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Certificate of Need Review: Adult Day Programs and Assisted Living Residences Generally Exempted

Bulletin
Wednesday, April 12, 2006
Health Care Bulletin #119

File attachments: 

http://www.dfr.vermont.gov/sites/default/files/BUL-H-119.pdf

Health Care Administration Bulletin 119

Certificate of Need Review: Adult Day Programs and Assisted Living Residences Generally Exempted

 

Introduction

The purpose of this bulletin is to notify potential developers of Adult Day Programs and Assisted Living Residences how the Department handles Certificate of Need (CON) review of such entities.

The question concerns the population that adult day programs and assisted living residences serve and what services that population receives. As this population becomes increasingly frail and ages in place, more and more of these facilities have medical components that include medical “diagnosis” and, to some extent, medical “treatment” on site. Examples include: physical, occupational and speech therapies, wound care, nebulizer treatments, pouring and dispensing of medications by nurses, drawing blood, checking blood glucose levels, foot care, checking vital signs. Staff, usually Licensed Nursing Assistants (LNA) level staff, also assist with personal care such as feeding, ambulation, toileting, and bathing.

Vermont’s CON law defines a “health care facility” as “all persons or institutions, whether public or private, proprietary or not-for-profit, which offer diagnosis, treatment, inpatient or ambulatory care to two or more unrelated persons, and the buildings in which those services are offered.”

The law defines healthcare services as “activities and functions of a healthcare facility that are directly related to care, treatment or diagnosis of patients.” Health care facilities providing services or initiating projects over certain dollar thresholds require a CON before such actions can be implemented.

Adult Day Programs

Historically, the Department has not reviewed Adult Day Programs as the services provided in adult day settings, until recently, have been primarily social, rather than medical, in nature. There are 14 Adult Day Programs operating 17 different sites that are certified by the Vermont Department of Disabilities, Aging and Independent Living (DAIL) and none were reviewed through the CON program.

Currently DAIL certifies all Adult Day Programs in Vermont and has written Standards that must be met. To be certified by DAIL, each Adult Day Program must now have a Registered Nurse to provide health coordination, including completing health assessments, contributing to the development of written plans of service, evaluating and documenting the on-going services provided to participants and providing instruction and supervision to staff. According to Standards for Adult Day Services in Vermont (page 22) the Registered Nurse is permitted to perform the full range of activities allowed under the Vermont Nurse Practices Act. Registered Nurses in Adult Day settings have performed assessments and evaluations, coordinated care with physicians, drawn blood, performed wound care, administered prescription drugs and are permitted to practice within the scope allowed by the Vermont Nurse Practices Act. Adult Day Programs are regulated by DAIL including the following areas:

  • Initial certification: DAIL certifies each program initially, determining whether the program meets the DAIL standards;
  • Annual quality management site review: DAIL conducts such reviews at previously certified programs, which includes interviews with participants, family members, staff and other relevant persons/organizations;
  • Internal quality assurance program;
  • Agency contracts with other entities;
  • Program administration;
  • Program policies;
  • Participant policies, including grievance policy with final appeal to Board of Directors, and policy for involuntary discharge from the center;
  • Participant records;
  • Facility requirements.

Assisted Living Residences

Historically, the Department has not asserted jurisdiction over Assisted Living Residences as they have been viewed as housing and housing is not subject to CON review. There are currently 5 licensed Assisted Living Residences in Vermont. DAIL licenses Assisted Living Residences in Vermont and has written licensing regulations. Regulations for Assisted Living Residences are based on the Residential Care Home regulations with additional requirements for Assisted Living Residence settings. Typically, on-going nursing and medical care is not needed for most residents in Assisted Living Residences. If on-going nursing and medical care is needed, the resident may contract with an existing provider or receive nursing services from the nursing staff employed by the Assisted Living Residence. Nursing services in Assisted Living Residences are currently based on tiers related to care needs.

DAIL regulates Assisted Living Residences and conducts the initial survey prior to issuing a license and may inspect any facility licensed as an Assisted Living Residence at any time DAIL considers an inspection necessary. DAIL also has the authority to investigate and survey a home that is unlicensed and meets the definition of a residential care home.

DAIL’s regulation for Assisted Living Residences allows for the provision of health care, including the following:

  • Nursing care and medication management (assistance and administration of medication) provided under the supervision of a Registered Nurse;
  • Home health services: A resident may choose to have needed home health services delivered by an existing home health agency or by the nursing staff at the Assisted Living Residence.

Conclusions and Guidance

If medical services in Adult Day Programs and Assisted Living Residences are secondary and limited, and are permitted and regulated by DAIL, such services would not require CON review.

Prior to initiating diagnosis or treatment projects or services, that would exceed the CON dollar thresholds, 1 Adult Day Programs and Assisted Living Residences should send a letter to the Department and DAIL outlining the projects or services in sufficient detail to allow the Departments to determine whether a proposed expenditure or action would result in the provision of a level of diagnosis or treatment that would require CON review because medical services are no longer secondary and limited.

Questions relating to whether and Adult Day Programs and Assisted Living Residences are subject to CON jurisdiction should be directed to Jennifer Garson or Donna Jerry at 802-828-2900.

Date:__4/12/06______



1 See 18 V.S.A. §9434. Generally the thresholds include: Construction, development, purchase, renovation or other establishment of a health care facility or any capital expenditure by or on behalf of a health care facility for which the cost exceeds $1.5 million or exceeding $750,000 if the Commissioner finds the project a) may be inconsistent with the Health Resource Allocation Plan; b) has the potential for significantly increasing utilization or rates; or c) may substantially change the type, scope or volume of service; offering of a health care service or technology having an annual operating expense which exceeds $500,000 for either of the next two budgeted fiscal years; or offering of any home health service.

Definition of Credible Coverage

Bulletin
Thursday, September 2, 2004
Health Care Bulletin #113

File attachments: 

http://www.dfr.vermont.gov/sites/default/files/BUL-H-113.pdf

HCA Bulletin 113 – Definition of Creditable Coverage

Vermont law requires both non-group and small group carriers to waive pre-existing condition exclusions for those applicants who produce evidence of 9 months of creditable coverage. 8 V.S.A. § 4080a(g) and 4080b(g). This language limits creditable coverage to coverage that is substantially equivalent to the common health plan approved by the commissioner.

Vermont law also states that “[f]or an eligible individual, as such term is defined in section 2741 of Title XXVII of the Public Health Service Act, a registered non group carrier shall not limit coverage of preexisting conditions.” 8 V.S.A. § 4080b(g). This federal definition of an eligible individual, which was enacted by the Health Insurance Portability and Accountability Act (HIPAA), requires, among other things, that the individual have at least 18 months of prior creditable coverage. HIPAA, and the federal regulations adopted pursuant to HIPAA, however, provide a more expansive definition of creditable coverage than Vermont law.

HIPAA defines creditable coverage to include any of the following: a group health plan, such as one obtained through an employer or a spouse’s employer; health insurance coverage, including individual coverage; Medicare and Medicaid; CHAMPUS/ TriCare; a medical program of the Indian Health Service Act or of a tribal organization; a state health benefits high risk pool; the Federal Employees Health Benefits Program; a public health plan; and a health benefit plan under section 5(e) of the Peace Corps Act. This definition of creditable coverage includes any hospital or medical service policy or certificate, hospital or medical service plan contract, or HMO contract offered by a health insurance issuer, which includes, but is not limited to, comprehensive non-group, small group and large group policies, basic hospital expense policies, basic medical-surgical expense policies, and major medical expense policies. This definition of creditable coverage is applicable when applying the HIPAA rules concerning pre-existing condition exclusions to applicants for non-group, small group and large group insurance.

This Bulletin reiterates the interpretation of these provisions of Vermont statute and the requirement imposed by HIPAA and the HIPAA regulations. All carriers are required to actively solicit information about prior coverage from applicants for health insurance in order to identify those applicants who either meet the federal definition of an eligible individual or meet the requirements of Vermont law or federal law for a waiver of preexisting condition exclusions. Accordingly, all health insurance applications must contain specific questions designed to elicit information about health insurance coverage for the applicant or the applicant’s dependents, including coverage of any of the above listed types of coverage, as well as the time period during which such coverage was in place.

All major medical carriers are directed to notify the Department, no later than three weeks from the issuance of this bulletin, of the manner in which it will comply with these requirements. If you have questions concerning this Bulletin, please contact Cassandra Edson at (802) 828-2900.

Repeal of Bulletin 87 (Alcohol Benefit Statistics)

Bulletin
Tuesday, July 9, 2002
Health Care Bulletin #111

File attachments: 

http://www.dfr.vermont.gov/sites/default/files/BUL-H-111.pdf

July 29, 2002

BULLETIN HCA -111

REPEAL OF BULLETIN 87

(ALCOHOL BENEFITS STATISTICS)

8 V.S.A. § 4099b required all insurers to compile data and periodically file statistical information relating to Alcohol Benefits with the Department for the purpose of identifying, measuring, and monitoring the services reimbursed under Subchapter 6 of Chapter 107 in Title 8 of the Vermont Statutes Annotated.

Bulletin # 87 was issued on 9/8/87 to notify insurers as to the specifics of the required data filing relating to alcohol benefits in accordance with 8 V.S.A. § 4099b.

8 V.S.A. § 4099b was repealed in 1997. The repeal applies to any health insurance plan offered or renewed on and after January 1, 1998.

Therefore, the reporting requirements only apply to plans offered prior to 1/1/98 that have not since renewed. Health insurance plans offered or renewed on and after January 1, 1998 do not have monitoring or reporting obligations under Vermont law.

As many plans were offered on or after 1/1/98 and most plans issued prior to 1/1/98 will have renewed since, the data required by 8 V.S.A. § 4099b and further specified by Bulletin 87 will be of increasingly limited value to the Department.

