GH-Advanced

ACO Eligibilty (Broad Topics to write down)

- Provider types - Legal entity - capable of - Governance - Leadership - Plan to (CREEP, SCAMGP) - Numbers - 5000/sufficient PCP - Integrity

Advanced APM: What are the eligibility requirements?

1. Electronic Health Records Requires participants to use certified EHR (electronic health record) technology Requires that at least 50% of the clinicians in each APM Entity use certified EHR technology to document and communicate clinical care information 2. Medical Home Model if actual expenditures > expected, the AAPM can withold services reduce payment rates require payments by the APM entitiy to CMS 3. Bears more financial risk 8% of the average medicare parts A and B revenues or 3% of the expected expenditures for which an APM is responsible

Describe the important pricing variables: N% =

= % of claims controlled by non-preferred providers

Update the formula below for each of the following adjustments: Fraction of a year of experience Z =

= f*Z/(1+(f-1)*Z) where f = the fraction of a year you have in experience

Expected Inforce (TOTAL) Contribution =

=[IBV (t-1) + RC(t-1)]*RDR + FS*i

What are the eligibility requirements? for MIPS

> $30K per year > 100 medicare patients per year Cannot be participating significantly in an AAPM

What are the populaiton pricing implications of provider payment arrangements Quality

A Access to care S Structure fo Care P Process fo care O Outcome of care E Experience of care **ASOEP - actuarial quality standards

Due Dilligence - Systems

C Capailities E Efficienty C Costs A Service agreemtns - assertain if terminatiosn can be achieced C Data Conversion S IT Support **Dude wants to play video games...let me ChASE CC

What is the formula for Adjusted Book Value?

C Capital I IMR A AVR D DTA N Non-admit N Notes A Asset Mark to Market **so sooooory, but could I adjust your book value for you? It's crooked...CANADIAN

PROS: Why Ers should self fund

C Cash flows C Costs

ERISA - What elements are in the adminsitrationand enforment provision

C Claims Review P Pre-emption clause S Savings clause D deemer clause

Reconciliation of Shareholders' Equity to Adjusted Net Worth

C Common Shareholders' Equity on Consolidated Statements of Financial Position D Carrying Value of Debt and Preferred Shares F Fair Value Adjustments G Goodwill and Intangibles A Impact of Differences between IFRS and Statutory Values in Asia Adjusted Net Worth **Cut Down Fattie Gluts & Abs

Functions of the PCMH

C Comprehensive Care P Patient Centered C Coordinated Care A Accessible Services QU Quality and Safety **CoCo Puffs Are Quality

What you must think about when creating the contract - for bundling

E Define the Episode T Tail Risk L Low Case Load Provisions A Provider Allocation S Case Severity Q Quality Outcome Reqs A Admin Complexity A Alternatives U Utilization Loopholes **STEAL AQUA

List items that could take the NET rate to the GROSS rate:

E Expenses F Fees D Deficit Recovery Charges T Termination Risk Charge P Poolin Charge P Profit Charge I Invest Income E Explic Margin **DEFT PIPE

Other ACA allowable requirements

L Lisence A Area R Restrictions E Eligibiliy **Superhero villians have LAREs

What is HIPAA's Title I about?

Must cover EES that have pre-existing conditions

What is HIPAA's Title II about?

Privacy and security of INFO

What rules must be the same on or off exchanges?

R Rates RA Risk Adj C Comp F Fee U Unhealthy O Open Enrollment **Rates for UFO enCounteRs

ASOP 41 recommended practices

R retain documents E explain point well enough so it will be followed W if oral, follow up with written R responsibility - your words may have unitended consequences Recommendations are rewarding

K1 =

k1 = regression coefficient of claims for individual based on the individuals' past claims = COV(X1, X2)/Var(X1)

What is the formula for New Business Value Margin?

New Business Value Margin = New Business Value / Annualized Premium Equivalent (APE)

How many terminations does it take to be fully credible?

...for say, claims to be within 5% of expected claims 85% of the time. = (Selected Variance Factor) x (1.44 / .05)^2

PROPECTIVE METHOD Describe the step by step to do this method: (list and describe)

1 Calculate the Incurred Claims 2 Adjust for pooled claims and calculate the charge 3 Calculate the credibility weighting of actual experience 4 Credibility weight the Actual and Expected claims for the next period 5 Apply the trend 6 Include retention items - like additional expenses to go from Net to Gross rate 7 Spread the total cost among everyone paying

Describe the general process of pricing new stop loss (Specific)

1 Calculate the manual rate 2 Calculate the expected claism of the group (normally based on their experience) 3 Take 125% (or other percent) and calculate the aggregate attachment point 4 Create the net premium using CPD tables 5 Calculate the gross price given the attachment poing by grossing up for retention items:

Describe the steps to building a good model:

1 Choose the basic structure 2 Decide the information to be carried 3 Decide the assumptions + build a prototype 4 extend the prototype 5 validate the model 6 Document 7 Communicate

Describe the general process of pricing new stop loss (Aggregate)

1 Determine the expected claims (using aCPD) 2 input senarios in a Monte Carlo simulation the flow through the CPD and aggregate Montearlo takes these varialbes as inputs: Number of Ees, Aggregate factor (125%), SSL Deductible, Agg benefit limit maximum 1 Number of Ees 2 Agg factor (125%) 3 SSL Deductible 4 Aggregate benefit limit (Max) 3 Consider Process Risk and Parameter Risk Process Risk - potential variations of actual caims vs expected Parameter Risk - potential for the UW to misestimate the expected claims 4 Calculate the gross price given the attachment poing by grossing up for retention items:

What are the ways to deal with known risks within SL insurance?

1 Laser - high claimants are identified and and specific provisions apply to them only 2 High expected claims may be added to the expected claism - and get built into the premium 3 Laser pooling - those high, known claims are pooled together and basically given another SL coverage for just them (own deductible)

How to price a bundled payment?

