Actuary Law

Filed rate doctrine — protection against rate challenges

The filed rate doctrine prohibits lawsuits which would challenge the appropriateness of any premium rate after it has been approved by a state insurance department.    A few months ago I pointed to a December 2011 decision by a federal court in Kentucky throwing out an actuarial malpractice claim on those grounds.

That decision was follwed in January by a federal court in Kansas dismissing a class action complaint trying to challenge premium rate increases for long term care insurance as based on faulty actuarial assumptions.  Armour v. Transamerica Life Ins. Co., No. 11- 2034 (D. Kan. Jan. 25, 2012). 

So if you are an actuary working on rate filings, breathe a sigh of relief after the department of insurance approves the rate increase.   Your work is not subject to attack in a subsequent suit by policyholders.

Industrywide probe of actuarial assumptions under rate filings

Another sign of the additional scrutiny being paid to actuarial work by regulators comes in this announcement that New York is going to make an “industrywide probe” into health insurance rate hikes:

A New York state agency said Wednesday it is launching an industrywide probe into health insurers and health maintenance organizations to question the underlying data and actuarial assumptions used to justify rate hikes.

The audit will be funded with a $4.4 million grant awarded in September by the U.S. Department of Health and Human Services to the New York Department of Financial Services.

“At a time when spiraling health insurance costs are an incredible burden for working people, it is essential that we ensure that rate requests are based on fair, accurate information that has not been manipulated,” said Benjamin M. Lawsky, New York Superintendent of Financial Services.

The department will be looking at the data and actuarial assumptions that health insurers use to set premiums for customers.

Actuarial Standard of Practice No. 8, last modified in December 2008, applies to this work by actuaries on behalf of health plan clients.