Hence, the Department hereby rescinds Bulletin # 87 and from this date forward will no longer require insurers, non-profit hospital and medical service plan corporations and health maintenance organizations transacting health insurance in Vermont to compile or file statistical information pursuant to 8 V.S.A. § 4099b.

If you have any questions concerning this Bulletin, please contact Theo Kennedy at (802) 828-2904.

Implementation of Vermont Act 91 with Respect to Health Insurance: Civil Unions Mandatory Endorsement and Related Issues for Insurers

Bulletin
Thursday, December 21, 2000
Health Care Bulletin #110

File attachments: 

http://www.dfr.vermont.gov/sites/default/files/Bulletin_HCA_110.pdf

HCA Bulletin 110

December 21, 2000

Implementation of Vermont Act 91 with Respect to Health Insurance:

Civil Unions Mandatory Endorsement and Related Issues for Insurers

Effective January 1, 2001, all policies and contracts must be in compliance with Act 91 of the 2000 Legislative Session, Vermont=s new AAct Relating to Civil Unions.@ An unofficial version of the full text of the Act is available at the web site of the Vermont State Legislature, at http://www.leg.state.vt.us/docs/2000/acts/ACT091.HTM. A review of the language of the Act should be helpful as insurers encounter specific issues and questions.

Section 17 of the Act requires that insurance contracts and policies offered to married couples, spouses and families also be made available to civil union couples, parties to the civil union and their families. Section 18 of the Act requires that health insurers offer dependent coverage to parties to a civil union and their families. Dependent coverage is defined as family coverage or two-person coverage. Act 91 requires that the Commissioner adopt rules necessary to carry out the purposes of the law. On December 6, 2000, the Department adopted regulation No. 2000-01-IH relating to civil unions that will take effect January 1, 2001. A copy of the regulation is available at the Department’s website at http://bishca.state.vt.us.

This new law authorizes the Commissioner to adopt, by Order, standards and a process to bring currently approved forms into compliance with Vermont law. The Commissioner will issue an Order (a draft of the Order is attached), effective January 1, 2001 requiring all health insurers to adopt the Vermont Mandatory Civil Unions Endorsement or file, for approval, an alternative endorsement that complies with Act 91, for all policies, contracts, certificates, riders and endorsements subject to regulation by the Commissioner. Insurers are responsible for ensuring that the endorsement attached to policies and contracts has been approved by the Department and is compatible with those forms.

Unless it is otherwise determined that specific forms need to be amended and filed for approval, insurers adopting the Vermont Mandatory Civil Unions Endorsement (the endorsement attached is the final version adopted by the Department) need not make form changes or submit a form filing specific to Act 91. If insurers choose to make specific form changes, these must be filed for approval.

An approved endorsement must be attached to all policies, contracts, certificates, riders and endorsements offered, issued, renewed or delivered in the state of Vermont. Insurers are allowed to include these endorsements with their renewals in 2001. For all contracts and policies that do not contain a renewal date, the contract or policy must be endorsed on the first anniversary of the policy effective date that occurs in 2001. For example, a contract or policy with an effective date of March 1, 1998 must be endorsed by March 1, 2001. If an insured requests that their policy be amended to comply with Act 91, the insurer shall promptly endorse or amend the contract using a form approved by the Department. Effective January 1, 2001, all health insurance policies and contracts shall be interpreted to provide equivalent benefits for married couples and civil union couples, and their families, whether or not they have been physically endorsed or amended at the time a claim is made.

The insurance provisions of Act 91 apply to insurers. Under federal law, the Employee Retirement Income Security Act of 1974 (ERISA), private employers determine eligibility for

enrollment in fully insured or self funded employee welfare benefit plans. Because of ERISA, Act 91 does not state requirements pertaining to a private employer’s enrollment of a party to a

civil union in an ERISA employee welfare benefit plan. However, governmental employers (not federal government) are not subject to ERISA and, therefore, are required to provide health benefits to the dependents of a party to a civil union if the public employer provides health benefits to the dependents of married persons.

Private employers should be directed to consult their own counsel for specific advice in establishing eligibility requirements for their ERISA health benefit plans. Insurers are not obligated to provide group coverage to a dependent of a party to a civil union if the private employer has declined to enroll that dependent even where the private employer provides benefits to the dependents of married persons.

The Department, in cooperation with the Vermont Department of Taxes, is preparing a AFrequently Asked Questions@ publication for parties to civil unions.

Department Contact Information: Paula DiStabile, Esq., Division Health Care Administration, (802) 828-2900

Re: Regulation 93-4: Uniform Claim Forms and Uniform Standards and Procedures for Processing Dental Coding

Bulletin
Thursday, November 2, 2000
Health Care Bulletin #109

File attachments: 

http://www.dfr.vermont.gov/sites/default/files/BUL-H-109.pdf

BULLETIN HCA-109

RE: Regulation 93-4: Uniform Claim Forms and Uniform Standards and Procedures for Processing Dental Coding

This Bulletin clarifies Vermont Insurance Regulation 93-4.

It is the Department’s position that Regulation 93-4 applies equally to health care providers and health insurers. Pursuant to the regulation’s requirement that the most current dental terminology (“CDT”) be used, the Department requires that dental providers and health insurers offering dental benefits submit, process, or reimburse all dental claims using CDT-3 no later than January 1, 2001.

Questions about this Bulletin may be directed to Jeff Fannon of the Division of Health Care Administration at (802) 828-2900.

Dated: 11/2/00

Elizabeth R. Costle, Commissioner

Department of Banking, Insurance, Securities and Health Care Administration

Actuarial Opinion and Memorandum

Regulation
Wednesday, January 1, 1997
Reg-97-04

File attachments: 

http://www.dfr.vermont.gov/sites/default/files/REG-IH-97-04.pdf

REGULATION 97-4 Actuarial Opinion & Memorandum

REGULATION 97-4 S 1

The purposes of this regulation are to prescribe:

A. Guidelines and standards for statements of actuarial opinion which are to be submitted in accordance with 8 V.S.A. 3561, 3577, subchapter 4 of Chapter 103 and Chapter 121 and for memoranda in support thereof;

B. Guidelines and standards for statements of actuarial opinion which are to be submitted when a company is exempt from 8 V.S.A. 3577 or 3782; and C. Rules applicable to the appointment of an appointed actuary.

REGULATION 97-4 S 2

This regulation is issued pursuant to the authority vested in the Commissioner of the Department of Banking, Insurance, Securities and Health Care Administration of the State of Vermont under 8 V.S.A 75, 3561, 3577 and subchapter 4 of Chapter 103 (Standard Valuation Law). This regulation will take effect beginning with annual statements filed for the year 1997.

REGULATION 97-4 S 3

This regulation shall apply to all life insurance companies and fraternal benefit societies doing business in this State and to all life insurance companies and fraternal benefit societies which are authorized to reinsure life insurance, annuities or accident and health insurance business in this State.

This regulation shall be applicable to all annual statements filed with the office of the commissioner after the effective date of this regulation. Except with respect to companies which are exempted pursuant to Section 6 of this regulation, filing of a statement of opinion on the adequacy of the reserves and related actuarial items based on an asset adequacy analysis in accordance with Section 8 of this regulation, and a memorandum in support thereof in accordance with Section 9 of this regulation, shall be required each year. Any company so exempted must file a statement of actuarial opinion pursuant to Section 7 of this regulation.

Notwithstanding the foregoing, the commissioner may require any company otherwise exempt pursuant to this regulation to submit a statement of actuarial opinion and to prepare a memorandum in support thereof in accordance with Sections 8 and 9 of this regulation if, in the opinion of the commissioner, an asset adequacy analysis is necessary with respect to the company.

REGULATION 97-4 S 4

A. Actuarial Opinion Actuarial Opinion means:

(1) With respect to Section 8, 9 or 10, the opinion of an Appointed Actuary regarding the adequacy of the reserves and related actuarial items based on an asset adequacy test in accordance with Section 8 of this regulation and with presently accepted Actuarial Standards;

(2) With respect to Section 7, the opinion of an Appointed Actuary regarding the calculation of reserves and related items, in accordance with Section 7 of this regulation and with those presently accepted Actuarial Standards which specifically relate to this opinion.

B. Actuarial Standards Board

Actuarial Standards Board is the board established by the American Academy of Actuaries to develop and promulgate standards of actuarial practice.

C. Annual Statement

Annual Statement means that statement required by 8 V.S.A. 3561 or 8 V.S.A. 4494 to be filed by the company with the office of the commissioner annually.

D. Appointed Actuary

Appointed Actuary means any individual who is appointed or retained in accordance with the requirements set forth in Section 5C of this regulation to provide the actuarial opinion and supporting memorandum as required by 8 V.S.A. 3577.

E. Asset Adequacy Analysis Asset Adequacy Analysis means an analysis that meets the standards and other requirements referred to in Section 5D of this regulation. It may take many forms, including, but not limited to, cash flow testing, sensitivity testing or applications of risk theory.

F. Commissioner

Commissioner means the Commissioner of Banking, Insurance, Securities and Health Care Administration.

G. Company

Company means a life insurance company, fraternal benefit society or reinsurer subject to the provisions of this regulation.

H. Non-Investment Grade Bonds Non-Investment Grade Bonds are those designated as classes 3, 4, 5 or 6 by the NAIC Securities Valuation Office.

I. Qualified Actuary Qualified Actuary means any individual who meets the requirements set forth in Section 5B of this regulation.

REGULATION 97-4 S 5

A. Submission of Statement of Actuarial Opinion

(1) There is to be included on or attached to Page 1 of the annual statement for each year beginning with the year in which this regulation becomes effective the statement of an appointed actuary, entitled Statement of Actuarial Opinion, setting forth an opinion relating to reserves and related actuarial items held in support of policies and contracts, in accordance with Section 8 of this regulation; provided, however, that any company exempted pursuant to Section 6 of this regulation from submitting a statement of actuarial opinion in accordance with Section 8 of this regulation shall include on or attach to Page 1 of the annual statement a statement of actuarial opinion rendered by an appointed actuary in accordance with Section 7 of this regulation.

