§ 2222.11. Definitions.

(a) The term “hospital, medical or surgical policy” as used in this article means any disability insurance contract (whether composed solely of a policy or of a policy and one or more riders, endorsements, or amendments attached thereto) designed, constructed, advertised or sold as having as its dominant purpose the provision of benefits contingent upon the rendition of hospital, medical or surgical services. This definition includes a “mass-marketed policy,” as described in Insurance Code section 10293. This definition also includes a policy of “health insurance” as described in Insurance Code section 106(b), but does not include supplemental policies of individual health insurance that provide coverage for vision care expenses only, dental care expenses only, or short-term limited duration health insurance with coverage durations of 6 months or less.

For purposes of this article, the phrase “dominant purpose” means any disability insurance contract (whether composed solely of a policy, or of a policy and one or more riders, endorsements, or amendments attached thereto) upon which at least 50 percent of the initial premium or of any renewal premium is or may be, under the underwriting rules or practices of the insurer, allocated or apportioned or should reasonably be allocated or apportioned to the hospital, medical or surgical benefits provided therein. In case of a “hospital, medical or surgical policy” which contains, in addition to benefits contingent upon the rendition of hospital, medical or surgical services, other benefits which are not subject to this article, the insurer may segregate the earned premiums and the incurred losses for those benefits which are subject to the provision of this article, and the commissioner may require such segregation if substantial benefits not subject to this article are provided. If there is no such segregation, the experience of the policy will be considered as a unit. This definition shall not be construed to include: (1) policies which provide a benefit expressed as an increase of a loss of time benefit during hospital confinement, which is not advertised or sold as a hospital benefit, or (2) a single premium nonrenewable transportation ticket policy having as its dominant feature the protection of the insured from a transportation hazard.

(b) The term “individual” policy as used in this article means a disability policy purporting to insure only one person, except that included within this definition shall be a family policy or family expense policy defined in Section 10320(c) of the Insurance Code.

(c) Policies “issued on a mass underwriting basis” as used in this article shall mean individual hospital, medical, or surgical policies (1) conforming to all of the underwriting and renewal conditions set forth in Section 10270.97 of the Insurance Code, relating to selected group disability insurance; or (2) issued without individual underwriting pursuant to the exercise of a conversion privilege in a group policy; or (3) issued at lower than the individual policy rates otherwise charged predicated on the expectation of substantial savings in operating expenses to members of a group of individuals (such as members of a professional association), under a plan or arrangement entered into between the insurer and the association; or issued on a mass enrollment basis to members of a defined group of individuals (such as residents over age 65 in one state) under a plan whereby the insurer will not discontinue, or modify rates of, any policy, unless it simultaneously discontinues or similarly modifies all other policies in the same group; or (4) at the discretion of the commissioner, any similar policy predicated upon substantial savings in operating expense arising from mass enrollment.

(d) The terms “premiums earned” and “losses incurred” as used in this article shall be developed by a method consistent with that method used for developing such items in Schedule H of the life and accident and health annual statement blank, unless otherwise specifically indicated in this article.

(e) References to specified portions of annual statement blanks shall apply to all amendments and additions or successor provisions hereafter made.

(f) “Rate revision” means a change in premium rates that applies to existing policies.

(g) “Lifetime anticipated loss ratio” means the ratio of (i) divided by (ii), where (i) is equal to the sum of the accumulated value of past incurred claims since the inception of the policy and the present value of future anticipated claims, and (ii) is the sum of the accumulated value of past earned premiums and the present value of future anticipated premiums earnings.

(h) “Disease management expenses” means expenses incurred by an insurer for services administered to patients in order to improve their overall health and to prevent clinical exacerbations and complications utilizing cost-effective, evidence-based guidelines and patient self-management strategies.

(i) “Lifetime anticipated disease management ratio” means the ratio of (i) divided by (ii), where (i) is equal to the sum of the accumulated value of past incurred disease management expenses since the inception of the policy and the present value of future anticipated disease management expenses, and (ii) is the sum of the accumulated value of past earned premiums and the present value of future anticipated premium earnings.

HISTORY

1. Amendment of subsection (a) and new subsections (f)-(i) and Note filed 12-29-2006; operative 3-29-2007 pursuant to Insurance Code section 10293(a) (Register 2006, No. 52).

Note

Note: Authority cited: Section 10293, Insurance Code. Reference: Section 10293(a), Insurance Code.