Ind. Admin. Code tit. 760, r. 3-11-1 – Loss ratio standards and refund or credit of premium

Sec. 1. (a) Loss ratio standards are as follows:

(1) A Medicare supplement policy form or certificate form shall not be delivered or issued for delivery unless the policy form or certificate form can be expected, as estimated for the entire period for which rates are computed to provide coverage, to return to policyholders and certificate holders in the form of aggregate benefits (not including anticipated refunds or credits) provided under the policy form or certificate form at least either of the following:
1. (A) Seventy-five percent (75%) of the aggregate amount of premiums earned in the case of group policies.
2. (B) Sixty-five percent (65%) of the aggregate amount of premiums earned in the case of individual policies, calculated on the basis of incurred claims experience or incurred health care expenses where coverage is provided by a health maintenance organization on a service rather than reimbursement basis and earned premiums for the period and in accordance with accepted actuarial principles and practices. Incurred health care expenses where coverage is provided by a health maintenance organization shall not include the following:
  1. (i) Home office and overhead costs.
  2. (ii) Advertising costs.
  3. (iii) Commissions and other acquisition costs.
  4. (iv) Taxes.
  5. (v) Capital costs.
  6. (vi) Administrative costs.
  7. (vii) Claims processing costs.
(2) All filings of rates and rating schedules shall demonstrate that expected claims in relation to premiums comply with the requirements of this section when combined with actual experience to date. Filings of rate revisions shall also demonstrate that the anticipated loss ratio over the entire future period for which the revised rates are computed to provide coverage can be expected to meet the appropriate loss ratio standards.
(3) For policies issued any time before January 1, 1992, expected claims in relation to premiums shall meet the following:
1. (A) The originally filed anticipated loss ratio when combined with the actual experience since inception.
2. (B) The appropriate loss ratio requirements from subdivision (1):
  1. (i) when combined with actual experience beginning with April 1, 1996, to date; and
  2. (ii) over the entire future period for which the rates are computed to provide coverage.
3. (C) In meeting the tests in clauses (A) and (B) and for purposes of attaining credibility, an issuer may combine experience under policy forms that provide substantially similar coverage. Once a combined form is adopted, the issuer may not separate the experience except with the approval of the commissioner.

(b) Refund or credit calculation is as follows:

(1) An issuer shall collect and file with the commissioner of the department of insurance by May 31 of each year the data contained in the applicable reporting form contained in this section for each type in a standard Medicare supplement benefit plan.
(2) If, on the basis of the experience as reported, the benchmark ratio since inception (ratio 1) exceeds the adjusted experience ratio since inception (ratio 3), then a refund or credit calculation is required. The refund calculation shall be done on a statewide basis for each type in a standard Medicare supplement benefit plan. For purposes of the refund or credit calculation, experience on policies issued within the reporting year shall be excluded.
(3) For purposes of this section, the issuer of policies or certificates issued before January 1, 1992, shall make the refund or credit calculation separately for all individual policies (including all group policies subject to an individual loss ratio standard when issued) combined and all other group policies combined for experience after April 1, 1996. The first report shall be due by May 31, 1998.
(4) A refund or credit shall be made only when the benchmark loss ratio exceeds the adjusted experience loss ratio and the amount to be refunded or credited exceeds a de minimis level. The refund shall include interest from the end of the calendar year to the date of the refund or credit at a rate specified by the Secretary of Health and Human Services but in no event shall it be less than the average rate of interest for 13-week Treasury notes. A refund or credit against premiums due shall be made by September 30 following the experience year upon which the refund or credit is based.

(c) An issuer of Medicare supplement policies and certificates issued before or after the effective date of this article in this state shall file annually its rates, rating schedule, and supporting documentation, including ratios of incurred losses to earned premiums by policy duration for approval by the commissioner of the department of insurance in accordance with the filing requirements and procedures prescribed by the commissioner of the department of insurance. The supporting documentation shall also demonstrate in accordance with actuarial standards of practice using reasonable assumptions that the appropriate loss ratio standards can be expected to be met over the entire period for which rates are computed. The demonstration shall exclude active life reserves. An expected third-year loss ratio, which is greater than or equal to the applicable percentage, shall be demonstrated for policies or certificates in force less than three (3) years.

