No
The local/statewide economic impact:
Minimal or none (< or = $50,000)
Contact Person
Insurance
This statement of scope was approved by the governor on September 13, 2012.
Rule No.
Chapter
Ins 57, Wis. Adm. Code.
Relating to
Care management organizations and affecting small business.
Rule Type
Permanent.
Detailed Description of the Objective of the Rule
The proposed objective of the rule is to:
1.
Correct a reference error in s.
Ins 57.06, Wis. Adm. Code.
2. Review and revise the working capital and restricted reserve requirement calculations for Care Management Organizations (CMO) with the Wisconsin Department of Health Services (DHS). The proposed rule may modify the basis of the calculation and the minimum requirements for working capital and restricted reserves.
The resulting rule is intended to ensure that CMO requirements are reflective of the cash flows required to meet operational needs, the organizations actual experience, and are based on required expenditures rather than projected budget expenditures.
3. Evaluate and revise the business plan requirements for CMOs who are seeking a renewal of their annual permit. The proposed rule may differentiate the annual business plan submission requirements between initial and renewal permits.
Description of the Existing Policies Relevant to the Rule and of New Policies Proposed to be Included in the Rule and an Analysis of Policy Alternatives; the History, Background, and Justification for the Proposed Rule
1.
Currently, s.
Ins 57.06, Wis. Adm. Code makes reference to s.
Ins 9.05 (3), Wis. Adm. Code, which provides requirements for Defined Network Plans. This reference is incorrect, and will be changed to the correct CMO requirement.
2. The existing rule prescribes that working capital shall be maintained of at least 3% of projected annual capitation over the contract period, and restricted reserves shall not be less than the sum of the following:
a) 8% of the first $5 million annual budgeted capitation revenue
b) 4% of the next $5 million annual budgeted capitation revenue
c) 3% of the next $10 million annual budgeted capitation revenue
d) 2% of the next $30 million annual budgeted capitation revenue
e) 1% of annual budgeted capitation revenue in excess of $50 million
The proposed rule would change the following:
•
The basis of the calculations from using projected annual capitation and annual budgeted capitation for working capital and restricted reserves, respectively, to using the Family Care service revenues, excluding member obligation and other third party service revenues, earned in any 12-month period.
•
Implement a minimum requirement or floor for working capital and restricted reserves.
In addition, the proposed change may result in the reduction of the 3% requirement for working capital.
3. The existing rule prescribes the same business plan requirements for initial and renewal permitting of CMOs. The proposed rule may provide clarification of the requirements for initial permitting of CMOs participating in a Family Care Program region and renewal permitting for those CMOs that have been participating in a Family Care Program region for multiple years.
Detailed Statutory Authority for the Rule (Including the Statutory Citation and Language)
The statutory authority for this rule is ss.
227.11 (2) (a), and
601.41 (3), Wis. Stats., that provides for the commissioner's rule making authority in general. Also, s.
648.10 (1), Wis. Stat., states that the commissioner may “promulgate rules that are necessary to carry out the intent of the chapter, including, after consulting with the department, standard for the financial condition of care management organizations." The changes that will be proposed follow consultation with the Department of Health Services and address standards for the financial condition of CMOs.
Estimate of the Amount of Time that State Employees will Spend to Develop the Rule and of Other Resources Necessary to Develop the Rule
200 hours and the Department of Health Services contracted professional accounting and actuarial services.
List with Description of All Entities that may be Impacted by the Rule
The proposed rule changes will only affect Care Management Organizations permitted under Ch.
648, Wis. Stat.
Summary and Preliminary Comparison of any Existing or Proposed Federal Regulation that is Intended to Address the Activities to be Regulated by the Rule
The Office is unaware of any proposed or existing federal regulations that are intended to address the activities to be regulated by the proposed rule change.
Anticipated Economic Impact of Implementing the Rule (Note: if the Rule is Likely to have a Significant Economic Impact on Small Businesses)
The impact of the proposed rule change is anticipated to be minimal. These changes are intended to lessen the regulatory burden on CMOs by adjusting the basis of the financial requirements to use actual results versus budgeted amounts and by clarifying the filing requirements for initial and renewal permitting.
This rule is not anticipated to have any impact on small businesses other than CMOs.
A significant economic impact on small businesses?
No
The local/statewide economic impact of the rule:
Minimal or none (< or = $50,000)
Contact Person
Insurance
This statement of scope was approved by the governor on September 13, 2012.
Rule No.
Relating to
Reserve requirements for life and fraternal insurers and affecting small business.
Rule Type
Permanent.
Detailed Description of the Objective of the Rule
The objectives of the rule changes are to modify the reserving requirements for life and fraternal insurers and to revise and clarify the reporting requirements related to the life reserves. The rule would repeal a table that is both incorrect and unnecessary thereby minimizing insurer, intermediary and consumer confusion. The changes also promote consistency with the National Association of Insurance Commissioners (NAIC) model regulation already adopted by 18 states.