(2) If in the previous year a company provided a statement of actuarial opinion in accordance with Section 7 of this regulation, and in the current year fails the exemption criteria of Sections 6C(1), 6C(2) or 6C(5) to again provide an actuarial opinion in accordance with Section 7, the statement of actuarial opinion in accordance with Section 8 shall not be required until August 1 following the date of the annual statement. In this instance, the company shall provide a statement of actuarial opinion in accordance with Section 7 with appropriate qualification noting the intent to subsequently provide a statement of actuarial opinion in accordance with Section 8.

(3) In the case of a statement of actuarial opinion required to be submitted by a foreign or alien company, the commissioner may accept the statement of actuarial opinion filed by such company with the insurance supervisory regulator of another state if the commissioner determines that the opinion reasonably meets the requirements applicable to a company domiciled in this state.

(4) Upon written request by the company, the commissioner may grant an extension of the date for submission of the statement of actuarial opinion.

B. Qualified ActuaryA qualified actuary is an individual who meets the requirements of 8

V.S.A. 3577(h) and has not been disqualified under 8 V.S.A. 3577(j).

C. Appointed Actuary An appointed actuary is a qualified actuary who is appointed or retained to prepare the Statement of Actuarial Opinion required by this regulation; either directly by or by the authority of the board of directors through an executive officer of the company. The company shall give the commissioner timely written notice of the name, title and, in the case of a consulting actuary, the name of the firm and manner of appointment or retention of each person appointed or retained by the company as an appointed actuary and shall state in such notice that the person meets the requirements set forth in Section 5B. Once notice is furnished, no further notice is required with respect to this person, provided that the company shall give the commissioner timely written notice in the event the actuary ceases to be appointed or retained as an appointed actuary or to meet the requirements set forth in Section 5B. If any person appointed or retained as an appointed actuary replaces a previously appointed actuary, the notice shall so state and give the reasons for replacement.

D. Standards for Asset Adequacy Analysis The asset adequacy analysis required by this regulation:

(1) Shall conform to the Standards of Practice as promulgated from time to time by the Actuarial Standards Board and on any additional standards under this regulation, which standards are to form the basis of the statement of actuarial opinion in accordance with Section 8 of this regulation; and

(2) Shall be based on methods of analysis as are deemed appropriate for such purposes by the Actuarial Standards Board.

E. Liabilities to be Covered

(1) Under authority of 8 V.S.A. Chapter 3, subchapter 4, Standard Valuation Law, and Chapter 121, on fraternal benefit societies, the statement of actuarial opinion shall apply to all in force business on the statement date regardless of when or where issued, e.g., reserves of Exhibits 8, 9 and 10, and claim liabilities in Exhibit 11, Part I in the annual statement required in 8 V.S.A. 3561 and equivalent items in the separate account statement or statements and successor exhibits to these exhibits.

(2) If the appointed actuary determines as the result of asset adequacy analysis that a reserve should be held in addition to the aggregate reserve held by the company and calculated in accordance with methods set forth in 8 V.S.A. Chapter 103, subchapter 4 and Chapter 121, the company shall establish such additional reserve.

(3) For years ending prior to December 31, 2000, the company may, in lieu of establishing the full amount of the additional reserve in the annual statement for that year, set up an additional reserve in an amount not less than the following:

December 31, 1998: The additional reserve divided by three. December 31, 1999: Two times the additional reserve divided by three.

(4) Additional reserves established under subdivision (E)(2) or (3) of this section and deemed not necessary in subsequent years may be released. Any amounts released must be disclosed in the actuarial opinion for the applicable year. The release of such reserves would not be deemed an adoption of a lower standard of valuation.

REGULATION 97-4 S 6

A. General

In accordance with 8 V.S.A. Chapter 103, subchapter 4 and Chapter 121, every company doing business in this state shall annually submit the opinion of an appointed actuary as provided for by this regulation. The type of opinion submitted shall be determined by the provisions set forth in this Section 6 and shall be in accordance with the applicable provisions in this regulation.

B. Company Categories

For purposes of this regulation, companies shall be classified as follows based on the admitted assets as of the end of the calendar year for which the actuarial opinion is applicable:

(1) Category A shall consist of those companies whose admitted assets do not exceed $20 million;

(2) Category B shall consist of those companies whose admitted assets exceed $20 million but do not exceed $100 million;

(3) Category C shall consist of those companies whose admitted assets exceed $100 million but do not exceed $500 million; and (4) Category D shall consist of those companies whose admitted assets exceed $500 million.

C. Exemption Eligibility Tests

(1) Any Category A company that, for any year beginning with the year in which this regulation becomes effective, meets all of the following criteria shall be eligible for exemption from submission of a statement of actuarial opinion in accordance with Section 8 of this regulation for the year in which these criteria are met. The ratios in (a),

(b) and (c) below shall be calculated based on amounts as of the end of the calendar year for which the actuarial opinion is applicable.

(a) The ratio of the sum of capital and surplus to the sum of cash and invested assets is at least equal to .10.

(b) The ratio of the sum of the reserves and liabilities for annuities and deposits to the total admitted assets is less than .30.

(c) The ratio of the book value of the non-investment grade bonds to the sum of capital and surplus is less than .50.

(d) The Examiner Team for the National Association of Insurance Commissioners (NAIC) has not designated the company as a first priority company in any of the two (2) calendar years preceding the calendar year for which the actuarial opinion is applicable, or a second priority company in each of the two (2) calendar years preceding the calendar year for which the actuarial opinion is applicable, or the company has resolved the first or second priority status to the satisfaction of the commissioner of the state of domicile and the commissioner has so notified the chair of the NAIC Life and Health Actuarial Task Force and the NAIC Staff and Support Office.

(2) Any Category B company that, for any year beginning with the year in which this regulation becomes effective, meets all of the following criteria shall be eligible for exemption from submission of a statement of actuarial opinion in accordance with Section 8 of this regulation for the year in which the criteria are met. The ratios in (a), (b) and (c) below shall be calculated based on amounts as of the end of the calendar year for which the actuarial opinion is applicable.

(a) The ratio of the sum of capital and surplus to the sum of cash and invested assets is at least equal to .07.

(b) The ratio of the sum of the reserves and liabilities for annuities and deposits to the total admitted assets is less than .40.

(c) The ratio of the book value of the non-investment grade bonds to the sum of capital and surplus is less than .50.

(d) The Examiner Team for the National Association of Insurance Commissioners (NAIC) has not designated the company as a first priority company in any of the two (2) calendar years preceding the calendar year for which the actuarial opinion is applicable, or a second priority company in each of the two (2) calendar years preceding the calendar year for which the actuarial opinion is applicable, or the company has resolved the first or second priority status to the satisfaction of the commissioner of the state of domicile and the commissioner has so notified the chair of the NAIC Life and Health Actuarial Task Force and the NAIC Staff and Support Office.

(3) Any Category A or Category B company that meets all of the criteria set forth in Paragraph (1) or (2) of this subsection, whichever is applicable, is exempted from submission of a statement of actuarial opinion in accordance with Section 8 of this regulation unless the commissioner specifically indicates to the company that the exemption is not to be taken.

(4) Any Category A or Category B company that, for any year beginning with the year in which this regulation becomes effective, is not exempted under Paragraph (3) of this subsection shall be required to submit a statement of actuarial opinion in accordance with Section 8 of this regulation for any year for which it is not exempt.

(5) Any Category C company that, after submitting an opinion in accordance with Section 8 of this regulation, meets all of the following criteria shall not be required, unless required in accordance with subdivision (6), to submit a statement of actuarial opinion in accordance with Section 8 of this regulation more frequently than every third year. Any Category C company which fails to meet all of the following criteria for any year shall submit a statement of actuarial opinion in accordance with Section 8 of this regulation for that year. The ratios in (a), (b) and (c) below shall be calculated based on amounts as of the end of the calendar year for which the actuarial opinion is applicable.

(a) The ratio of the sum of capital and surplus to the sum of cash and invested assets is at least equal to .05.

(b) The ratio of the sum of the reserves and liabilities for annuities and deposits to the total admitted assets is less than .50.

(c) The ratio of the book value of the non-investment grade bonds to the sum of the capital and surplus is less than .50.

(d) The Examiner Team for the National Association of Insurance Commissioners (NAIC) has not designated the company as a first priority company in any of the two (2) calendar years preceding the calendar year for which the actuarial opinion is applicable, or a second priority company in each of the two (2) calendar years preceding the calendar year for which the actuarial opinion is applicable, or the company has resolved the first or second priority status to the satisfaction of the commissioner of the state of domicile and the commissioner has so notified the chair of the NAIC Life and Health Actuarial Task Force and the NAIC Staff and Support Office.

(6) Any company which is not required by this Section 6 to submit a statement of actuarial opinion in accordance with Section 8 of this regulation for any year shall submit a statement of actuarial opinion in accordance with Section 7 of this regulation for that year unless as provided for by the second paragraph of Section 3 of this regulation the Commissioner requires a statement of actuarial opinion in accordance with Section 8 of this regulation.

D. Large Companies

Every Category D company shall submit a statement of actuarial opinion in accordance with Section 8 of this regulation for each year beginning with the year in which this regulation becomes effective.

REGULATION 97-4 S 7

A. General Description The statement of actuarial opinion required by this section shall consist of a paragraph identifying the appointed actuary and his or her qualifications; a regulatory authority paragraph stating that the company is exempt pursuant to this regulation from submitting a statement of actuarial opinion based on an asset adequacy analysis and that the opinion, which is not based on an asset adequacy analysis, is rendered in accordance with Section 7 of this regulation; a scope paragraph identifying the subjects on which the opinion is to be expressed and describing the scope of the appointed actuary's work; and an opinion paragraph expressing the appointed actuary's opinion as required by 8 V.S.A. Chapter 103, subchapter 4.