1 Obtain claims data 2 select the conditions to bund 3 definie the episode 4 define exclusion criteria 5 estimate the cost of the bundle 6 identify savings opportunities

Describe the steps to creating a TNHP

1 Select an existing health plan 2 Selet a provider category you want to tier ( OCO, Specialist, Hospitals) 3 Split these providers on cost and quality into 2 tiers: Preferred and Non Preferred 4 Add adidtional cost to the non-preferred tier

What is the process for determing OPEN claim reserves?

1 determine case credibilty 2 apply credibilty to the base table and experience base TERMINATON table: 2012 GLTD What method do we use to determine credibilty? limited fluctuation credibility

What are some situations that might arise when and entiry is exitiing a line of bisness (in wind-down mode)?

1) Entity, while winding down has a positive statutory suplus that drops below the regulatory minimums. The regulatory by law will require the insurance regulator to take control of the reporting entity even though the affairs are wrapped up. 2) Single LOB exit, large fixed expenses spread over a dwindling number fo policies. Guidance suggests that fixed costs directly incurred by the product need to be allocated to that product and not another. This may lead to a PDR needing to be set up for the LOB. 3) Wind down with no contracts left inforce, but expenses still being incurred from prior incurral periods. This may lead to a PDR even when there are no contracts, no premium, and no propsoect of in force in the future

Embedded Value Results

A Adjusted Net Worth, excluding holding company activities P Present Value of Future Profits C Cost of Capital I Value of In-Force Business H Holding Company Activities C Carrying Value of Debt and Preferred Shares Embedded Value **Annie Put Cock in Her Cooter

Large Group Renewal Underwriting What to look at?

A Admin T Tail risk - Catastrophic claims E Enrollment changes A Antiselection **Large group = adult **Adults renew with TEA

Describe the STRENGTHS fo Episode Based Profiling:

A Admin Administrative ease (easier to group and pay) C Comparison Can compare performance because standardized P Patient Patient Centered **Can Actually Protect

What is process risk?

risk of variations of actual claims vs the expected

Update the formula below for each of the following adjustments: Pooling Points Z = What is the ideal pooling point?

The pooling points modify the experience rate, not the Z 5-15%

To get from ANW to adj ANW what should you do?

Accumulate all investor cash flows during the period to the end of the period and remove them from ending ANW

ASOP 19

Actuarial Appraisals fo Helath, Life, and Casualsy

What are the three types of antiselection?

External antiselection against the insurance company when first issued Internal antiselection while insured Durational (AKA CAST) antiselection while lapsing

What is a purchasing alliance?

Formed when two or more non-affiliated large groups come together (goal is to form a larger group with lower costs and more purchasing power)

List the six items actuaries commonly must opinon (SAO)

C 5. Claim reserves A 3. Accrued medical incentives R 6. Experience-rated refunds P 4. Aggregate policy reserves A 2. Unpaid claim adjustment expenses L 1. Unpaid claim liability *CARPAL

What methods does CMS use to monitor ACOs?

C Beneficiary complaints Q analysof of quality data S site visits A audits **CmS Q&A

What causes performance risk? How can we reduce performance risk?

Causes: Relates to inefficiency, suboptimal quality, and high cost of care Solutions: Attainment of care efficiency gains reduction of operation costs reduction fo fraud/waste/abuse in the system

Due Dilligence - Reinurnance

Choose the selection: P Different plans P Other products or risk tyoes T affiliated company transactions U transaction with reinsurers not lisenced by the target's domicile state ISSUES Ass Asset managemetn Ad Policy admin Man claims managemnt U Underwriting E Effect of reinsurance on combined entity due to coverage overlap **Dude, I know you have ISSUES, Under Every Advise contrary, you are an ASS Man, but PPUT it away and CHOOSE another SELECTION

QP: What are the eligibility requirements?

Clinicians who have a certain % of Part B payments or patients through an AAPM

What is the formula for the Cost of Capital?

CoC = RC(t-1)*(RDR - i) **investors could have invested elsewhere, so what is this costing them in opportunity cost? **if the required capital is earning the same rate the investor could be getting elsewhere, then there is no cost to him.

List the TOOLS underwriters can use to perform initial underwriting

Commercial databases internal data tax returns Individual application Attending Physician statement (APS) telephone interview lab testing medical exams

What problem was the creation of APPs trying to solve?

Comprehensive Physicians were trending to episodic care rather than comprehensive care Rural Declining number of physicians in rural areas Cost Cost control

How do you calculate the surplus?

Difference between Claims Fund and Actual Claims If actual = 170, then surplus = 204 - 170 If actual = 150, then surplus = 204 - 150 **so the lower you can get your claims, the more surplus you get back

What are generally the two types of credibilty formula you can use for pricing?

Empirical Model driven by experiene studies using company specifc data (or similar industry data) Traditional Model like limited fluctuation

List the Key updates to the ACO Gain sharing calculatino

Equall Equally weight the benchmark years during subsequent agreements Pro-rate Add the ACO saving sover three previous years (LATER REMOVED) Regional use the regional FFS instead of National First agreement period benchmarking: Use assignable Medicare FFS beneficiaries Subsequent benchmarking - Replace National with Regional - Rebase the benchmark - using regional and historical Benchmark will be rebased annually for regional trend

ASOP 42

Estimation of Liabilitites OTHER than incurred claims

ASOP 42: General Considerations—When determining deficiency reserves, the actuary should take into account the following:

