Sec. 360.11. Community rates applicable to commercial insurers, article 43 corporations, and HMOs

(a) Pooling of experience of different community-rated policies will be required where the superintendent determines that the policy form provides substantially similar benefits as another community-rated policy offered by the insurer in that market (individual or small group). Policies issued during different time periods under different forms may be determined to provide substantially similar benefits. Insurers should not develop separate community rates without substantial benefit variations. Benefit variations which shall not generally be considered substantial shall include, but not be limited to, variations in deductibles, coinsurance amounts, the number of days or visits covered or the adding or deleting of benefits which do not substantially affect premiums for the policy.

(b) The experience pool consisting of claims costs, marketing costs and administrative costs maintained for developing community rates for individuals may be separate from the experience pool maintained for developing community rates for groups. Insurers which currently utilize one experience pool for developing community rates for both individuals and groups are encouraged, but not required, to continue that practice. Insurers which currently utilize one experience pool for developing community rates for both small groups subject to chapter 501 and large groups not subject to chapter 501 are encouraged, but not required, to continue that practice.

(c) Rate tiers for family units (e.g., different community rates for individuals, two-person families and larger families) are permitted. However, the rate differences must be based upon the cost differences for the different family units and the rate tiers must be uniformly applied. Different rate tiers may apply to individuals than apply to small groups.

(d) The geographic rating areas filed as of July 17, 1992 may be retained or altered if, as part of the review and approval process, the superintendent determines that:

(1) Each regional component is geographically distinct and separate from every other regional component.

(2) The community rate for each geographic region must be based on the different costs and availability of providing health services in the respective regions.

(3) A rate is not established for a region smaller than a single county.

(4) A proposed region does not appear to contain configurations designed to avoid, or segregate into a separate region, particular areas within a county. All changes to rating areas are subject to prior approval even after October 1, 1994 when a commercial insurer utilizes the alternative rate filing procedure described in section 3231(e)(2) of the Insurance Law.

(e) Community rates shall change in accordance with the following rules, unless otherwise approved by the superintendent:

(1) Community rates shall change at the same time for all policies or contracts based upon the same community rates, regardless of differing renewal dates among the various groups or individuals holding such policies or contracts.

(2) Community rates shall change pursuant to the option for rolling premium rates which is a method that establishes a scale of annual rates that vary by quarter or month of issue. The premium rate in effect at each quarter (or month) remains constant for a stated period (usually one year). A schedule of rolling rates may be approved for a period not to exceed one year. The application of rolling premium rates may be illustrated by the following example (based on a two percent increase in premium each quarter) which assumes the insurer has submitted a second application to the superintendent regarding second year rates and that application has been approved.

Year	Quarter	Basic Single Premium
1	1	$100.00
1	2	102.00
1	3	104.04
1	4	106.12
2	1	108.24
2	2	110.41
2	3	112.62
2	4	114.87

(i) Groups enrolled during the first quarter would pay a monthly premium of $100 for a single employee. At renewal (after the first year) the rate would be $108.24. Similarly, enrollees during the second quarter of the first year would have an initial monthly premium of $102 and a renewal premium of $110.41.

(ii) The above illustration is based on a quarterly change of rates but could be arranged on a monthly basis.

(iii) For the second year, if no rate adjustment has been approved or filed as part of a second year rate adjustment (as appropriate), then the highest first-year rate (106.12 in the above example) remains in effect.

(f) An insurer may only charge a small group or an individual the community rate as approved by the superintendent. The only exception shall be in the event an insurer renders a rate quote to the group prior to the date the insurer receives the superintendent's written approval of that rate, and in that instance the rate quoted to the group may only be the proposed rate as submitted by the insurer to the superintendent and which is pending approval before the superintendent. In the event the rate approved by the superintendent varies from the rate the insurer proposed to the superintendent and quoted to the group, the variance must be reconciled at the next premium renewal date using a prospective adjustment. The prospective adjustment may involve a surcharge to the approved rates implemented by use of an approved rider or remitting agent agreement. This rider may be applied to a group contract or group remittance arrangement where the group remitting agent agrees to accept liability for payments due to the insurer. Any difference between the actual approved rate and the estimated annual rate must be reconciled by use of an advance premium deposit account (the accumulated surcharges). Settlement of the account must occur no later than 12 months after the end of the prior contract year or upon termination of the contract if earlier. Advance premium deposit accounts and the settlements of such accounts do not require the approval of the superintendent. In the event the rate increase is less than expected, the extra premium collected (overage) will be applied towards the following year's premium. If the rate increase is an amount in excess of what had been expected, then an adjustment for the shortage will be made, commencing at the yearly anniversary date, to ensure a level monthly rate of premium payment.