B. Recommended Language The following language provided is that which in typical circumstances would be included in a statement of actuarial opinion in accordance with this section. The language may be modified as needed to meet the circumstances of a particular case, but the appointed actuary should use language which clearly expresses his or her professional judgment. However, in any event the opinion shall retain all pertinent aspects of the language provided in Section 7.

(1) The opening paragraph should indicate the appointed actuary's relationship to the company. For a company actuary, the opening paragraph of the actuarial opinion should read as follows:

I, [name of actuary], am [title] of [name of company] and a member of the American Academy of Actuaries. I was appointed by, or by the authority of, the Board of Directors of said insurer to render this opinion as stated in the letter to the Commissioner dated [insert date]. I meet the Academy qualification standards for rendering the opinion and am familiar with the valuation requirements applicable to life and health companies.

For a consulting actuary, the opening paragraph of the actuarial opinion should contain a sentence such as:

I, [name and title of actuary], a member of the American Academy of Actuaries, am associated with the firm of [insert name of consulting firm]. I have been appointed by, or by the authority of, the Board of Directors of [name of company] to render this opinion as stated in the letter to the Commissioner dated [insert date]. I meet the Academy qualification standards for rendering the opinion and am familiar with the valuation requirements applicable to life and health insurance companies.

(2) The regulatory authority paragraph should include a statement such as the following: Said company is exempt pursuant to Regulation 97-4 of the Vermont Department of Banking, Insurance, Securities and Health Care Administration from submitting a statement of actuarial opinion based on an asset adequacy analysis. This opinion, which is not based on an asset adequacy analysis, is rendered in accordance with Section 7 of the regulation.

(3) The scope paragraph should contain a sentence such as the following:

I have examined the actuarial assumptions and actuarial methods used in determining reserves and related actuarial items listed below, as shown in the annual statement of the company, as prepared for filing with state regulatory officials, as of December 31, [ ].

The paragraph should list items and amounts with respect to which the appointed actuary is expressing an opinion. The list should include but not be necessarily limited to:

(a) Aggregate reserve and deposit funds for policies and contracts included in Exhibit 8 of the annual statement required in 8 V.S.A. 3561, 3569 and 4494;

(b) Aggregate reserve and deposit funds for policies and contracts included in Exhibit 9 of the annual statement required in 8 V.S.A. 3561, 3569 and 4494;

(c) Deposit funds, premiums, dividend and coupon accumulations and supplementary contracts not involving life contingencies included in Exhibit 10 of the annual statement required in 8 V.S.A. 3561, 3569 and 4494; and

(d) Policy and contract claims -- liability end of current year included in Exhibit 11, Part I of the annual statement required in 8 V.S.A. 3561, 3569 and 4494.

(4) If the appointed actuary has examined the underlying records, the scope paragraph should also include the following:

My examination included such review of the actuarial assumptions and actuarial methods and of the underlying basic records and such tests of the actuarial calculations as I considered necessary.

(5) If the appointed actuary has not examined the underlying records, but has relied upon listings and summaries of policies in force prepared by the company or a third party, the scope paragraph should include a sentence such as one of the following:

I have relied upon listings and summaries of policies and contracts and other liabilities in force prepared by [name and title of company officer certifying in force records] as certified in the attached statement. (See accompanying affidavit by a company officer.) In other respects my examination included review of the actuarial assumptions and actuarial methods and such tests of the actuarial calculations as I considered necessary.

or

I have relied upon [name of accounting firm] for the substantial accuracy of the in force records inventory and information concerning other liabilities, as certified in the attached statement. In other respects my examination included review of the actuarial assumptions and actuarial methods and such tests of the actuarial calculations as I considered necessary.

The statement of the person certifying shall follow the form indicated by Section 7B(10).

(6) The opinion paragraph should include the following:

In my opinion the amounts carried in the balance sheet on account of the actuarial items identified above:

(a) Are computed in accordance with those presently accepted actuarial standards which specifically relate to the opinion required under this section;

(b) Are based on actuarial assumptions which produce reserves at least as great as those called for in any contract provision as to reserve basis and method, and are in accordance with all other contract provisions;

(c) Meet the requirements of the insurance law and regulations of the state of Vermont and are at least as great as the minimum aggregate amounts required by the state in which this statement is filed.

(d) Are computed on the basis of assumptions consistent with those used in computing the corresponding items in the annual statement of the preceding year-end with any exceptions as noted below; and

(e) Include provision for all actuarial reserves and related statement items which ought to be established.

The actuarial methods, considerations and analyses used in forming my opinion conform to the appropriate Compliance Guidelines as promulgated by the Actuarial Standards Board, which guidelines form the basis of this statement of opinion.

(7) The concluding paragraph should document the eligibility for the company to provide an opinion as provided by this Section 7. It shall include the following:

This opinion is provided in accordance with Section 7 of the NAIC Actuarial Opinion and Memorandum Regulation. As such it does not include an opinion regarding the adequacy of reserves and related actuarial items when considered in light of the assets which support them.

Eligibility for Section 7 is confirmed as follows:

(a) The ratio of the sum of capital and surplus to the sum of cash and invested assets is [insert amount], which equals or exceeds the applicable criterion based on the admitted assets of the company (Section 6C).

(b) The ratio of the sum of the reserves and liabilities for annuities and deposits to the total admitted assets is [insert amount], which is less than the applicable criteria based on the admitted assets of the company (Section 6C).

(c) The ratio of the book value of the non-investment grade bonds to the sum of capital and surplus is [insert amount], which is less than the applicable criteria of .50.

(d) To my knowledge, the NAIC Examiner Team has not designated the company as a first priority company in any of the two (2) calendar years preceding the calendar year for which the actuarial opinion is applicable, or a second priority company in each of the two (2) calendar years preceding the calendar year for which the actuarial opinion is applicable or the company has resolved the first or second priority status to the satisfaction of the commissioner of the state of domicile.

(e) To my knowledge there is not a specific request from any commissioner requiring an asset adequacy analysis opinion.

Signature of Appointed Actuary Address of Appointed Actuary

Telephone Number of Appointed Actuary

(8) If there has been any change in the actuarial assumptions from those previously employed, that change should be described in the annual statement or in a paragraph of the statement of actuarial opinion, and the reference in Section 7B(6)(d) to consistency should read as follows:

. . . with the exception of the change described on Page [ ] of the annual statement (or in the preceding paragraph).

The adoption for new issues or new claims or other new liabilities of an actuarial assumption which differs from a corresponding assumption used for prior new issues or new claims or other new liabilities is not a change in actuarial assumptions within the meaning of this paragraph.

(9) If the appointed actuary is unable to form an opinion, he or she shall refuse to issue a statement of actuarial opinion. If the appointed actuary's opinion is adverse or qualified, he or she shall issue an adverse or qualified actuarial opinion explicitly stating the reason(s) for such opinion. This statement should follow the scope paragraph and precede the opinion paragraph.

(10) If the appointed actuary does not express an opinion as to the accuracy and completeness of the listings and summaries of policies in force, there should be attached to the opinion, the statement of a company officer or accounting firm who prepared such underlying data similar to the following:

I [name of officer], [title] of [name and address of company or accounting firm], hereby affirm that the listings and summaries of policies and contracts in force as of December 31, [ ], prepared for and submitted to [name of appointed actuary], were prepared under my direction and, to the best of my knowledge and belief, are substantially accurate and complete.

Signature of the Officer of the Company or Accounting Firm Address of the Officer of the Company or Accounting Firm

Telephone Number of the Officer of the Company or Accounting Firm REGULATION 97-4 S 8

A. General Description

The statement of actuarial opinion submitted in accordance with this section shall consist of:

(1) A paragraph identifying the appointed actuary and his or her qualifications (see Section 8B(1));

(2) A scope paragraph identifying the subjects on which an opinion is to be expressed and describing the scope of the appointed actuary's work, including a tabulation delineating the reserves and related actuarial items which have been analyzed for asset adequacy and the method of analysis, (see Section 8B(2)) and identifying the reserves and related actuarial items covered by the opinion which have not been so analyzed;

(3) A reliance paragraph describing those areas, if any, where the appointed actuary has deferred to other experts in developing data, procedures or assumptions, (e.g., anticipated cash flows from currently owned assets, including variation in cash flows according to economic scenarios (see Section

8B(3)), supported by a statement of each such expert in the form prescribed by Section 8E; and

(4) An opinion paragraph expressing the appointed actuary's opinion with respect to the adequacy of the supporting assets to mature the liabilities (see Section 8B(6)).

(5) One or more additional paragraphs will be needed in individual company cases as follows:

(a) If the appointed actuary considers it necessary to state a qualification of his or her opinion;

(b) If the appointed actuary must disclose the method of aggregation for reserves of different products or lines of business for asset adequacy analysis;

(c) If the appointed actuary must disclose reliance upon any portion of the assets supporting the Asset Valuation Reserve (AVR), Interest Maintenance Reserve (IMR) or other mandatory or voluntary statement of reserves for asset adequacy analysis.

(d) If the appointed actuary must disclose an inconsistency in the method of analysis or basis of asset allocation used at the prior opinion date with that used for this opinion.

(e) If the appointed actuary must disclose whether additional reserves of the prior opinion date are released as of this opinion date, and the extent of the release.

(f) If the appointed actuary chooses to add a paragraph briefly describing the assumptions which form the basis for the actuarial opinion.

B. Recommended Language

The following paragraphs are to be included in the statement of actuarial opinion in accordance with this section. Language is that which in typical circumstances should be included in a statement of actuarial opinion. The language may be modified as needed to meet the circumstances of a particular case, but the appointed actuary should use language which clearly expresses his or her professional judgment. However, in any event the opinion shall retain all pertinent aspects of the language provided in this section.