Ex b. Exposure—The actuary should consider reasonable increases and decreases in exposure units over the time period of the calculation in the premium deficiency reserve calculation. This parameter should reflect changes due to such factors as mortality, lapses, and the impact of expected premium rate changes. Pre c. Premium Rate Changes—The actuary should use a premium rate change assumption that is reasonable in relation to the projected claims costs and the risk-assuming entity's expectations. This assumption should take into account factors such as market conditions, regulatory restrictions, and rate guarantees. Rinse g. Reinsurance—The actuary should consider the expected effects of reinsurance andchanges in reinsurance premiums in determining the premium deficiency reserve. Egg a. Assumptions in the Aggregate—The actuary should use assumptions that are reasonable in the aggregate Arrange e. Risk-Sharing Arrangements—The actuary should take into account risk-sharing arrangements. If the actuary anticipates there will be a payout for risk-sharing arrangements associated with a block of business that is being tested for premium deficiency, the actuary should treat the amount of the payout as an expense. Some of these arrangements require providers to share in losses as well as gains. If such an agreement is in effect and the actuary anticipates there will be losses associated with the block of business being tested, the actuary should include the amount due from the providers to offset the losses only to the extent that the actuary reasonably expects the amount due to be collectible. In f. Interest Rates—The actuary should use interest rates in the present value calculation that are reasonable and consistent with the purpose for which the reserve is being calculated. Clay d. Claim Trend—The actuary should take into account the wearing away of durational effects such as risk selection and pre-existing condition limitations, changes in provider agreements, adverse selection due to premium rate increases and plan design, and other factors that affect future claim payments. Tax h. Taxes—The actuary should consider the effect of losses assumed in the calculation ofthe premium deficiency reserve on the risk-assuming entity's taxes and may include a tax credit in the calculations where appropriate. Expensive i. Expenses—The actuary should consider total expenses of the risk-assuming entity inestablishing a premium deficiency reserve and should consider whether the expenses allocated to the block of business are reasonable for the purpose of determining premium deficiency reserves. **PUT FANCY EGGS IN THE PDR HOLE **my EX PRE-rinses eggs before arranging in the clay - expensive taxes

Expected EV (nb) [total] =

Expected EV (nb) = Value NB(1+RCR)^0.5

Historically, how have the mechanics improved for - payment models that incorporate provider risk

I Clinical Integration E electronic health records G Cliniccal Guidlenes I Health Plan incentives to transition risk RA Refined reisk adjusmtent methods E Experieince from current sucesses an past failures P Quality and cost pressure on proivders T Increased Transparency **GRAPE TIE

What factors influence EE choice?

I Inertia C Cost D Demographics A Attitude O Other coverages I Information N Network I Issues ** you bonded with your insurance plan? IONIC bond? IONIC AID !

Due Dilligence - Claim Managemetn

I Intake V Validation S Settlememt I Infastruure E Expertise I Integration A Independnt claim adjusters T Timelines D Triple damages **mangement claims to look nice for the ladies TIE ADVISE

Developing the large group proposal:

L Lengthy Cosider: P Plan Design, E Enrollment patterns A Funding arrangments, and AD Charges for admin expenses are case specific GUAR Performance guarantees: speed and accuracy fo claims processing ALT Funding Alternatives: Fully-insured, self-funded, combination approach **Large group = adults Ad-Alt PLEAd Guilty

Considerations for incurred claim Analysis

LA Large claim patterns mc Methodology Consistency tv Time Value of Money PR Provider Contractual arrangements r a Reinsurance Arrangmeetn DA Data PA PAD ac Assumptions Consistency C Coordination of benfits/subrogation/ recoveries **the LA MC was on TV selling Pr-RA-Da PACs

What is HIPAA's Title I about? What is HIPAA's Title II about? HIPAA - list the five rules that help simplify administratio What is HIPAA's Title III about? What is HIPAA's Title IV about? What is HIPAA's Title V about?

Must cover EES that have pre-existing conditions Privacy and security of INFO P Privacy rule T transactions and code sets rule S security rule U unique identifiers rule E enforcement rule Title 3 = Amount allowed to be saved in a Medical Savings Account (MSA) Title 4 = reform: pre-ex, continued coverage Title 5 = COLI + those who lose citizenship **PIMP C (if you pimp yourself out, may lose coverage, and everntuallylose citisenship)

Large Group - Develop Recommend

N New Premium Rates A Alternative funding methods P Plan design changes **Large group = adult **Adults recommend naps

what items will the NCQA look for when evaluating a physician office?

N New member capacity A Ambiance M Quality Manaement S Slots AA Accute Appointents C Clenliness N Nice A Atmosphere **is it peaceful? CAN NAM-AA-S ?

What is the TNHP savings formula?

N% * [M% (1-shift%) + SHIFT%*P%]

New Business Value Margin

New Business Value Margin = New Business Value / Annualized Premium Equivalent (APE) o APE helps account for single premium products as well as annual products

Common choice options:

No Coverage vs No Coverae ER ER plan and other plan IN Insurer choice PRO Provider networks or Medical mangmetn (HMO vs PPO) DE Traditional vs consumer directed (PPO vs High Deductipble) PRE Prescirption choice RI Rider choice

Why might the CMS terminate a contract with an ACO?

Noncompliance with the ACO Requirements Sactions taken against an ACO by an accrediting institue that disqualify the ACO from performing/compliing with shared savings program Violations of rules Physician self-refferal prohibition Civil monetary penalty laws Antitrust

Excess Ceding commission =

Purchase Price (ceding commission) - (Stat reserves - Tax reserves) - Mark to market of assets - DAC proxy Tax on initial consideration

What are the populaiton pricing implications of provider payment arrangements General pricing process

Qu Quanitfy quanitfy risk, calculate price, model cash flows Pop Population Select and review the target population Deliver Delivery method Revist the service delivery model to make sure it is appropriate fo the populatoin M Model select a payment model P Project project/modle cash flows

For a provider participating in an ACO, what is the equation for that provider's gain/loss?