Description of the Existing Policies Relevant to the Rule and of New Policies Proposed to be Included in the Rule and an Analysis of Policy Alternatives; the History, Background, and Justification for the Proposed Rule
The proposed rule changes would address four items described below. The changes contemplated in items (a) and (b) would bring Wisconsin regulations in line with the respective NAIC model regulations and 18 other states. The consistency would therefore help create a level playing field for our domestic insurers specifically as several of the states that have implemented the model regulation house a significant number of life insurers. The changes contemplated in item (c) would ease the administrative burden on the Office of the Commissioner of Insurance and foreign insurers doing business in Wisconsin by eliminating an unnecessary filing requirement. Finally, the changes contemplated in item (d) would correct an error contained in existing regulation.
(a) Section
Ins 2.80, Wis. Adm. Code, establishes minimum standards for life insurance policy reserves and the method for calculating the reserves. The existing rule includes requirements for a premium deficiency reserve, under which the company can incorporate “X" factors to adjust the mortality factor to a level that is based on the company's own mortality experience. Currently, under s.
Ins 2.80 (4), Wis. Adm. Code, the X factors used in the calculation of deficiency reserves are subject to a minimum of 20% and cannot be decreased in any successive policy years. The changes contemplated for a proposed rule would remove these limits on the X factors. When the rule was first enacted, the limits were included to provide additional conservatism. The industry has demonstrated to the NAIC that the limits are arbitrary and are not needed. This change could result in a reduction of reserves for some insurers and would create a more level playing field with the 18 states that have already adopted the NAIC model regulation.
(b) s.
Ins 50.79 (3) (a) and s.
Ins 2.80 (4) (b) 3., Wis. Adm. Code, would be better understood with the addition of clarifying language specifying that the Regulatory Asset Adequacy Issues Summary, a confidential document which is filed annually with the Commissioner, shall disclose the impact of cash flow insufficiencies that are projected to occur during the interim periods prior to the end of the test period. The current wording is somewhat ambiguous regarding what should be reported with respect to deficiencies in interim periods. The anticipated changes would improve the rule by eliminating inconsistencies in what insurers are reporting.
(c) Currently all life and fraternal insurers must submit a confidential Regulatory Asset Adequacy Issues Summary annually to the Commissioner. It would be proposed that the language of s.
Ins 50.79, Wis. Adm. Code, be amended such that the summary would not be required to be submitted by foreign insurers (approximately 450 companies), unless requested by the Commissioner.
(d) The proposed rule would repeal the table of select mortality factors at the end of ch.
Ins 2, Wis. Adm. Code. Since the rule was originally adopted, the correct table from the NAIC model rule has been referenced in two places within s.
Ins 2.80 (4), Wis. Adm. Code. At the time our rule was published, an incorrect preliminary version of the table was mistakenly included as an appendix to ch.
Ins 2, Wis. Adm. Code. An attempt to repeal the appendix when the rule was amended in 2004 resulted in the removal of the introductory page of the appendix, but most of the table remained. The entire table should be removed as it is unnecessary and incorrect.
Detailed Statutory Authority for the Rule (Including the Statutory Citation and Language)
The statutory authority for this rule is ss.
227.11 (2) (a) and
601.41 (3), Wis. Stats., that provide for the commissioner's rule making authority in general, and specifically, ss.
601.42 (2), and
623.04, Wis. Stats., authorize the commissioner to “promulgate rules specifying the liabilities required to be reported by insurers in the financial statements submitted under s.
601.42 (1g) (a) and the methods shall be consistent with s.
623.06."
The changes described in paragraphs 2 (a) and 2 (d) above are authorized under s.
623.04, Wis. Stats. The changes described in paragraphs 2 (b) and 2 (c) are authorized pursuant to ss.
601.42, Wis. Stats. Under s.
601.42 (1g) (a), Wis. Stats., the commissioner may request “statements, reports, answers to questionnaires and other information, and evidence thereof, in whatever reasonable form the commissioner designates, and at such reasonable intervals as the commissioner chooses, or from time to time." Under s.
601.42 (2), Wis. Stats., “the commissioner may prescribe forms for the reports under subs. (1g) and (1r) and specify who shall execute or certify such reports. The forms for the reports required under sub. (1g) shall be consistent, so far as practicable, with those prescribed by other jurisdictions."
Estimate of the Amount of Time that State Employees will Spend to Develop the Rule and of Other Resources Necessary to Develop the Rule
200 hours and no other resources are necessary to develop the rule.
List with Description of All Entities that may be Impacted by the Rule
Life and fraternal insurers licensed in Wisconsin.
Summary and Preliminary Comparison of any Existing or Proposed Federal Regulation that is Intended to Address the Activities to be Regulated by the Rule
The Office is unaware of any proposed or existing federal laws or regulations that are intended to address the activities to be regulated by the proposed rule change.
Anticipated Economic Impact of Implementing the Rule (Note: if the Rule is Likely to have a Significant Economic Impact on Small Businesses)
Item 2. (a) above would have the greatest potential economic impact by possibly allowing some insurers to reduce their reserves, thus freeing up capital for other purposes. It is difficult to predict which companies would be able to reduce reserves, and by how much. The change would probably not be considered material in relation to an insurer's total reserves, however the actual affect is not fully known at this time.
A significant economic impact on small businesses?
No
The local/statewide economic impact:
Minimal or none (< or = $50,000)
Contact Person
Safety and Professional Servives —
Architects, Landscape Architects, Professional Engineers, Designers, and Land Surveyors Examining Board
This statement of scope was approved by the governor on September 7, 2012.
Rule No.