(1) The opening paragraph should generally indicate the appointed actuary's relationship to the company and his or her qualifications to sign the opinion.

For a company actuary, the opening paragraph of the actuarial opinion should read as follows:

I, [name], am [title] of [insurance company name] and a member of the American Academy of Actuaries. I was appointed by, or by the authority of, the Board of Directors of said insurer to render this opinion as stated in the letter to the Commissioner dated [insert date]. I meet the Academy qualification standards for rendering the opinion and am familiar with the valuation requirements applicable to life and health insurance companies.

For a consulting actuary, the opening paragraph should contain a sentence such as:

I, [name], a member of the American Academy of Actuaries, am associated with the firm of [name of consulting firm]. I have been appointed by, or by the authority of, the Board of Directors of [name of company] to render this opinion as stated in the letter to the Commissioner dated [insert date]. I meet the Academy qualification standards for rendering the opinion and am familiar with the valuation requirements applicable to life and health insurance companies.

(2) The scope paragraph should include a statement such as the following: I have examined the actuarial assumptions and actuarial methods used in determining reserves and related actuarial items listed below, as shown in the annual statement of the company, as prepared for filing with state regulatory officials, as of December 31, 19[ ]. Tabulated below are those reserves and related actuarial items which have been subjected to asset adequacy analysis. (For a copy of this table, please request a copy of the regulation from the Department.)

Notes:

(a) The additional actuarial reserves are the reserves established under Paragraphs (2) or (3) of Section 5E.

(b) The appointed actuary should indicate the method of analysis, determined in accordance with the standards for asset adequacy analysis referred to in Section 5D of this regulation, by means of symbols which should be defined in footnotes to the table.

(c) Allocated amount.

(3) If the appointed actuary has relied on other experts to develop certain portions of the analysis, the reliance paragraph should include a statement such as the following:

I have relied on [name], [title] for [ e.g., anticipated cash flows from currently owned assets, including variations in cash flows according to economic scenarios] and, as certified in the attached statement, . . .

or

I have relied on personnel as cited in the supporting memorandum for certain critical aspects of the analysis in reference to the accompanying statement.

Such a statement of reliance on other experts should be accompanied by a statement by each of such experts of the form prescribed by Section 8E.

(4) If the appointed actuary has examined the underlying asset and liability records, the reliance paragraph should also include the following:

My examination included such review of the actuarial assumptions and actuarial methods and of the underlying basic asset and liability records and such tests of the actuarial calculations as I considered necessary.

(5) If the appointed actuary has not examined the underlying records, but has relied upon listings and summaries of policies in force and/or asset records prepared by the company or a third party, the reliance paragraph should include a sentence such as:

I have relied upon listings and summaries [of policies and contracts, of asset records] prepared by [name and title of company officer certifying in-force records] as certified in the attached statement. In other respects my examination included such review of the actuarial assumptions and actuarial methods and such tests of the actuarial calculations as I considered necessary.

or

I have relied upon [name of accounting firm] for the substantial accuracy of the in-force records inventory and information concerning other liabilities, as certified in the attached statement. In other respects my examination included review of the actuarial assumptions and actuarial methods and tests of the actuarial calculations as I considered necessary.

Such a section must be accompanied by a statement by each person relied upon of the form prescribed by Section 8E.

(6) The opinion paragraph should include the following:

In my opinion the reserves and related actuarial values concerning the statement items identified above:

(a) Are computed in accordance with presently accepted actuarial standards consistently applied and are fairly stated, in accordance with sound actuarial principles;

(b) Are based on actuarial assumptions which produce reserves at least as great as those called for in any contract provision as to reserve basis and method, and are in accordance with all other contract provisions;

(c) Meet the requirements of the insurance law and regulation of the state of Vermont and are at least as great as the minimum aggregate amounts required by the state in which this statement is filed.

(d) Are computed on the basis of assumptions consistent with those used in computing the corresponding items in the annual statement of the preceding year-end (with any exceptions noted below);

(e) Include provision for all actuarial reserves and related statement items which ought to be established.

The reserves and related items, when considered in light of the assets held by the company with respect to such reserves and related actuarial items including, but not limited to, the investment earnings on such assets, and the considerations anticipated to be received and retained under such policies and contracts, make adequate provision, according to presently accepted actuarial standards of practice, for the anticipated cash flows required by the contractual obligations and related expenses of the company.

The actuarial methods, considerations and analyses used in forming my opinion conform to the appropriate Standards of Practice as promulgated by the Actuarial Standards Board, which standards form the basis of this statement of opinion. This opinion is updated annually as required by statute. To the best of my knowledge, there have been no material changes from the applicable date of the annual statement to the date of the rendering of this opinion which should be considered in reviewing this opinion.

or

The following material change(s) which occurred between the date of the statement for which this opinion is applicable and the date of this opinion should be considered in reviewing this opinion: (Describe the change or changes.)

Note: Choose one of the above two paragraphs, whichever is applicable.

The impact of unanticipated events subsequent to the date of this opinion is beyond the scope of this opinion. The analysis of asset adequacy portion of this opinion should be viewed recognizing that the company's future experience may not follow all the assumptions used in the analysis.

Signature of Appointed Actuary Address of Appointed Actuary

Telephone Number of Appointed Actuary

C. Assumptions for New Issues

The adoption for new issues or new claims or other new liabilities of an actuarial assumption which differs from a corresponding assumption used for prior new issues or new claims or other new liabilities is not a change in actuarial assumptions within the meaning of this Section 8.

D. Adverse Opinions

If the appointed actuary is unable to form an opinion, then he or she shall refuse to issue a statement of actuarial opinion. If the appointed actuary's opinion is adverse or qualified, then he or she shall issue an adverse or qualified actuarial opinion explicitly stating the reason(s) for such opinion.

This statement should follow the scope paragraph and precede the opinion paragraph.

E. Reliance on Data Furnished by Other Persons

If the appointed actuary does not express an opinion as to the accuracy and completeness of the listings and summaries of policies in force and/or asset oriented information, there shall be attached to the opinion the statement of a company officer or accounting firm who prepared such underlying data similar to the following:

I [name of officer], [title], of [name of company or accounting firm], hereby affirm that the listings and summaries of policies and contracts in force as of December 31, 19[ ], and other liabilities prepared for and submitted to [name of appointed actuary] were prepared under my direction and, to the best of my knowledge and belief, are substantially accurate and complete.

Signature of the Officer of the Company or Accounting Firm Address of the Officer of the Company or Accounting Firm

Telephone Number of the Officer of the Company or Accounting Firm and/or

I, [name of officer], [title] of [name of company, accounting firm, or security analyst], hereby affirm that the listings, summaries and analyses relating to data prepared for and submitted to [name of appointed actuary] in support of the asset-oriented aspects of the opinion were prepared under my direction and, to the best of my knowledge and belief, are substantially accurate and complete.

Signature of the Officer of the Company, Accounting Firm or the Security Analyst Address of the Officer of the Company, Accounting Firm or the Security Analyst

Telephone Number of the Officer of the Company, Accounting Firm or the Security Analyst

REGULATION 97-4 S 9

A. General

(1) In accordance with 8 V.S.A. 3577, 4494 and the NAIC's annual statement instructions, the appointed actuary shall prepare a memorandum to the company describing the analysis done in support of his or her opinion regarding the reserves under a Section 8 opinion. The memorandum shall be made available for examination by the commissioner upon his or her request but shall be returned to the company after such examination and shall not be considered a record of the insurance department or subject to automatic filing with the commissioner.

(2) In preparing the memorandum, the appointed actuary may rely on, and include as a part of his or her own memorandum, memoranda prepared and signed by other actuaries who are qualified within the meaning of Section 5B of this regulation, with respect to the areas covered in such memoranda, and so state in their memoranda.

(3) If the commissioner requests a memorandum and no such memorandum exists or if the commissioner finds that the analysis described in the memorandum fails to meet the standards of the Actuarial Standards Board or the standards and requirements of this regulation, the commissioner may designate a qualified actuary to review the opinion and prepare such supporting memorandum as is required for review. The reasonable and necessary expense of the independent review shall be paid by the company but shall be directed and controlled by the commissioner.

(4) The reviewing actuary shall have the same status as an examiner for purposes of obtaining data from the company and the work papers and documentation of the reviewing actuary shall be retained by the commissioner; provided, however, that any information provided by the company to the reviewing actuary and included in the work papers shall be considered as material provided by the company to the commissioner and shall be kept confidential to the same extent as is prescribed by law with respect to other material provided by the company to the commissioner pursuant to the statute governing this regulation.

The reviewing actuary shall not be an employee of a consulting firm involved with the preparation of any prior memorandum or opinion for the insurer pursuant to this regulation for any one of the current year or the preceding three (3) years.

B. Details of the Memorandum Section Documenting Asset Adequacy Analysis (Section 8)

When an actuarial opinion under Section 8 is provided, the memorandum shall demonstrate that the analysis has been done in accordance with the standards for asset adequacy referred to in Section 5D of this regulation and any additional standards under this regulation. It shall specify:

(1) For reserves:

(a) Product descriptions including market description, underwriting and other aspects of a risk profile and the specific risks the appointed actuary deems significant;

(b) Source of liability in force;

(c) Reserve method and basis;

(d) Investment reserves;

(e) Reinsurance arrangements.

(2) For assets:

(a) Portfolio descriptions, including a risk profile disclosing the quality, distribution and types of assets;

(b) Investment and disinvestment assumptions;

(c) Source of asset data;

(d) Asset valuation bases.

(3) Analysis basis:

(a) Methodology;

(b) Rationale for inclusion or exclusion of different blocks of business and how pertinent risks were analyzed;

(c) Rationale for degree of rigor in analyzing different blocks of business;

(d) Criteria for determining asset adequacy;

(e) Effect of federal income taxes, reinsurance and other relevant factors.