R -Revenue Reduction B +Bonus/share of revenue reduction S -start-up costs A -Admin costs fo operatin the aco E +reduction in direct expenses

Reinsurance Approaches

R Assumption Reinsurance (You are ASSUMING the people onto your own books) I Indemnity Coinsurance M Modified Coinsurance **RIM - just the rim of what you are able to do

Considerations in forming an opinion with respect to asset adequayc analysis

R Reasonablness LI Reserve /Liability Adequacy S Scenario Result AT Aggregation during testing AR aggregation of results T Trends M Managemetn Action S Subsequent Events **SM-AR-T LIARS

What are the pitfalls for TNHP

R Regulation P Provider Reaction/ Morale A Anti-selection R Rural Areas T Transferring **RAPTuRe - split'em wheat from chaff

List the practical consideration for choosing credibility levels

R Regulation o Regulatory restrictions on experience rating for certain group sizes C Competition o Competitive pressures A Administration o Administrative and managerial units within the company and their ability to cope with experience rating C Cost Tradeoffs - of admin versus sales gain o Trade-off between the added cost of applying experience rating and the resulting gains in volume and quality of new business E Effect to existing business o Effect on existing business of change in credibility S Management strategy o Management philosophy regarding experience rating I Internally self-consistent o Need to be internally self consistent between classes of business **Practically, you must pick up the SAC of RICE

Antitrust guidelines conduct to avoid

R Restricting Selection Info for providers E Exclusive Contract S Sales R Referrals I Limiting Info - Shareing sensitive info among ACOs that coul be used for servieces provided out side the ACO **REStRIct - cannot restrict information or competition

What groups are not subject to ERISA? Who are they regulated by instead?

Self funded CMS Fully Insured state insurance regulations

Describe MIPS APMs:

Subset Subset of APMS streamlined Streamlined reporting and scoring aggregates aggregates eligible clinician MIPS scores to the APM entity level All elibilbe clinicians in an APM entity receive the same MIPS final score incentive Incentive payments are based on performance, cost, and quality **SET IN ST-AG merritt is set in his stag lifestile

What is IBV?

The PV of after tax statutory book profits less the PV fo the CoC, both computed with best estimate assumptions at the data of valuationa nd discounted tot eh valuation data at a risk adjusted RDR.

What is the "theory of improvement"?

The theory that 'market share' will shift through 1) Informed Consumer Choice 2) Financial Incentives The focus of performance measurement ha shifted to the individual physician 1) migration to 'open access' PPO (no gatekeeper - ees making educated choices in providers 2) growth of CDHP and increased demand for info materials

What is HIPAA's Title III about?

Title 3 = Amount allowed to be saved in a Medical Savings Account (MSA)

What is HIPAA's Title IV about?

Title 4 = reform: pre-ex, continued coverage

What is HIPAA's Title V about?

Title 5 = COLI + those who lose citizenship

Due Dilligence - Risk Management

Tool the target's ERM practices provide effiennt analysi tools givent eh limited ue dilligence time fram Integration seller's ERM must be integrated: SOX SOX requirements S Staffing issues Differences philosophy and scope **Dude needs TOOLS to INTEGRATE Differences in Slippery SOX versus non slippery socks

How do we measure the performae measures? (how do we know which are the good ones?)

Validity - how well does a measure represent the phenomenon of interst? Reliability - how much of the variation is due to real differences in performance? (measured physician to physician)

APPs for academic physicians may also include:

W- Compensation for clinical work T - Compensationfor teachign Re - Research funding Ad - Stipends for admin duties F E S- Partial compensation for staff, facilites, equipment T-Re-Ad - Water For eh Second

What is a residual value?

When claims are beneath the attachment point, so there is money left in the fund.

Expected Inforce (IBV) Contribution =

[IBV (t-1) + RC(t-1)]*RDR - BP(t) - RC(t-1)(i) + FS*i

What is the end product of CFT?

a. Actuarial opinion and memorandum regulation (AOMR) i. Requires an appointed actuary to file an opinion annually ii. Opinion includes asset adequacy analysis and cash flow testing

Aggregate Attachment Point =

max ( expected PEPM * EXP members months*120%* 90%, expected PEPM * ACTUAL members months*120%)

First, what is a prototype cell, or a 'proto-cell'?

this is a set of cells that represent a given subset of the business being modelled group similar policies together that are identical (or close enough) Get a distribution of the exposure in each cell

Cost Efficency

(Total acutal / Total Expected Costs)

mean reserve

Mean Reserve - Def prem = [tV40 + (t+1)V40 + Net Prem]/2 - Def Prem

Assumptions Needed for TVFOG

TVFOG assumptions, methodologies, and models should be consistent with other EV calculations Stochastic considerations: o 1. Stochastic simulations can be based on a regime-switching lognormal model, Cox- Ingersoll-Ross, or other o 2. Need policyholder behavior algorithm to reflect utilization of options and guarantees o 3. Consider management actions when developing the stochastic model Example: how management might react to low interest rates For simple, short duration options, TVFOG can be calculated using closed-form solutions like Black-Scholes o Never appropriate for longer duration guarantees in more complex products

How do we caluculate Reliablity?

((sigma squared)[physician-to-physician]) / ((sigma squared)[physician-to-physician] + (sigma squared)[physician-specific error]) Solving this formula will tell you the % reliable 1 = 100% reliable - deviations due to real differences in performance 0 = 0% reliable - all fluctuations due to measurement error

How do you calculate the Claims Fund for the Level Funding product?

(ASL Corridor) * (Expected Claism Below the SSL Deductible)

List the pros and cons for the list of Physician Contracting Situations:

**I ManaGe IPA Deliveries to the Homes of Special Faculty

Considerations for Estimating incurred claims

**from MR PIMP TCES **from STEP UP MMEN **from CUPS MTS S Claims seasonality C Credibility O Risk Charicteristics and organizational practices R Legislative reqs L Long Term Products C Separate reporting of carve-outs **the other charictersistics are: CROCS Loafers (these are sooooo other)

List and describe pooling methods used to dampen claim cluctuations

-Catastrophic claim pooling - a charge is added and in return, allows for the forgiveness of exceptionally high claims on individuals within the group -Loss ratio / Rate increase limits - sets an upper limit on the loss ratio used in setting future rates -Credibility weighting - develop a credibility factor (based on group size) to be applied to the claims experience and combined with expected claims -Multi-year averaging - combines several years of experience to smooth out fluctuations in a single year For example: Pooled loss ratio in year Z = [5*LR in year (Z) +3*LR in year (Z-1) + 1*LR in year (Z-2) ] /9 -Combination methods - many of the methods can be used together

PDR - what to document?