(g) Premium load and discount factors for the demographic pools, as set forth in section 361.3 of this Title shall be calculated as a constant percentage for each policy form across all pool areas in accordance with the following rules:

(1) Calculate the projected average demographic factor for all insureds on a policy form within each region as set forth in section 361.3 of this Title.

(2) The policy form's projected liability to or credit from a regional demographic pool shall be determined as a percentage of earned premiums before application of pooling loads or discounts, being the product of subparagraphs (i), (ii) and (iii) of this paragraph:

(i) −100

(ii) The projected incurred loss ratio of the policy form.

(iii) 1.0 minus the ratio of the projected regional demographic factor for the pool to the projected demographic factor for the policy form within the pool.

(3) Multiply the percentage calculated in paragraph (2) of this subdivision times the projected annualized premium for the policy form in the region.

(4) Sum the amounts from paragraph (3) of this subdivision for the policy form for all regions and divide by the total projected annualized premium for the policy form to calculate the net projected demographic pool load or discount for the policy.

(5) Premium loads and discounts due to paragraph (4) of this subdivision may be adjusted for commissions, premium taxes and other expenses incurred in the collection of premium adjusted for such loads and discounts, subject to separate approval by the department. Claims and other administrative expenses cannot be a part of that adjustment.

(h) As a general rule, insurers which are in both the individual market and the small group market shall compute the adjustments required by Part 361 of this Title separately for the individual market product than for the small group product and apply the increased, or decreased, cost attributable to Part 361 to that particular product. Insurers which have more than one community rated policy form within the small group or individual market shall compute the adjustment required by Part 361 separately for each community rated policy form within that market.

(1) Insurers which utilize one experience pool for developing community rates for small groups as well as large groups shall administer the adjustments required by Part 361 by applying the adjustment, at the insurer's option, either:

(i) to the entire experience pool; or

(ii) as an increase or decrease to the community rates applicable only to small groups.

(2) Insurers which utilize one experience pool for developing community rates for individuals as well as groups shall administer the adjustments required by Part 361 of this Title by applying the adjustment, at the insurer's option, either:

(i) to the entire experience pool; or

(ii) as an increase or decrease to the community rates, which shall be applicable only to small groups and individuals; or

(iii) as a decrease to the community rates, while shall be applicable only to individuals.

(i) As part of the rate filing of each separately community rated policy form, a separate page shall show the percentage or dollar adjustment to premiums for the form that is mandated by its share of one or more of the regional demographic pools and pools for specified medical conditions. Such page shall record the appropriate adjustments for each calendar quarter commencing with the second quarter of 1993 and shall be updated each time a change in the adjustment is required by the operation of the pooling mechanisms as described in Part 361 of this Title. The filing of all such adjustments shall be accompanied by exhibits detailing their calculation.

(j) Rate differences intended to reflect differences in expenses such as per case charges, premium volume discount or load scales and similar rate differences are not permitted.

(k) Commissions and marketing practices in the small group market must be uniformly applied to all size cases. If an insurer pays commissions on any small group case, then that insurer must pay commissions on all small group cases, using the same commission scale. The commission scale must pay a flat percentage of premium or a percentage which decreases as premium increases or a flat dollar amount per person or a flat dollar amount per case. Payment of commissions or other sales compensation based on loss ratio or in any way reflecting or dependent upon the experience of any case or group of cases and payment of no commissions or reduced commissions on cases below a specified size are prohibited practices. An insurer is not prohibited from selecting, appointing or using the services of agents or brokers in accordance with its normal selection practice. However, the use of agents or brokers cannot be limited to a certain size market, such as, cases of 10 or more lives. An insurer must notify every licensed agent or broker with whom it does business of current commission practices, revised if necessary to comply with this subdivision, by March 1, 2001 and at least annually thereafter.