(4) Summary of Results

(5) Conclusion(s)

C. Conformity to Standards of Practice

The memorandum shall include a statement:

Actuarial methods, considerations and analyses used in the preparation of this memorandum conform to the appropriate Standards of Practice as promulgated by the Actuarial Standards Board, which standards form the basis for this memorandum.

REGULATION 97-4 S 10

A. Aggregation

For the asset adequacy analysis for the statement of actuarial opinion provided in accordance with Section 8 of this regulation, reserves and assets may be aggregated by either of the following methods:

(1) Aggregate the reserves and related actuarial items, and the supporting assets, for different products or lines of business, before analyzing the adequacy of the combined assets to mature the combined liabilities. The appointed actuary must be satisfied that the assets held in support of the reserves and related actuarial items so aggregated are managed in such a manner that the cash flows from the aggregated assets are available to help mature the liabilities from the blocks of business that have been aggregated.

(2) Aggregate the results of asset adequacy analysis of one or more products or lines of business, the reserves for which prove through analysis to be redundant, with the results of one or more products or lines of business, the reserves for which prove through analysis to be deficient. The appointed actuary must be satisfied that the asset adequacy results for the various products or lines of business for which the results are so aggregated:

(a) Are developed using consistent economic scenarios, or

(b) Are subject to mutually independent risks, i.e., the likelihood of events impacting the adequacy of the assets supporting the redundant reserves is completely unrelated to the likelihood of events impacting the adequacy of the assets supporting the deficient reserves.

In the event of any aggregation, the actuary must disclose in his or her opinion that such reserves were aggregated on the basis of method A(1), (2)(a) or (2)(b) of this subsection, whichever is applicable, and describe the aggregation in the supporting memorandum.

B. Selection of Assets for Analysis

The appointed actuary shall analyze only those assets held in support of the reserves which are the subject for specific analysis, hereafter called specified reserves. A particular asset or portion thereof supporting a group of specified reserves cannot support any other group of specified reserves. An asset may be allocated over several groups of specified reserves. The annual statement value of the assets held in support of the reserves shall not exceed the annual statement value of the specified reserves, except as provided in subsection C of this section. If the method of asset allocation is not consistent from year to year, the extent of its inconsistency should be described in the supporting memorandum.

C. Use of Assets Supporting the Interest Maintenance Reserve and the Asset Valuation Reserve:

An appropriate allocation of assets in the amount of the Interest Maintenance Reserve (IMR), whether positive or negative, must be used in any asset adequacy analysis. Analysis of risks regarding asset default may include an appropriate allocation of assets supporting the Asset Valuation Reserve (AVR); these AVR assets may not be applied for any other risks with respect to reserve adequacy.

Analysis of these and other risks may include assets supporting other mandatory or voluntary reserves available to the extent not used for risk analysis and reserve support.

The amount of the assets used for the AVR must be disclosed in the Table of Reserves and Liabilities of the opinion and in the memorandum. The method used for selecting particular assets or allocated portions of assets must be disclosed in the memorandum.

D. Required Interest Scenarios

For the purpose of performing the asset adequacy analysis required by this regulation, the qualified actuary is expected to follow standards adopted by the Actuarial Standards Board; nevertheless, the appointed actuary must consider in the analysis the effect of at least the following interest rate scenarios:

(1) Level with no deviation;

(2) Uniformly increasing over ten (10) years at a half percent per year and then level;

(3) Uniformly increasing at one percent per year over five (5) years and then uniformly decreasing at one percent per year to the original level at the end of ten (10) years and then level;

(4) An immediate increase of three percent (3%) and then level;

(5) Uniformly decreasing over ten (10) years at a half percent per year and then level;

(6) Uniformly decreasing at one percent per year over five (5) years and then uniformly increasing at one percent per year to the original level at the end of ten (10) years and then level; and

(7) An immediate decrease of three percent (3%) and then level.

For these and other scenarios which may be used, projected interest rates for a five (5) year Treasury Note need not be reduced beyond the point where the five (5) year Treasury Note yield would be at fifty (50%) of its initial level. The beginning interest rates may be based on interest rates for new investments as of the valuation date similar to recent investments allocated to support the product being tested or be based on an outside index, such as Treasury yields, of assets of the appropriate length on a date close to the valuation date. Whatever method is used to determine the beginning yield curve and associated interest rates should be specifically defined. The beginning yield curve and associated interest rates should be consistent for all interest rate scenarios.

E. Documentation

The appointed actuary shall retain on file, for at least seven (7) years, sufficient documentation so that it will be possible to determine the procedures followed, the analyses performed, the bases for assumptions and the results obtained.

Oversight of Fees Charged by the NAIC and Retaliatory Action by the State of Vermont

Regulation
Saturday, May 10, 1997
Reg-97-01

File attachments: 

http://www.dfr.vermont.gov/sites/default/files/REG-IH-97-01.pdf

REGULATION 97-1-I

 

RULES PROVIDING FOR OVERSIGHT OF FEES CHARGED BY THE NATIONAL ASSOCIATION OF INSURANCE COMMISSIONERS AND RETALIATORY ACTION BY THE STATE OF VERMONT

Section 1. Purpose and Authority

This regulation is promulgated pursuant to Title 8, Sections 3367 and 3552 and in accordance with the findings and purpose of the General Assembly as set forth in Act No. 83 of the 1995 Adjourned Session.

Section 2. Authorized Fees

The fees, assessments or charges imposed by the National Association of Insurance Commissioners (NAIC) on Vermont domestic insurance companies for database filings and for valuation of securities, as set forth in the NAIC Database Participation Packet list of “Filing Fees” and the December 31, 1996 Purposes and Procedures of the Securities Valuation Office of the National Association of Insurance Commissioners “List of Fees for Services and Publications,” attached hereto as Appendix to this Regulation, are hereby established and authorized by the Commissioner.

Section 3. Annual Review

The Commissioner shall annually review the fees, assessments or charges imposed by the NAIC on Vermont domestic insurance companies for database filings and for valuation of securities to determine if:

(A) Such fees, assessments or charges have increased, and

(B) If such fees, assessments or charges have increased by a rate which is higher than the then-current Consumer Price Index, whether the increase is likely to result in excessive revenues to the NAIC.

(C) If such fees, assessments or charges have increased by a rate which is higher than the then-current Consumer Price Index, the Commissioner shall issue an order, after public notice and opportunity to comment, stating the Commissioner’s determination as to whether an increase results in excessive revenues to the office charging the fees, assessments or charges or to the NAIC as a whole, and the bases for the determination. If the Commissioner determines that the increase is excessive, the order shall provide that no Vermont domestic insurer shall be required to pay such fee, assessment or charge, or any portion thereof determined to be excessive.

(D) The Commissioner shall consider, along with such other factors deemed appropriate by the Commissioner, whether the increase and the resulting revenues are reasonable and necessary to achieve the purposes of the NAIC, and whether the choice of revenue source is reasonable.

Section 4. Standards and Procedures for Retaliatory Actions

(A) After determination by the Commissioner that an insurance department or other similar regulatory entity of any other state or territory of the United States has imposed any sanctions, fines, penalties, financial or deposit requirements, prohibitions, restrictions, regulatory requirements, or other obligations of any kind on domestic insurance companies authorized to transact insurance in this state and licensed to transact business in such other state or territory:

(1) because the insurance department of this state is not accredited or otherwise approved by the NAIC, or by any agent or representative of the association; or

(2) because the insurance department of this state has not complied with any directive, financial annual statement requirement, model act or regulation, market conduct or financial examination report or requirement, or any report or requirement of any kind imposed directly, or indirectly through the laws or regulations of another state, by the NAIC, or by any agent or representative of the association; or

(3) because a domestic insurance company has refused to comply with, file or pay any requirement, report, fee, assessment, or charge determined by the commissioner to be unreasonable and imposed directly, or indirectly through the laws or regulations of another state, by the NAIC, or by any agent or representative of the association; the commissioner shall impose similar sanctions, fines, penalties, financial or deposit requirements, prohibitions, restrictions, regulatory requirements or other obligations of any kind on the domestic insurance companies of such other state or territory.

(B) Any Vermont domestic insurance company upon whom any sanctions, fines, penalties, financial or deposit requirements, prohibitions, restrictions, regulatory requirements, or other obligations of any kind are imposed as set forth in subsection (A) of this Section may request similar imposition by the Commissioner upon the domestic insurance companies of such other state which are licensed to do business in Vermont by demonstrating to the Commissioner that the circumstances of the imposition meet the standard set forth in subsections A(1), (2) or (3) of this Section.

(C) If any other state requires a Vermont domestic insurance company licensed to transact insurance in such state to pay, directly or indirectly, a fee, assessment, or charge of any kind to the NAIC in excess of the fees, assessments, or charges approved under Section 2 of this Regulation, such fees, assessments, or charges shall be considered excessive and shall be imposed by the Commissioner in similar manner upon the domestic insurers of such other state doing business in this state.

(D) Any Vermont domestic insurance company upon whom any sanctions, fines, penalties, financial or deposit requirements, prohibitions, restrictions, regulatory requirements, or other obligations of any kind are imposed as set forth in subsection (C) of this Section, may request similar imposition by the Commissioner upon the domestic insurance companies of such other state which are licensed to do business in Vermont by demonstrating to the Commissioner that the circumstances of the imposition meet the standard set forth in subsection (C) of this Section.

Section 5. Effective Date

This Regulation shall be effective on May 10, 1997.

Life and Health Reinsurance Agreements

Regulation
Saturday, October 1, 1994
Reg-93-01

File attachments: 

http://www.dfr.vermont.gov/sites/default/files/REG-I-93-1.pdf

REVISED REGULATION 93-1

LIFE & HEALTH REINSURANCE AGREEMENTS

Revisions Effective October 1, 1994

 

Section 1. Authority

This Regulation is promulgated pursuant to the authority granted by 8 V.S.A. §§ 75 and 3634a.