(d) As soon as practicable, but before the effective date of enhancements in Medicare benefits, every issuer of Medicare supplement policies or certificates in this state shall file with the commissioner of the department of insurance, in accordance with the applicable filing procedures of this state, the following:

(1) Appropriate premium adjustments necessary to produce loss ratios as anticipated for the current premium for the applicable policies or certificates. Supporting documents as necessary to justify the adjustment shall accompany the filing.
(2) An issuer shall make premium adjustments as are:
1. (A) necessary to produce an expected loss ratio under the policy or certificate as will conform with minimum loss ratio standards for Medicare supplement policies; and
2. (B) expected to result in a loss ratio at least as great as that originally anticipated in the rates used to produce current premiums by the issuer for the Medicare supplement policies or certificates.
No premium adjustment, which would modify the loss ratio experience under the policy other than the adjustments described in this subdivision, shall be made with respect to a policy at any time other than upon its renewal date or anniversary date.
(3) If an issuer fails to make premium adjustments acceptable to the commissioner of the department of insurance, the commissioner of the department of insurance may order:
1. (A) premium adjustments;
2. (B) refunds; or
3. (C) premium credits;
deemed necessary to achieve the loss ratio required by this section.
(4) Any appropriate riders, endorsements, or policy forms needed to accomplish the Medicare supplement policy or certificate modifications necessary to eliminate benefit duplications with Medicare. The riders, endorsements, or policy forms shall provide a clear description of the Medicare supplement benefits provided by the policy or certificate.

(e) The commissioner of the department of insurance may conduct a public hearing to gather information concerning a request by an issuer for an increase in a rate for a policy form or certificate form issued before or after the effective date of this article if the experience of the form for the previous reporting period is not in compliance with the applicable loss ratio standard. The determination of compliance is made without consideration of any refund or credit for the reporting period. Public notice of the hearing shall be furnished in a manner deemed appropriate by the commissioner of the department of insurance.

(f) The following forms shall be used for the calculations and reporting requirements of this rule:

MEDICARE SUPPLEMENT REFUND CALCULATION FORM
FOR CALENDAR YEAR ______
TYPE¹ _________________________________			SMSBP² _________________________________
For the State of ________________________			Company Name _________________________
NAIC Group Code _____________________			NAIC Company Code ____________________
Address ______________________________			Person Completing Exhibit _______________
Title _________________________________			Telephone Number ______________________
			(a)			(b)
			Earned			Incurred
Line			Premium³			Claims⁴
1. Current Year's Experience
	a. Total (all policy years)
	b. Current year's issues⁵
	c. Net (for reporting purposes = 1a - 1b)		___________________			________________
2. Past Years' Experience (All Policy Years)			___________________			________________
3. Total Experience
(Net Current Year + Past Year's Experience)			___________________			_________________
4. Refunds Last Year (Excluding Interest) ____________________
5. Previous Since Inception (Excluding Interest) ____________________
6. Refunds Since Inception (Excluding Interest) ____________________
7. Benchmark Ratio Since Inception (SEE WORKSHEET FOR RATIO 1) __________
8. Experienced Ratio Since Inception __________
Total Actual Incurred Claims (line 3, col. b)					= Ratio 2
Total Earned Prem. (line 3, col. a) - Refunds Since Inception (line 6)
9. Life Years Exposed Since Inception _____
If the Experience Ratio is less than the Benchmark Ratio, and there are more than five hundred (500) life years exposure, then proceed to calculation of refund.
10. Tolerance Permitted (obtained from credibility table)_________
Medicare Supplement Credibility Table
		Life Years Exposed
		Since Inception		Tolerance
		10,000 +		0.0%
		5,000─9,999		5.0%
		2,500─4,999		7.5%
		1,000─2,499		10.0%
		500─999		15.0%
		If less than 500, no credibility.

