virginia policyholders or certificateholders made pursuant to the requirements of this section and based upon national annual earned premium volume shall be calculated by:
(1) Multiplying the anticipated loss ratio by the applicable earned premium during the experience period and subtracting from that result the actual incurred claims during the experience period; and
(2) Multiplying the results of subdivision (1) of this subsection by the total earned premium during the experience period from all West Virginia policyholders or certificateholders eligible for refunds; and
(3) Dividing the results of subdivision (2) of this subsection by the total earned premium during that period in all states on the policy form.
(d) With respect to a policy form or certificate form which has been offered by an insurer in West Virginia or nationally for five years or less, the insurer may use the anticipated loss ratio filed with and approved by the commissioner to determine the amount of premium refunds, if any, that must be made pursuant to subsection (a) of this section.
(e) Refunds shall be made to all West Virginia policyholders and certificateholders who are insured under the applicable policy form or certificate as of the last day of the experience period. Such refund shall include interest, at the current accident and health reserve interest rate established by the national association of insurance commissioners, from the end of the experience period until the date of payment. Payment shall be made during the third quarter of the year following the experience period for which a refund is determined to be due.
(f) Refunds of less than ten dollars shall be aggregated and held by the insurer in a policyholders' and certificateholders' liability fund and shall be used to offset any future rate increases.
§ 33-16E-6. Notice of cancellation or nonrenewal.

No insurer may cancel or nonrenew a limited benefits policy or certificate unless written notice of such cancellation or nonrenewal is forwarded to the policyholder or certificateholder not less than sixty days prior to the expiration date of the policy or certificate, or in the case of nonpayment of premium not less than thirty days prior to the expiration date of the policy or certificate.

§ 33-16E-7. Prohibition against preexisting conditions, waiting periods, elimination periods and probationary periods in replacement policies or certificates.

(a) If a limited benefits policy or certificate replaces another limited benefits policy or certificate providing similar coverage, the replacing insurer shall waive any time periods applicable to preexisting conditions, waiting periods, elimination periods and probationary periods in the new limited benefits policy or certificate for similar benefits or benefit amounts to the extent that such time was spent under the original policy or certificate. If a limited benefits policy or certificate replaces another limited benefits policy or certificate with greater benefits or benefit amounts, this restriction shall only apply to the extent the coverages are the same, and not to any excess or greater coverage.

(b) If a limited benefits policy or certificate replaces another limited benefits policy or certificate providing similar coverage that has been in effect for at least six months, the replacing policy may not provide any time periods applicable to preexisting conditions, waiting periods, elimination periods and probationary periods.

NOTE: The purpose of this bill is to clarify provisions applicable to limited benefits accident and sickness insurance policies and certificates.