Section 2. Preamble

A. The Vermont Department of Banking, Insurance and Securities recognizes that licensed insurers routinely enter into reinsurance agreements that yield legitimate relief to the ceding insurer from strain to surplus.

B. However, it is improper for a licensed insurer, in the capacity of ceding insurer, to enter into reinsurance agreements for the principal purpose of producing significant surplus aid for the ceding insurer, typically on a temporary basis, while not transferring all of the significant risks inherent in the business being reinsured. In substance or effect, the expected potential liability to the ceding insurer remains basically unchanged by the reinsurance transaction, notwithstanding certain risk elements in the reinsurance agreement, such as catastrophic mortality or extraordinary survival. The terms of such agreements referred to herein and described in Section 4 would violate or otherwise require action by the Commissioner pursuant to

(1) Section 3561 of Title 8, Vermont Statutes Annotated, relating to financial statements which do not properly reflect the financial condition of the ceding insurer;

(2) Section 3634a of Title 8, Vermont Statutes Annotated, relating to reinsurance reserve credits, thus resulting in a ceding insurer improperly reducing liabilities or establishing assets for reinsurance ceded; and

(3) Chapter 145 of Title 8, Vermont Statutes Annotated, relating to creating a situation that may be hazardous to policyholders and the people of this State.

Section 3. Scope

This Regulation shall apply to all domestic life and accident and health insurers and to all other licensed life and accident and health insurers who are not subject to a substantially similar regulation in their domiciliary state. This Regulation shall also similarly apply to licensed property and casualty insurers with respect to their accident and health business. This regulation shall not apply to assumption reinsurance, yearly renewable term reinsurance or certain nonproportional reinsurance such as stop loss or catastrophe reinsurance.

Section 4. Accounting Requirements

A. No insurer subject to this Regulation shall, for reinsurance ceded, reduce any liability or establish any asset in any financial statement filed with the Department if, by the terms of the reinsurance agreement, in substance or effect, any of the following conditions exist

(1) Renewal expense allowances provided or to be provided to the ceding insurer by the reinsurer in any accounting period, are not sufficient to cover anticipated allocable renewal expenses of the ceding insurer on the portion of the business reinsured, unless a liability is established for the present value of the shortfall (using assumptions equal to the applicable statutory reserve basis on the business reinsured). Those expenses include commissions, premium taxes and direct expenses including, but not limited to, billing, valuation, claims and maintenance expected by the company at the time the business is reinsured;

(2) The ceding insurer can be deprived of surplus or assets at the reinsurer's option or automatically upon the occurrence of some event, such as the insolvency of the ceding insurer, except that termination of the reinsurance agreement by the reinsurer for nonpayment of reinsurance premiums or other amounts due, such as modified coinsurance reserve adjustments, interest and adjustments on funds withheld, and tax reimbursements, shall not be considered to be such a deprivation of surplus or assets;

(3) The ceding insurer is required to reimburse the reinsurer for negative experience under the reinsurance agreement, except that neither offsetting experience refunds against current and prior years' losses under the agreement nor payment by the ceding insurer of an amount equal to the current and prior years' losses under the agreement upon voluntary termination of in force reinsurance by the ceding insurer shall be considered such a reimbursement to the reinsurer for negative experience.

Voluntary termination does not include situations where termination occurs because of unreasonable provisions which allow the reinsurer to reduce its risk under the agreement. An example of such a provision is the right of the reinsurer to increase reinsurance premiums or risk and expense charges to excessive levels forcing the ceding company to prematurely terminate the reinsurance treaty;

(4) The ceding insurer must, at specific points in time scheduled in the agreement, terminate or automatically recapture all or part of the reinsurance ceded;

(5) The reinsurance agreement involves the possible payment by the ceding insurer to the reinsurer of amounts other than from income realized from the reinsured policies. For example, it is improper for a ceding company to pay reinsurance premiums, or other fees or charges to a reinsurer which are greater than the direct premiums collected by the ceding company;

(6) The treaty does not transfer all of the significant risk inherent in the business being reinsured. The following table identifies for a representative sampling of products or type of business, the risks which are considered to be significant. For products not specifically included, the risks determined to be significant shall be consistent with this table.

Risk categories:

(a) Morbidity

(b) Mortality

(c) Lapse

This is the risk that a policy will voluntarily terminate prior to the recoupment of a statutory surplus strain experienced at issue of the policy.

(d) Credit Quality (C1)

This is the risk that invested assets supporting the reinsured business will decrease in value. The main hazards are that assets will default or that there will be a decrease in earning power. It excludes market value declines due to changes in interest rate.

(e) Reinvestment (C3)

This is the risk that interest rates will fall and funds reinvested (coupon payments or monies received upon asset maturity or call) will therefore earn less than expected. If asset durations are less than liability durations, the mismatch will increase.

(f) Disintermediation (C3)

This is the risk that interest rates rise and policy loans and surrenders increase or maturing contracts do not renew at anticipated rates of renewal. If asset durations are greater than the liability durations, the mismatch will increase. Policyholders will move their funds into new products offering higher rates. The company may have to sell assets at a loss to provide for these withdrawals

Risk Category : + = Significant 0 = Insignificant

 

a

b

c

d

e

f

Health Insurance - other than LTC/LTD*

+

0

+

0

0

0

Health Insurance - LTC/LTD*

+

0

+

+

+

0

Immediate Annuities

0

+

0

+

+

0

Single Premium Deferred Annuities

0

0

+

+

+

+

Flexible Premium Deferred Annuities

0

0

+

+

+

+

Guaranteed Interest Contracts

0

0

0

+

+

+

Other Annuity Deposit Business

0

0

+

+

+

+

Single Premium Whole Life

0

+

+

+

+

+

Traditional Non-Par Permanent

0

+

+

+

+

+

Traditional Non-Par Term

0

+

+

0

0

0

Traditional Par Permanent

0

+

+

+

+

+

Traditional Par Term

0

+

+

0

0

0

Adjustable Premium Permanent

0

+

+

+

+

+

Indeterminate Premium Permanent

0

+

+

+

+

+

Universal Life Flexible Premium

0

+

+

+

+

+

Universal Life Fixed Premium

0

+

+

+

+

+

Universal Life Fixed Premium - dump-in premiums allowed

0

+

+

+

+

+

*LTC = Long Term Care Insurance

LTD = Long Term Disability Insurance

 

(7)

(a) The credit quality, reinvestment, or disintermediation risk is significant for the business reinsured and the ceding company does not (other than for the classes of business excepted in Paragraph (7)(b)) either transfer the underlying assets to the reinsurer or legally segregate such assets in a trust or escrow account or otherwise establish a mechanism satisfactory to the commissioner which legally segregates, by contract or contract provision, the underlying assets.

(b) Notwithstanding the requirements of Paragraph (7)(a), the assets supporting the reserves for the following classes of business and any classes of business which do not have a significant credit quality, reinvestment or disintermediation risk may be held by the ceding company without segregation of such assets:

-Health Insurance - LTC/LTD

-Traditional Non-Par Permanent

-Traditional Par Permanent

-Adjustable Premium Permanent

-Indeterminate Premium Permanent

-Universal Life Fixed Premium (no dump-in premiums allowed)

The associated formula for determining the reserve interest rate adjustment must use a formula which reflects the ceding company's investment earnings and incorporates all realized and unrealized gains and losses reflected in the statutory statement. The following is an acceptable formula:

Rate = 2 (I + CG) X + Y - I – CG

Where:

I is the net investment income

CG is capital gains less capital losses

X is the current year cash and invested assets plus investment income due and accrued less borrowed money

Y is the same as X but for the prior year

(8) Settlements are made less frequently than quarterly or payments due from the reinsurer are not made in cash within ninety (90) days of the settlement date.

(9) The ceding insurer is required to make representations or warranties not reasonably related to the business being reinsured.

(10) The ceding insurer is required to make representations or warranties about future performance of the business being reinsured.

(11) The reinsurance agreement is entered into for the principal purpose of producing significant surplus aid for the ceding insurer, typically on a temporary basis, while not transferring all of the significant risks inherent in the business reinsured and, in substance or effect, the expected potential liability to the ceding insurer remains basically unchanged.

B. Notwithstanding Subsection A of this section, an insurer subject to this Regulation may, with the prior approval of the Commissioner of Banking, Insurance and Securities take such reserve credit or establish such asset as the Commissioner may deem consistent with the insurance law of Vermont, including actuarial interpretations or standards adopted by the Commissioner.

C.

(1) Agreements entered into after the effective date of this regulation which involve the reinsurance of business issued prior to the effective date of the agreements, along with any subsequent amendments thereto, shall be filed by the ceding company with the commissioner within thirty (30) days from its date of execution. Each filing shall include data detailing the financial impact of the transaction. The ceding insurer's actuary who signs the financial statement actuarial opinion with respect to valuation of reserves shall consider this regulation and any applicable actuarial standards of practice when determining the proper credit in financial statements filed with this department. The actuary should maintain adequate documentation and be prepared upon request to describe the actuarial work performed for inclusion in the financial statements and to demonstrate that such work conforms to this regulation.

(2) Any increase in surplus net of federal income tax resulting from arrangements described in Subsection C(1) shall be identified separately on the insurer's statutory financial statement as a surplus item (aggregate write- ins for gains and losses in surplus in the Capital and Surplus Account, page 4 of the Annual Statement) and recognition of the surplus increase as income shall be reflected on a net of tax basis in the "Reinsurance ceded" line, page 4 of the Annual Statement as earnings emerge from the business reinsured.