1. Description of the groupings, along with a) The rationale for the groupings (such as "marketed," "serviced," and "measured" issues); b) An indication of which lines of business were combined due to immateriality; and c) The basis for changes from prior years; 2. All assumptions used in the projections; and 3. Discussion of the time periods chosen for the projections. The actuary should review ASOP No. 41, Actuarial Communications, when preparing the appropriate documentation.

Describe the process to create the ACO Benchmark

1. Medicare develops a baseline or 'target' to use to compare expenses 1 Take 3 years of data for beneficiaries that would have been assigned to that ACO 2 Adjust (risk adjusted) - Health Status - Catastrophic claims (reduce volatility - Split out special classes (ESRD, dual eligibles, aged, disabled) 3 Index to curren calendar year 4 Weight years so that newest gets most weight Most recent = 60% Middle = 30% Oldest = 10% 5 VOILA! This final number is your raw estimate baseline 2. Medicare trends raw baseline to get to a spending baseline Trend is based on... Spending growth Changes in health status over time 3. Policy adjustments Based on... Exclude teaching hospital charges Exclude incentive payments outside Medicare

For PDr testing, Actuaries have historically considered four interest rates, based upon the situation:

1. The average earnings rate on the applicable investment portfolio; 2. Current new-money rates; 3. The interest rate assumed in product pricing; 4. The interest rate prescribed by the standard valuation law (SVL).

What does HIPAA do in general?

Abuse Combat waste, fraud, and abuse P Improve the portabilty, continuity M Promote MSA L Improve access to LTC coverage A Simplify Adminsitration **PALM Abuse

Describe the evolution of the MSSP

2012 - one sided/two sided 1 one-sided basis Potential savings: 50% of gains to a maximum of 10% of benchmark 2 two-sided basis Potential gainsharing: up to 60% of savings up to 15% of benchmark Loss sharing: between 40% and 60% of losses Loss sharing: limited to between 5% and 10% of benchmark, depending on year 2016 3 two-sided basis Potential gainsharing: up to 75% of savings up to 20% of benchmark Loss sharing: between 40% and 75% of losses Loss sharing: limited to 15% of benchmark costs 2018 1+ two-sided basis Potential gainsharing: up to 50% of savings up to 10% of benchmark Loss sharing: limited to 30% of losses Loss sharing: limited to 4% of benchmark OR 8% of FFS revenues

What to consider about capitated payments?

3. ASOP 16 a. Actuary should discuss what is known about provider entities that are capitated b. If information is limited, consider adding disclaimer that status of capitated entities is unknown

ACOs report out on how many measures? What 'domains' / types of measures are there?

33 E patient/caregiver experience, C care coordination/patient safety, P preventive health, R at risk population. **domains have Prestigious CREsts

Why would you want to be a Qualifying APM Participant (instead of normal APM status)?

5% o QPs are excluded from MIPS and receive a 5% lump sum bonus More $$ o Receive a higher Physician Fee Schedule update starting in 2026 ++ • The Quality Payment Program provides additional rewards for participating in APMs

ACO Size Requirements

5,000 Medicare beneficiaries "sufficient PCPs"

People with no claims this year will average how many claims next year? People with claims that are 2X the mean claims this year will average how many claims next year?

75% of the average claims in past year 125% of the average claims in the past year

Describe the important pricing variables: Shift % =

= % of non-preferred users moving to preferred providers

Update the formula below for each of the following adjustments: Specific or individual Stop Loss Z =

= ((K1) + (n-1)*(K2'))/(1+(n-1)*(K3)) Where K2/K3 = S S = % change for the stop loss attachment points (see example)

Describe the important pricing variables: P% =

= (1- "Preferred Cost" / "Non-preferred cost")

Update the formula below for each of the following adjustments: Multiple years of experience Z =

= (1- sum of past Zt's)*Z(t-1) Zt is the additional credibility you get from adding on another year It must be generated recursively

Update the formula below for each of the following adjustments: Variance of Claims/Variance of age/sex factors Z =

= (K1 + (n'-1)*K2)/(1+(n'-1)*K3) where n' = n*[ (mu^2) / (mu^2 + sigma^2) ] Age/Gender cells that have high cells will drive the overall credibility of the case.

Update the formula below for each of the following adjustments: Employee Turnover Z =

= (p*(K1) + (n-p)*(K2))/(1+(n-1)*(K3))

Expected EV (nb) [NI] =

= BP(nb)

Describe the important pricing variables: M% =

= Member liability differential

Expected EV (nb) [IBV] =

= Value NB(1+RCR)^0.5 - BP(nb)

Using a least squares credibility model, state the following formulas Z =

= [ (K1) + (n-1)*(K2) ] / [1+(n-1)*(K3)] where n = number of individuals in the group k1 = regression coefficient of claims for individual based on the individuals' past claims k2 = regression coefficient of claims for individuals based on the claims of others in same group k3 = how the in-group variance is less than the total variance of indiviual claims

EffEVRate(t) =

= [adj ANW(t) - ANW(t-1)] - [IBV(t) - IBV(t-1)] - VNB(t) / IBV (t-1) + ANW (t-1) + 0.5 VNBt

What are the best practices in provider payment arrangement? Talk about the team of players

A Actuary: Quantifies risks, models, calcualtes capital to cover losses O Actuary & CFO: Set a budget to maintainteh ROI of the payment reform model C Clinicians: Provide high-quality care to achieve good outcomes T IT: provide timely and accurate info P Policymakers: address systematic issues such as shortages in the workforce P Payment reform team: understands the utilizationrisk, technical, insurance, and performance risk **CAT POPoo is the bestest

What are the drawbakcs for bundled payments?

A Admin administer Difficult to administer and too costly for some providers V Changes variance in cost variations in cost of devices C Changes changes/medical changes in treatemetns or drug/medical practice patterns R Data limitations reimbursable data includes only reimbursable costs Y Data limitations severity claism data does not indicate the severit of disease **drawbacks of bundled babies? **Always Volatile when then CRY

What could a physician get paid for / how can they get paid under the APP system?

