SECTION 3.506. Review of Rate Filings

(a) Upon receipt of a rate filing under this subchapter, TDI will evaluate whether the issuer has provided sufficient data and documentation for TDI to make the determinations specified in this section. If the level of detail provided by the issuer under §3.505 of this title (relating to Required Rate Filings) does not provide a sufficient basis for TDI to make a determination, TDI will request additional information as necessary. The issuer must provide the requested information within 10 business days of the request. If the issuer fails to provide the requested information or establish a plan that is acceptable to TDI to provide the information, TDI will deem the filing withdrawn and notify the issuer of the withdrawal.

(b) In reviewing rates filed under this subchapter, TDI will examine:

(1) the reasonableness of the assumptions used by the issuer to develop the rates and the validity of the historical data underlying the assumptions;

(2) the issuer's data related to past projections and actual experience;

(3) the reasonableness of assumptions used by the issuer to estimate the rate impact of the reinsurance and risk adjustment programs under 42 USC §18061, concerning Transitional Reinsurance Program for Individual Market in Each State, and 42 USC §18063, concerning Risk Adjustment; and

(4) the issuer's data related to implementation and ongoing utilization of a market-wide single risk pool, essential health benefits, actuarial values, and other market reform rules as required by 42 USC Subchapter XXV, Part A, concerning Individual and Group Market Reforms.

(c) In reviewing rates filed under this subchapter, TDI will consider the following factors to the extent applicable to the filing under review:

(1) the factors specified in Insurance Code §1698.052(b) and (d), concerning Additional Rules and Guidance Related to Individual Health Plan Rates;

(2) the factors listed in 45 CFR §154.301(a)(4), concerning CMS's Determinations of Effective Rate Review Programs; and

(3) whether the issuer complies with the rating standards provided under §3.503 of this title (relating to Rating Standards).

(d) In reviewing rates for a qualified health plan, TDI will also consider the factors specified in Insurance Code §1698.052(c).

(e) A rate increase is unreasonable if, based on the criteria identified in this subsection, the rate is excessive, unjustified, or unfairly discriminatory.

(1) A rate increase is excessive if it causes the premium charged for the health insurance coverage to be unreasonably high in relation to the benefits provided under the coverage. In determining whether the rate increase causes the premium charged to be unreasonably high in relationship to the benefits provided, TDI will consider:

(A) whether the rate increase results in a projected medical loss ratio below the federal medical loss ratio standard in the applicable market to which the rate increase applies, after accounting for any adjustments allowable under federal law;

(B) whether one or more of the assumptions on which the rate increase is based is not supported by substantial evidence; and

(C) whether the choice of assumptions or combination of assumptions on which the rate increase is based is unreasonable.

(2) A rate increase is unjustified if the issuer provides data or documentation that is incomplete, inadequate, or otherwise does not provide a basis upon which the reasonableness of an increase may be determined.

(3) A rate increase is unfairly discriminatory as described by Insurance Code §560.002(c), concerning Use of Certain Rates Prohibited; Rate Requirements.

(f) A rate will be deemed compliant at the expiration of 60 days from the filing of the rate, unless the filing is withdrawn or TDI has determined that the rate is noncompliant or granted an extension as described below. If TDI has not finalized a determination before the 60th day, TDI may extend the 60-day period by not more than 10 days if TDI provides notice of the extension to the issuer. Notwithstanding anything else in this subsection, the issuer may extend the time frame for TDI's review or waive the right to deem the rate compliant.

(g) If a rate filing fails to comply with the rating standards provided under §3.503 of this title, TDI will identify the deficiency and ask for corrections. If within 10 business days the issuer fails to either make the necessary corrections or establish a plan that is acceptable to TDI to address the identified deficiencies, TDI will deem the filing to be noncompliant and notify the issuer of the determination.

(h) Before making a determination that a rate increase is unreasonable, TDI will communicate its objections to the issuer and provide an opportunity for the issuer to provide additional information or to make modifications. If TDI determines that a rate increase is unreasonable but that the issuer is legally permitted to implement the rate increase, TDI will issue a final determination and a brief explanation. After receiving a final determination that a rate increase is unreasonable, the issuer must submit a final justification for the rate increase and prominently post information concerning the rate increase, consistent with 45 CFR §154.230, concerning Submission and Posting of Final Justifications for Unreasonable Rate Increases.

Source Note: The provisions of this §3.506 adopted to be effective June 16, 2022, 47 TexReg 3467