{For example, on the last day of calendar year N, company XYZ pays a $20 million initial commission and expense allowance to company ABC for reinsuring an existing block of business. Assuming a 34% tax rate, the net increase in surplus at inception is $13.2 million ($20 million - $6.8 million) which is reported on the "Aggregate write-ins for gains and losses in surplus" line in the Capital and Surplus account. $6.8 million (34% of $20 million) is reported as income on the "Commissions and expense allowances on reinsurance ceded" line of the Summary of Operations.

At the end of year N+1 the business has earned $4 million. ABC has paid

$.5 million in profit and risk charges in arrears for the year and has received a $1 million experience refund. Company ABC's annual statement would report $1.65 million (66% of ($4 million - $1 million - $.5 million) up to a maximum of $13.2 million) on the "Commissions and expense allowance on reinsurance ceded" line of the Summary of Operations, and -$1.65 million on the "Aggregate write-ins for gains and losses in surplus" line of the Capital and Surplus account. The experience refund would be reported separately as a miscellaneous income item in the Summary of Operations.}

Section 5. Written Agreements

A. No reinsurance agreement or amendment to any agreement may be used to reduce any liability or to establish any asset in any financial statement filed with the Department, unless the agreement, amendment or a binding letter of intent has been duly executed by both parties no later than the "as of date" of the financial statement.

B. In the case of a letter of intent, a reinsurance agreement or an amendment to a reinsurance agreement must be executed within a reasonable period of time, not exceeding ninety (90) days from the execution date of the letter of intent, in order for credit to be granted for the reinsurance ceded.

C. The reinsurance agreement shall contain provisions which provide that:

(1) The agreement shall constitute the entire agreement between the parties with respect to the business being reinsured thereunder and that there are no understandings between the parties other than as expressed in the agreement; and

(2) Any change or modification to the agreement shall be null and void unless made by amendment to the agreement and signed by both parties.

Section 6. Existing Agreements

Insurers subject to this Regulation shall reduce to zero by December 31, 1995 any reserve credits or assets established with respect to reinsurance agreements entered into prior to the effective date of this regulation which, under the provisions of this regulation would not be entitled to recognition of the reserve credits or assets; provided, however, that the reinsurance agreements shall have been in compliance with laws or regulations in existence immediately preceding the effective date of this regulation.

Independent Analysis of Proposed Medicare Supplement Rate Increases

Regulation
Sunday, December 1, 1991
Reg-91-02

File attachments: 

http://www.dfr.vermont.gov/sites/default/files/REG-IH-91-02.pdf

REGULATION 91-2

INDEPENDENT ANALYSIS OF PROPOSED MEDICARE SUPPLEMENT RATE INCREASES

 

Sec. 1. Purpose

The purpose of this regulation is to set forth rules for the hiring of independent experts to analyze proposed rate increases in Medicare supplement health insurance policies pursuant to Title 33 V.S.A. § 6706.

Sec. 2. Authority

This regulation is issued pursuant to the authority vested in the Commissioner of Banking, Insurance and Securities (“Commissioner”) by Title 33 V.S.A. § 6706.

Sec. 3. Review by the Commissioner

(a) Proposed rate increases in Medicare supplement rates shall be reviewed by the Commissioner to determine if the best interests of the policyholders or certificateholders will be served by having an analysis of the proposed increase performed by an independent expert. In determining whether such analysis would serve the policyholders’ or certificateholders’ best interests, the Commissioner:

(1) shall consider the premium volume and the amount of the proposed increase;

(2) shall weigh the cost of such analysis to each policyholder or certificateholder against the amount of the proposed rate increase; and

(3) may consider amendments to Medicare law, inflation, and other factors that impact Medicare supplement rates.

(b) When the Commissioner determines that independent analysis is in the best interest of the policyholders or certificateholders, he shall notify the insurer of such determination no later than thirty (30) days after the filing is received by the Department. Once such notification is given, the Commissioner shall submit the filing to an expert for independent analysis. The filing will not be deemed approved until thirty (30) days after it is returned to the Department by the expert.

(c) The Commissioner’s determination under this section shall become part of the Department’s rate filing records and shall be made at least five (5) days prior to the granting of the rate increase or any portion thereof.

Sec. 4. Information Required of Insurers

To enable the Commissioner to adequately review Medicare supplement rates pursuant to Section 3 of this regulation, insurers are required to provide with each rate filing –

(a) the proposed rate increase, expressed as both:

(1) the total dollar amount; and

(2) a percentage of written premiums; and

(b) for the most recent period of experience, the following Vermont data:

(1) the number of individual policyholders or certificateholders to be affected by the rate increase; and

(2) the average premium per policyholder or certificateholder both before and after the filing, assuming the filing is approved; and

(c) for the preceding five-year period of sale of the certificates or policies in Vermont, the following Vermont data for each calendar year:

(1) the amount of written premiums;

(2) the amount of earned premiums; and

(3) the incurred claims associated with Vermont insureds.

Sec. 5. Independent Analysis

(a) The Commissioner shall periodically solicit proposals from and enter into agreements with qualified experts to conduct the required independent analysis.

(b) The Commissioner may set reasonable limits on the expert’s fees and costs. Such fees and costs shall be submitted to the Department and the insurer and paid directly by the insurer. The insurer may assess the affected policyholders or certificateholders.

(c) The independent expert shall submit a report, containing findings, analysis and a summary statement, to the Department within thirty (30) days of the rate filing being submitted to such expert for analysis. The summary shall become part of the Department’s rate filing records.

Sec. 6. Severability

Should a court hold any provision of this regulation invalid in any circumstance, the invalidity shall not affect any other provisions or circumstances.

Sec. 7. Effective Date

This regulation shall become effective January 1, 1992.

Maternity Regulation

Regulation
Sunday, October 1, 1989
Reg-89-01

File attachments: 

http://www.dfr.vermont.gov/sites/default/files/REG-IH-89-01.pdf

REGULATION 89-1

MATERNITY REGULATION

Section 1. PURPOSE

This regulation is promulgated to eliminate unfair discrimination in health insurance policies and contracts covering Vermont residents.

Currently, men are able to purchase health insurance policies which provide coverage for virtually all types of medical expenses. Women cannot obtain this type of comprehensive health insurance at comparable prices. Benefits for medical expenses attributable to pregnancy, including related conditions, are typically excluded from health insurance policies and contracts. When such coverage is available, it can only be obtained at rates significantly higher than the rates charged for policies sold to men.

The Vermont Legislature has prohibited unfair discrimination based on sex in the issuance of insurance policies and contracts. Inclusion of coverage for maternity related medical expenses in health insurance policies eliminates such unfair discrimination.

Section 2. AUTHORITY

This regulation is issued pursuant to the authority of the Commissioner of Banking and Insurance to promulgate regulations. 8 V.S.A. Section 75. The regulation is based on the legislative prohibition against unfair discrimination based on sex. See 8 V.S.A. Sections 4062 and 4724(7)(b).

Section 3. APPLICABILITY

(a) This regulation applies to all health insurers, non-profit hospital and medical service corporations and health maintenance organizations transacting the business of insurance in Vermont. All health insurance policies and contracts sold in Vermont are subject to this regulation, including but not limited to policies and contracts for payment of medical expenses incurred and for indemnification of insureds. This regulation does not limit the scope of insurance coverage set forth in Regulation 80-1.

(b) The regulation does not apply to policies or contracts issued on a specified disease or accident basis. In addition, this regulation does not apply to disability income policies.

(c) The regulation shall apply to all health insurance policies and contracts issued or renewed on or after October 1, 1989. If the policy has no renewal date, this regulation will apply on the first anniversary of the policy effective date following the date on which this regulation takes effect.

Section 4. DEFINITION

“Complication of Pregnancy” shall include but not be limited to:

(1) conditions, requiring hospital confinement (when the pregnancy is not terminated), whose diagnosis are distinct from pregnancy but are adversely affected by pregnancy or are caused by pregnancy, such as acute nephritis, nephroses, cardiac decompensation, missed abortion and similar medical and surgical conditions of comparable severity, but shall not include false labor, occasional spotting, physician prescribed rest during the period of pregnancy, morning sickness, hyperemesis gravidarum, pre-eclampsia and similar conditions associated with the management of a difficult pregnancy not constituting a nosologically distinct complication of pregnancy; and

(2) non-elective cesarean section, ectopic pregnancy which is terminated and spontaneous termination of pregnancy, which occurs during a period of gestation in which a viable birth is not possible.

Section 5. REQUIREMENTS

(a) All health insurance policies and contracts, unless expressly excluded by this regulation, shall provide maternity coverage. Maternity coverage means the payment of benefits to insureds for medical expenses resulting from pregnancy, childbirth, prenatal care, and related conditions and complications. This coverage shall be subject to the same deductibles, durational limits and co-insurance factors as other conditions, illnesses or accidents covered by the policy or contract.

(b) No health insurance policy or contract shall limit the terms, conditions or benefits for maternity coverage except to the extent that such terms, conditions, or benefits for other conditions or illnesses are so limited under the policy or contract.

(c) maternity coverage may be limited or excluded as a pre-existing condition provision only to the extent that all other illnesses and conditions are so limited or excluded. In the event of a change of coverage or insurance carriers, the pre-existing limitation, exclusion or waiting period, if any, shall be applied equally to all conditions. However, the six month maximum waiting period for certain conditions established by Regulation 80-1 does not apply in determining whether or not a waiting period for maternity coverage is discriminatory. This provision does not impose a requirement that a new policy or contract must have a waiting period or exclusion.

(d) Insurers, non-profit hospital and medical service corporations and health maintenance organizations shall refile their policies and contracts to provide the required coverage within thirty days after the date on which this regulation is adopted. Policies or contracts which are exempt or which already include coverages provided for in this regulation need not be refiled.

Section 6. SEVERABILITY

Should a court hold any provision of this regulation invalid or inapplicable to any person, the remainder of the regulation or the application of it to other persons shall not be affected.

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