MEDICARE SUPPLEMENT REFUND CALCULATION FORM
FOR CALENDAR YEAR ______
	TYPE¹ _______________________________	SMSBP² _______________________________
	For the State of _______________________________	Company Name ___________________________
	NAIC Group Code ____________________________	NAIC Company Code __________________________
	Address _______________________________	Person Completing Exhibit ______________________
	Title _______________________________	Telephone Number ___________________________
11. Adjustment to Incurred Claims for Credibility __________
	Ratio 3 = Ratio 2 + Tolerance
If Ratio 3 is more than Benchmark Ratio (Ratio 1), a refund or credit to premium is not required.
If Ratio 3 is less than the Benchmark Ratio, then proceed.
12. Adjusted Incurred Claims __________
[Total Earned Premiums (line 3, col. a) - Refunds Since Inception (line 6)] × Ratio 3 (line 11)
13. Refund = Total Earned Premiums (line 3, col. a) - Refunds Since Inception (line 6).
	Adjusted Incurred Claims (line 12)
	Benchmark Ratio (Ratio 1)
If the amount on line 13 is less than.005 times the annualized premium in force as of December 31 of the reporting year, then no refund is made. Otherwise, the amount on line 13 is to be refunded or credited, and a description of the refund and/or credit against premiums to be used must be attached to this form.
¹Individual, group, individual Medicare Select, or group Medicare Select only.
²"SMSBP" = Standardized Medicare Supplement Benefit Plan.
³Includes Modal Loadings and Fees Charged.
⁴Excluded Active Life Reserves.
⁵This is to be used as "Issue Year Earned Premium" for Year 1 of the next year's "Worksheet for Calculation of Benchmark Ratios".
I certify that the above information and calculations are true and accurate to the best of my knowledge and belief.

		Signature

		Name–Please Type

		Title

		Date

REPORTING FORM FOR THE CALCULATION OF BENCHMARK
RATIO SINCE INCEPTION FOR GROUP POLICIES
FOR CALENDAR YEAR___________
TYPE¹ _________________________________________		SMSBP² _________________________________
For the State of _________________________________		Company Name _________________________________
NAIC Group Cod________________________________		NAIC Company Code ____________________________
Address _______________________________________		Person Completing Exhibit __________________________
Title _________________________________________		Telephone Number ______________________________

(a)³	(b)⁴	(c)	(d)	(e)	(f)	(g)	(h)	(i)	(j)	(o)⁵
Year	Earned Premium	Factor	(b)×(c)	Cumulative Loss Ratio	(d)×(e)	Factor	(b)×(g)	Cumulative Loss Ratio	(h)×(i)	Policy Year Loss Ratio
1		2.770		0.507		0.000		0.000		0.46
2		4.175		0.567		0.000		0.000		0.63
3		4.175		0.567		1.194		0.759		0.75
4		4.175		0.567		2.245		0.771		0.77
5		4.175		0.567		3.170		0.782		0.80
6		4.175		0.567		3.998		0.792		0.82
7		4.175		0.567		4.754		0.802		0.84
8		4.175		0.567		5.445		0.811		0.87
9		4.175		0.567		6.075		0.818		0.88
10		4.175		0.567		6.650		0.824		0.88
11		4.175		0.567		7.176		0.828		0.88
12		4.175		0.567		7.655		0.831		0.88
13		4.175		0.567		8.093		0.834		0.89
14		4.175		0.567		8.493		0.837		0.89
15		4.175		0.567		8.684		0.838		0.89
Total:			(k):		(l):		(m):		(n):

Benchmark Ratio Since Inception: (l + n)/(k + m): ___________
¹Individual, Group, Individual Medicare Select, or Group Medicare Select Only.
²“SMSBP” = Standardized Medicare Supplement Benefit Plan - Use “P” for pre-standardized plans.
³Year 1 is the current calendar year - 1. Year 2 is the current calendar year - 2 (etc.) (Example: If the current year is 1991, then: Year 1 is 1990; Year 2 is 1989, etc.)
⁴For the calendar year on the appropriate line in column (a), the premium earned during that year for policies issued in that year.
⁵These loss ratios are not explicitly used in computing the benchmark loss ratios. They are the loss ratios, on a policy year basis, which result in the cumulative loss ratios displayed on this worksheet. They are shown here for informational purposes only.