A Aministrative Fees P Preventative care bonus P Patient enrolled model (PEM) s Shadow FFS F FFS R Rostering P new Patient incentives Care comprehensive CARE mangement fee D chronic Disease O blOck funding C Capitaiton S Sessional Fees **APPs FoR Primary Care DOCS

Charicteristics fo rwhich development method works well

A Any product - Short or Long Term C Need sufficient volume for credible claims Vo Volume depends on - Benefits covered - Duration since inception - Growth Rate Qu Data quality - Ability to recored incurred and paid date K Knowledge of Consistent pattern - able to use past data for future **what childhood development tv show helped build character? Donal duck! QuACK in the BuilDinG

Due Dilligence - Investments

A Asset Type QU Quality I Potential Imoarments S Seller's investmeetn strategies and guidelines L asset liability matching In Internal control environment C Changes needed toconform seller ot buyer's standards *INVEST In Courrier QUAILS

Factors that Determine Purchase or Sales Price:

A Assumptions D Discount Rate U Urgency E Economies of scale T Tax I Intangibles E Expenses of sales O Other **ADIEU TOE - sell body to ballet, toes always messed up

So why would you want to use a bundled payment? (note two ways you can do this: by physician or by payor)

A Attract more business o By providers to attract more business, including business from self-pay patients, medical tourism, and payor contracts E Engage Physicians - who could split time o By providers to engage physicians (especially surgeons), including those who could split their admissions among several hospitals C Cooperate Physicians - to reduce hospital costs o By providers to gain the cooperation of physicians (especially surgeons) to reduce hospital cost R Reduce overall payments o By payors to reduce payments C Change patient behavior - to lower cost or higher quality o By payors to encourage patients to use lower-cost or higher-quality providers A Align finanical incentives o Bundled payments can help align financial and quality of care incentives among the various providers **RACE CAr

CEO Forum Guidance in 2006 EEV Principles Paper

A Key Assumptions E Explanation - How Key assumptions were determined M Methodologies R Reconciliation of opening to closing EV by source F Analysi fo change in free surplus S sensitivities Recommend: 100bps increase in RDR 100bs reduction in interest rates **FARMES % change in various non-eco assumptions

Describe the charicteristics of a good model:

A o Reliable Accuracy - should be good enough to predict future events and should be robust G o Suitability for Use - should produce results for which it is designated, without unnecessary complications P o Appropriate Precision - how many decimal places should be used and displayed S o Sensibility - underlying basis of model should reflect a logical approach to what is being modeled R o Results Effectively Communicated - results are useless unless they can be communicated to users and clients **GRASP - should have a grasp on it

Integrity Requirements ACO

ACO must have... • Integrity requirements O Compliance Officer - (reports to board) P Compliance Plan M Compliance mechanisms in place R Compliance reporting T Compliance training **TROMP **Do not TROMP on the law by comitting fraud!! SCREEN CMS screens the program for integreity issues duing the approbal process CONS confilict of interest polcy NO NO: gifts as induemetns for services preferential referrals

The goal of an ACO is to further evidence based medicine... How does it do this?

ACO provides plan E - Evidence Based Medicine E - Beneficiary Engagement R - Reporting Quality + Cost metrics C - Coordination of Care **CREEP - - if you stalk and kill someone, you may need futher evidence ACO proves patient centeredness S - Patient Surveys G - Patient involvement in Governance C - Patient Communication - understandable A - Patient access to medical records M - Performance metrics **SCAM GrandPa

What is the formula for Adjusted Net Worth?

ANW = Free Surplus + Required Capital

What is the Box-Jenkins ARIMA model?

ARIMA Model = (auto-regressive integrated moving average) Econometric models that create linear combinations of leading indicators to predict claim trends

EV - Additional guidance in the 2006 paper

Additional guidance in the 2006 paper: o List of prescribed sensitivities 100 basis point increase in the risk discount rate 100 basis point reduction in the interest rate environment 10% decrease in equity or property values 100 basis point increase in yield on equities or property 10% decrease in maintenance expenses 10% decrease in lapse rates 5% decrease in mortality and morbidity rates o Basis for determining required capital for cost of capital calculations o Derivation of risk margins o Pattern of reinvestment yields

what is ANW?

Adjusted net worth is the realizable value fo capital and surplus. Statutory capital and surplus are adjusted to include certain liabilites that are, in essence, allocations of surplus and have realizable value (ex. AVR included, intangibles NOT included).

Why might you perform Cash Flow Testing?

Ass Material Asset Risks Long Liabilities that have very far out cash flows New Company has New or Rapidly growing LOB Anti Liklihood of antiselection due to the policyholer being given a choice **Kristen LONG performs cft, she is ANTI-ASS for my NEW skirt

What is the relationship between IBV and PV(DE)?

Assuming a simplified state( no debt), then PV(DE) = IBV + RC and thus... EV = PV(DE) + FS EV = IBV + RC + FS

What is the formula for Book Profit? (2)

BP = Surplus(t) - Surplus(t-1)*(1+i) BP = After Tax STAT income - RBC*i i=interest actually earned on assets, if there are dividends paid out of surplus or additional paid in capital during that period, it will need to be added/removed according to the time it was added/removed (aka with interest)

Expected Inforce (Net Income) Contibution =

BP(t) + i*RC(t-1)

List and describe the specific items the Actuary should review during due dilligence

BS Balance Sheet: A Accuracy R Rserve methodologies (for STAT/TAX/GAAP) C Completenes R Reserve Conservatim/deficienceis A Adjusted Net Worth P Compliance with regulatyr standards IS Income Statement P Patterns NON Flucturatiosn in earnigns/nonrecurring adjustements INT Internal Managemnt Reporint EARN Earnings Analysis thes eller uses to manage its rbusiness EX Experiene Reprots P Primarey Basis MAN Drive key managemetn metirics and explanations of earnings EX Seller's experience compared to buyers ASS Assumption monitoring - mortality, morbidity, laposes, expenses **Dude's girlfriend spends all his money, bad financials!! **she is total BS! Girls AR CRAP **she (Petunia) is a NON -Income Earner **because of Petunia, dude is an EX-ASS-MAN

