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The following opinion is presented on-line for informational use only and does not replace the official version. (Mich Dept of Attorney General Web Site - www.ag.state.mi.us) STATE OF MICHIGAN FRANK J. KELLEY, ATTORNEY GENERAL Opinion No. 6210 March 27, 1984 INSURANCE: Authority of Insurance Commissioner to disapprove or withdraw approval of individual medicare supplemental insurance policy forms The Insurance Commissioner has authority to disapprove, or withdraw approval previously granted, on a case by case basis, of individual medicare supplemental insurance policy forms if the commissioner determines that the benefits provided under the policy are unreasonable in relation to the premium charged, even though the policies have an expected aggregate loss ratio of at least 65%. Elizabeth P Howe Director Department of Licensing and Regulation P.O. Box 30018 Lansing, Michigan You have requested my opinion on a question which may be stated as follows: Does the Michigan Insurance Commissioner have authority to disapprove of, or to withdraw approval previously granted to, individual medicare supplemental policy forms, even though the expected loss ratio is at least 65% if the commissioner determines that a higher loss ratio is appropriate? Medicare supplemental policy is defined by 1956 PA 218, Sec. 2264a(1)(d), as added by 1982 PA 195; MCLA 500.2264a(1)(d); MSA 24.12264a(1)(d): "Medicare supplemental policy' means a group or individual policy or certificate of insurance which is advertised, marketed, or designed primarily as a supplement to reimbursements under medicare for the hospital, medical, or surgical expenses of persons eligible for medicare. Medicare supplemental policy does not include a policy or contract of 1 or more employers or labor organizations, or of the trustees of a fund established by 1 or more employers or labor organizations, or both, for employees or former employees, or both, or for members or former members, or both, of the labor organizations.' Medicare supplemental policies are 'polic[ies] of disability insurance' in that they cover loss resulting from sickness or from bodily injury by accident, including hospital, medical, surgical and sick-care benefits as defined by 1956 PA 218, Sec. 3400; MCLA 500.3400; MSA 24.13400. Basic insurance policy forms must be submitted to and approved by the Insurance Commissioner prior to being issued or delivered to any person in this state. 1956 PA 218, Sec. 2236; MCLA 500.2236; MSA 24.12236. The grounds for disapproving or for withdrawing prior approval of individual disability insurance policy forms, including individual medicare supplemental policies, are set out in 1956 PA 218, Sec. 2242; MCLA 500.2242; MSA 24.12242. That section reads, in relevant part: '(2) Grounds for disapproval. The commissioner may within 30 days after the filing of any disability insurance policy form applicable to individual or family expense coverage, disapprove such form: (a), if the benefits provided therein are unreasonable in relation to the premium charged, or (b), if it contains a provision or provisions which are unjust, unfair, inequitable, misleading, deceptive or encourage misrepresentation of such policy, or (c), if it does not comply with other provisions of law; subject to the requirements as to notice, hearing and appeal set forth in sections 2236 and 244. '(3) Withdrawal of approval, notice, hearing, appeal. The commissioner may at any time withdraw his approval of any such individual or family expense policy form on any of the grounds stated in subsection (2) above, subject to the requirements as to notice, hearing, and appeal set forth in sections 2236 and 244. It shall be unlawful for the insurer to issue such form after the effective date of such withdrawal of approval.' Thus, the Insurance Commissioner may disapprove an individual medicare supplemental policy form, or withdraw approval previously granted for such form, if the commissioner determines that the benefits provided therein are unreasonable in relation to the premium charged. The Insurance Commissioner has provided by administrative rule that benefits are presumed unreasonable in relation to the premium charged if the anticipated loss ratio does not equal or exceed 65% for policies rated by age. 3 Michigan Administrative Code 1979, R 500.803(1)(a). Prior to the adoption of amendatory 1982 PA 195, an insurer with a loss ratio of less than 65% could attempt to rebut the presumption of unreasonableness in an effort to have the commissioner approve the policy. 3 Michigan Administrative Code 1979, R 500.803(2). With the adoption of 1982 PA 195, effective June 30, 1982, it is now no longer permissible for an individual medicare supplemental policy to be used in this state where the expected loss ratio is less than 65%. 1956 PA 218, Sec. 2274, as added by 1982 PA 195; MCLA 500.2274; MSA 24.12274, reads, in pertinent part: 'Medicare supplemental policies shall be expected to return to policyholders in the form of aggregate benefits under the policy, as estimated for the entire period for which rates are computed to provide coverage, on the basis of incurred claims experience and earned premiums for that period and in accordance with accepted actuarial principles and practices, the following: (b) At least 65% of the aggregate amount of premium collected, in the case of individual policies.' Accordingly, the Insurance Commissioner may not approve any individual medicare supplemental policy form if the expected aggregate loss ratio is less than 65% pursuant to her authority under section 2242, supra, on the grounds that the form does not comply with the requirement of section 2274, supra. Although section 2274, supra, establishes the lowest loss ratio which the commissioner may approve, nothing in the Insurance Code establishes a loss ratio which is, per se, reasonable. It is my opinion therefore, that the Insurance Commissioner has the authority to disapprove, or to withdraw approval previously granted, on a case by case basis, of individual medicare supplemental insurance policy forms, even though they have an expected aggregate loss ratio of at least 65% if the commissioner determines that the benefits provided under the policy of insurance are unreasonable in relation to the premium charged. Frank J. Kelley Attorney General
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