REPORTING FORM FOR THE CALCULATION OF BENCHMARK
RATIO SINCE INCEPTION FOR INDIVIDUAL POLICIES
FOR CALENDAR YEAR___________
TYPE¹ ______________________________		SMSBP² ______________________________
For the State of ______________________________		Company Name ______________________________
NAIC Group Code ______________________________		NAIC Company Code__________________________
Address ______________________________		Person Completing Exhibit _________________________
Title ______________________________		Telephone Number ______________________________

(a)³	(b)⁴	(c)	(d)	(e)	(f)	(g)	(h)	(i)	(j)	(o)⁵
Year	EarnedPremium	Factor	(b)×(c)	CumulativeLoss Ratio	(d)×(e)	Factor	(b)×(g)	CumulativeLoss Ratio	(h)×(i)	Policy YearLoss Ratio
1		2.770		0.442		0.000		0.000		0.40
2		4.175		0.493		0.000		0.000		0.55
3		4.175		0.493		1.194		0.659		0.65
4		4.175		0.493		2.245		0.669		0.67
5		4.175		0.493		3.170		0.678		0.69
6		4.175		0.493		3.998		0.686		0.71
7		4.175		0.493		4.754		0.695		0.73
8		4.175		0.493		5.445		0.702		0.75
9		4.175		0.493		6.075		0.708		0.76
10		4.175		0.493		6.650		0.713		0.76
11		4.175		0.493		7.176		0.717		0.76
12		4.175		0.493		7.655		0.720		0.77
13		4.175		0.493		8.093		0.723		0.77
14		4.175		0.493		8.493		0.725		0.77
15		4.175		0.493		8.684		0.725		0.77
Total:			(k):		(l):		(m):		(n):

Benchmark Ratio Since Inception: (l + n)/(k + m): ___________
¹Individual, Group, Individual Medicare Select, or Group Medicare Select Only.
²"SMSBP" = Standardized Medicare Supplement Benefit Plan - Use "P" for pre-standardized plans.
³Year 1 is the current calendar year - 1. Year 2 is the current calendar year - 2 (etc.) (Example: If the current year is 1991, then: Year 1 is 1990; Year 2 is 1989, etc.)
⁴For the calendar year on the appropriate line in column (a), the premium earned during that year for policies issued in that year.
⁵These loss ratios are not explicitly used in computing the benchmark loss ratios. They are the loss ratios, on a policy year basis, which result in the cumulative loss ratios displayed on this worksheet. They are shown here for informational purposes only.

(Department of Insurance; 760 IAC 3-11-1; filed Jul 8, 1993, 10:00 a.m.: 16 IR 2573; filed Jul 18, 1996, 1:00 p.m.: 19 IR 3419; readopted filed Sep 14, 2001, 12:22 p.m.: 25 IR 531; filed Sep 14, 2005, 3:00 p.m.: 29 IR 530; errata filed Oct 5, 2005, 2:25 p.m.: 29 IR 548; readopted filed Nov 29, 2011, 9:14 a.m.: 20111228-IR-760110553RFA; readopted filed Nov 20, 2015, 9:25 a.m.: 20151216-IR-760150341RFA; readopted filed Nov 15, 2021, 8:32 a.m.: 20211215-IR-760210419RFA; readopted filed Oct 22, 2025, 3:17 p.m.: 20251119-IR-760240637RFA)