Actuarial Support for the Self-Insured Plan

C COBRA Premiums Determine COBRA premiums for members who lose employer coverage AM ACA MV Determine the ACA Minimum Value (MV) for Self-Insued Plans AI ACA Issues Effect of Other ACA-Related Actuarial Issues on Self-Insured Plans Taxes and Fees Enrollment and Expenses Tax Penalites Minimum Essential Coverage Settign Affordable EE Contributions Balancing benefits and ER budget Defined Contribution plans R Retiree coverage Establish Credible Coverage for Retiree Prescription Drug Plans O Other Support Items described on other flashcards

7. Designign output and communicating results What is important to think about here?

C Context - of the question being asked (answer the question) C Code - of profesional conduct C Compare - against osm standard results C State intent clearly

How does the CRA (IRS) determine whether a physician is an EE or independent contractor? (Salaried EE or Self Employed)?

C Control O Ownership of Tools I Integration of work into the business L Risk of Loss

What are the capabilities of the Contract Managemetn Systems? (CMS)

C Network Gaps/Cracks R Recruiting Efforts N Create New Contracts S Store contracts T Track contract changes **CNTRactS - contract capabilities

What are the considerations when offering a Level Funding Product?

C Other Companies If an insurere moves a low risk to a level funding, the remaining companies in the ACA community block may suffer T Timing Transitional relief on ACA plans will still make ACA lowest (until transitional is gone) A Admin Level funding are hard to price, sell, and administer S Sales Need to train sales team because still a new product that will need to be explained. **CATS

Why would people choose to offere multiple options anyways?

C Show ER is currentNew options attract good talent/show ER as leading-edge F Favorable selection - create plans to attract low cost risk E encourage consumerism - entice ees to choose higher option D can implement a defined contirbution - which is better for Ers to have in order to manage yearly budget **DEFined Contribution

Describe the Group Medical Insurance environment Consequenes of the Group Medical Insurance Environment

C Very price competitive L Policyholder normally has little loyalty to the insurer E large enough groups get experience rated N Final rates enerally result more from negotiation than theoreticla calculated amounts A Competition exerts a downward price influence and reduces the profit margin C Correlation of claims year to year - Individuals within a group who have high claims in one year tend to have high claims in the next year L Groups with a stale population will have greater credibility than those with high turnover E Credibilty can have a significant effect on premiums A Insureers using inappropirate credibility will end up overpricing less expenseive groups and vice versa **health insurance can make you CLEAN and CLEar

For these items, list what the actuary signs off on for each

C calculation consistent with year end A Appropriate assumptiosn are used R State requirements are met P Premiums make sufficient provisions for claism/liabilities - - Predictions (estimates) versus actuals A has Asset Adequacy analysis been performed L Liabilitieas are in acordance with acturial standards **CARPAL tunnel - if you write too much

Due Dilligence - Marketing and Distribution

Culture Cultural compensation Comp Producer compensation TO agent turn over Ag Agent's retirement funding ST sales team **Com TO STAge Culture

List the typical credentialing application elements:

D Demographics E Education D Practice Details B Billiing I Professional Liability Insurance H Work History/References D Disclosure Questions O Other : Images of supporting documents **HID DED BOdies - in order to get past the credentialing process

Risk Classification Schemes

D Demogrpahics U Utilization D Diagnosis I Medical information H Perceived health status L Lifestyle and beharior **DUDe Hill almost all tuuls use both diagnosis and demographic information to assign risk scores to each member

What information is important for underwriters to have when underwriting? (List) Eligibilty

D Dependent Percent of Ees covering spouses R Rural Rural vs Urban I Inactive Inactive Ees P Participation Participation- low participation in self insured plan can be a warning flag (higher antiselection) H HMO HMO - is there membership in an HO plan as well E Enrollmemt Enrollment - changes in renrollment over time *Underwriting is like a home inspection - need to find the problems before you buy *HElp the DRIP - - risk is leaking away if no underwriters

What is included in the Actuarial Memorandum?

D Description Description of coerage P Premiums premium rates and factors A Anticipated LR anticipated LR S Statement statemetn that the filing complies with laws, and premiums are sound and reasonable

List the influential variables that determine the paid amount: (for LTC) especially if these are accurate in the data

D Diagnosis T Time since onset S gendr/sex T type of care provider R region A age S spouse status (if alive, will help care before professional service is solicited) R Reason the claim qualilfied for benefits. **STaR DARTS - if the LTC disability was caused by a bad incident of lawn star darts, then that may impact the payment

What are the types of things that the provider will monitor for the physicians? (Examples of Elements for Ongoign Network Monitoring)

D Disciplinary Actions from licensing borads C Member Complaints U Utilization Review L Expiration of Medical Lisence E Expiration fo Specialty Cert E Expeiration fo Malpractice insurance **DULCEE vida - - monitor for me baby

Typical Adjustmetns by buyer of actuarial appraisal report

D Discount Rate M Mnagemetn N New Business S Synergies S Strucutre **DeMoNSS

Challenges in Valuing Insurance Companies:

D Duration I Interest Rtae S Subjective C Cyclicl R Reins M Market R Regulation A Accounting R Rating Agencies **DIRector!!! the Rate of Return is a SCAM!!

What are some of the variables that change SL base rates?

D Group Risk Caracteristics U Underlyning benefit plan C Stop Loss contract provisions C Claim Cost Controls L Deductible leveraging R Retention itesm *CLeaR the DUCts

What are the Major Objectives of ERISA?

D reporting and disclosure laws: SAR SPD SMM F Every plan must have a named fiduciary Person who oversees and has responsibilty over the plan A Administration and Enforcement pre pre-emptoin RE reclaism review DEEM deemer clause s savings N Non discriminary Must pass a set of tests to make sure it does nto favor the highly compensated ees **Desk FAN - think of some regulator sitting bored at his desk while he reviews these

What Reinsurance Taxes are there?

