Section R20-6-2301. Applicability; Definitions

A.      This Article applies to rates charged by health insurers for individual health insurance. This Article does not apply to rates charged by health insurers for the following:

1.        Health insurance that a health insurer issues to an employer or to any group described in either A.R.S. § 20- 1401 or A.R.S. § 20-1404(A), except health insurance issued to an association or its individual members as described in R20-6-2301(B)(7)(b);

2.        Grandfathered health plan coverage as defined in 45 CFR 147.140; or

3.        Health insurance that covers excepted benefits as described in section 2791(c) of the PHS Act, 42 U.S.C. 300gg-91(c).

B.       In this Article, the following definitions apply:

1.        “Department” means the Arizona Department of Insur- ance.

2.        “Blanket disability insurance” has the meaning pre- scribed in A.R.S. § 20-1404(A).

3.        “CMS” means the Centers for Medicare & Medicaid Ser- vices.

4.        “Federal medical loss ratio standard” means the applica- ble medical loss ratio standard determined under 45 CFR 158, Subpart B.

5.        “Health insurance” means disability insurance as defined in A.R.S.  § 20-253, a health care plan as defined  in

A.R.S. § 20-1051(5) and disability insurance or a health care plan offered by a hospital service corporation, medi- cal service corporation or hospital, medical, dental and optometric service corporation as defined in A.R.S. § 20- 822(3).

6.        “Health insurer” means an insurer, as that term is defined in A.R.S. § 20-104, authorized to transact disability insur- ance in Arizona, a health care services organization as defined in A.R.S. § 20-1051(7) or a hospital service cor- poration, medical service corporation or hospital, medi- cal, dental and optometric service corporation as defined in A.R.S. § 20-822(3).

7.        “Individual health insurance” means health insurance that a health insurer issues to either:

a.         An individual, to cover:

i.         The individual, or

ii.        The individual’s dependents, or

iii.      The individual and the individual’s dependents.

b.        An association or its individual members to cover the individual members and their dependents, and which the Department would regulate under A.R.S. Title 20, Chapter 6 as individual health insurance if the health insurer did not issue it to an association or individual members of an association.

8.        “PHS Act” means Part A of Title XXVII of the Public Health Service Act, 42 U.S.C. Chapter 6A.

9.        “Product” means a package of health insurance benefits with a discrete set of rating and pricing methodologies that a health insurer offers as individual insurance in Ari- zona.

10.     “Preliminary justification” means a justification that con- sists of the parts described in R20-6-2302(A).

11.     “Rate increase” means an increase of the rates for an indi- vidual health insurance product that a health insurer offers in Arizona that:

a.         Results from a change to the underlying rate struc- ture of the product, and

b.        May result in premium changes for the product.

12.     “Secretary” means the Secretary of  the United States Department of Health and Human Services.

13.     “Threshold rate increase” means a rate increase that meets or exceeds an Arizona-specific threshold as noticed by the Secretary in 45 CFR 154.200, provided:

a.         The average increase for all enrollees weighted by premium volume meets or exceeds the applicable threshold; and

b.        If a rate increase that does not otherwise meet or exceed the Arizona-specific threshold meets or exceeds the Arizona-specific threshold when com- bined with a previous increase or increases during the 12-month period preceding the date on which the rate increase would become effective, then the rate increase must be considered to meet or exceed the Arizona-specific threshold and is subject to thresh- old rate review that shall include a review of the aggregate rate increases during the applicable 12- month period.

14.     “Threshold rate review” means the review by the Depart- ment under this Article of a threshold rate increase.

15.     “Unreasonable rate increase” means a rate increase that results in benefits that are not reasonable in relation to the premium the health insurer charges for the product. The following factors are relevant in determining whether a rate increase results in benefits that are unreasonable in relation to premium:

a.         The rate increase results in a projected medical loss ratio below the federal medical loss ratio standard after accounting for any adjustments allowable under federal law;

b.        One or more of the assumptions on which the health insurer based the rate increase is not supported by sound actuarial reasoning, data and analysis;

c.         The choice of assumptions or combination of assumptions on  which the insurer  based the rate increase is unreasonable;

d.        The health issuer provides data or documentation that is incomplete, inadequate or otherwise does not provide a basis upon which the Department can determine the reasonableness of a rate increase; or

e.         The increase results in premium differences between insureds within similar risk categories that are unfairly discriminatory under A.R.S. Title 20, Chap- ter 2, Article 6.

Historical Note

New Section made by final rulemaking at 18 A.A.R.

2721, effective October 3, 2012 (Supp. 12-4).