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Bankers Life and Casualty Co. v. Commissioner of Insurance3/23/1998
The case was reported by Marshall, J.
On joint motion of the parties, a single Justice of this court reserved and reported without decision the petition of Bankers Life and Casualty Company (Bankers Life) for judicial review of the decision of the Commissioner of Insurance (commissioner) disapproving its request for rate increases for two of its Medicare supplement insurance plans. Bankers Life argues that the commissioner exceeded her authority under G. L. c. 176K, Section 7, which governs rate-setting procedures for Medicare supplement insurance policies, in using a methodology to determine the "reasonableness" of Bankers Life's proposed rates on grounds other than compliance with the statutory minimum loss ratio. Related to that argument is Bankers Life's claim that the disapproval of the proposed rates is, in any event, based on findings that are speculative and unsupported by substantial evidence. We conclude that, consistent with Federal law and the Minimum Standards Model Act of the National Association of Insurance Commissioners (NAIC), the commissioner may consider information other than data necessary to validate the statutory minimum loss ratio if she deems it essential to her determination whether a proposed rate is "reasonable." We direct judgment to enter in the county court affirming the decision of the commissioner.
On November 14, 1995, Bankers Life submitted to the division of insurance (division) for review and approval pursuant to G. L. c. 176K, Section 7, and 211 Code Mass. Regs. Sections 69.00 et seq. (1994), a proposed schedule of premiums for six different insurance plans providing Medicare supplement insurance. Bankers Life sought a rate increase of 21.5 per cent for its "core" Medicare supplement plan, and a rate increase of 30 per cent for its "Medicare Supplement 2" plan that provides core coverage and additional benefits including skilled nursing and prescription drugs. On January 5, 1996, the commissioner issued notice that, pursuant to G. L. c. 176K, Section 7 (g), there would be a public hearing on the proposed rates on February 1, 1996. The Attorney General and the State Rating Bureau (SRB) intervened in the proceeding to oppose the submitted rate increases.
After conducting evidentiary hearings and accepting written testimony and other submissions, a hearing officer of the division issued a decision disapproving Bankers Life's proposed rates on June 28, 1996. On the same day, the commissioner approved the decision. On July 17, 1996, in response to the commissioner's decision, Bankers Life submitted revised rate filings that proposed increases of 15.5 per cent for its core policy, and 13.1 per cent for its Medicare Supplement 2 policy. These rates were approved. On July 18, 1996, pursuant to G. L. c. 176K, Section 7 (i), Bankers Life filed its petition in the county court for judicial review of the June 28 decision.
1. The commissioner's methodology for approving proposed rate increases. Bankers Life's claims rest all but entirely on its assertion that, in determining whether a proposed rate is reasonable, the commissioner may consider only whether the rate meets the minimum loss ratio standards imposed by G. L. c. 176K, Section 7 (d), (e). According to Bankers Life, the statutory minimum loss ratio represents "the supreme, definitive and exclusive measure" of whether a rate is reasonable, and the commissioner exceeded her authority in applying a test for reasonableness that included non-loss ratio factors such as administrative expenses or accounting for investment income. The commissioner responds that the statutory minimum loss ratio is a threshold requirement for rate approval that is independent of, and does not replace, the "
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