DAC PROXY TAX o DAC proxy tax is based on the ongoing net consideration received by the assuming company (typically premiums less claims and commissions) o Mark-to-market on the asset portfolio creates an immediate taxable gain or loss to purchaser o Excess ceding commission on a tax basis is deductible

What is the formula for Distributable Earnings? (2)

DE = (Stat After tax income) - (Increase in RBC) DE = Book Profit + Interest Earned on RBC - (Increase in RBC)

What is the 'contract basis'

Deals with the time element in the definition of claims covered by SLI Describe what a 12/18 contract means? The congract will cover all claims incurred in the set 12 month period, and those claism can be paid within that 12 months or in the next 6 (12+6)=18. Describe what a 18/12 contract means? (effective July 1, 2018) Covers incurred claims from July 1, 2017 - Dec 31, 2018 that are paid from Jan 1, 2018 - Dec 31, 2018

How do you reduce antiselection? What two levers do we have?

Design Choice Pricing Predictability

Factors/changes that could cause actual results to differ materially from expectations

E Economic R Regulations A Acct C Capital R Reputation P Mort M Method H Hedging A Aquisision L Liquidit A Asset sourcing/yield C Competition R Reins **if you REACH MR LA CRAP

List and Describe the key points of this ASOP

E Projected Earnigns Project distributable earnings, refert to ASOP 7 in regard to projecting cash flows A Setting Assumptions Consider historical experience, adjust to current day. Consider credibilty. D Discount rate Since this is a main driver of the appraisal value ( and is very hard to predict). Consider displaying at several discount rates A Applicability fo Appraisal What are the needs of the intended audience? T Treatmetn of Assets composition of asset portfolio (type, quality, maturity) M Modeling and Model Validation choose and validate model before use S Sensitivity Testing determine key assumptions. Think about intended purpose. R Reliance asop 23 D Documentation document retention, asop 41 **SMART or DEAD - appraisals are crucial, you might make a smart call on the aquisision or you might be dead.

What assumptions should you include when calculating the PDR?

E expenses Projected losses should include expenses associated withteh policy grouping. Expenses need only reflect operating costs for the policy gourping if other lines of business canrealistically be expected to cover overhead costs. Basically all company expenses need to be allocated somewhere, but a product grouping only NEEDs to include the expenses directly associated with the business. R Rate Increases Rate increases should be reasonable and should be at a level likely to be implmented under market conditions E Enrollment Realistic enrollment assumptisons should be included. New entrants cannot be projected to improve morbidity unless tehere is historical experience to justify the assumption. Should include durational wear off and antiselection in lapses. C Conservatism Realistic assumptions should be used (GAAP = requirement, STAT = no guidane given) T Taxes Reservse should be calculated after-tax P Provider Arrangments Do not include provider settlements under risk sharing arrangments as offsets of claism payments unles the arrangments have been specifically determined and billed to the providers. I Interest Rates Reasonable interest rate asumptions should be used to discoun the PV of the deficiencies T Claims Trend Anticipated increases in cost due to reasonably expected claims cost inflation should be included in the calculation. **to create the PDR (to fill the hole) we must first ERECT the PIT

List the models that have the APM Scoring Standard (as of 2017)

E o Comprehensive ESRD Care (CEC) Model (All Arrangements) C o Comprehensive Primary Care Plus (CPC+) Model S o Shared Savings Program Tracks 1, 2, and 3 N o Next Generation ACO Model O o Oncology Care Model (OCM) (All Arrangements) **CONES **you score if you stayin the cones

What are the two types of associations?

EEs ▪ Association of individuals such as members of a medical society or bar association ERs ▪ Multiple-employer trusts (METs) are issued to the trustees of a fund established by two or more employers in the same industry

List the formulas for Embedded Value: (2)

EV = Adjusted Net Worth + Inforce Business Value EV = PV (Dist Earnings) + MV(Free Surplus)

List methods you could use if you need to estimate when data is not credible:

F Factor method E Examiner's method A Avg size claim P PMPM method S Cost method L LR method F Formula Method S Stochastic approaches L LAE reserve E Emerging issues and techniques ** estimation station! (little kid)...it feeeeels like a big number...FEELS SLAP!!! idiot!!! its a small number!!!!

List and Describe the types of facilities and contracting situations (hospitals and ambulatory facilities):

F For-Profit National Hosptial Companies O Other G Government hosptials M Multihospital System A ACOs P Physician owned single specialty C Community Based Single Care R Retail health clinics A Abulatory Surgical and procedure centers S Specialized hospitals S Subaccuet Care H Hospice **why are you in the hospital? FOG MAP CRASH!!!!

Common Categories of Liabilities:

F Future Claims I IBNR R Reproted Claism E ERRs D Claims Due and unpaid **FRIED - my braisn is fried thinkign about canadial liabiliities...all fo theem

List the theoretical consideration for choosing credibility levels

F Low Frq o Coverages with low frequency of claim are more volatile and will require a larger exposure base for a given credibility level S Varying Sev o Coverages with widely varying claim sizes will tend to be more volatile I Intervals - can be a good choice o Statistical confidence interval chosen by the insurer s Square Root o Portion of experience due to statistical fluctuation has historically been treated as varying inversely to the square root of the number of claims or exposed lives ?? o Typical measure of credibility is number of lives covered, but covering a longer period rather than more lives may be appropriate if claims are independent **Theoretically, one SIFtS through the bag of rice to look at the rice's experience

What is the formula for Free Surplus?

FS = MV of surplus in excess of RC

What is book profit?

For a particular reporting period, statutory book profit is the after-tax net income achieved after resetting invested assets at the beginnign of the period exactly equal to the net statutory liabilities. Basically, the income less the interest earned on required capital (since we do not want to include the interest on assets supporting required capital, only liabilities).

Challenge of CALM

G Encompasses ER group, association, and special risks VA Wide variety fo benfeits and financial arrangements C Customization creates complexity T TPAs are common (data provided may not be good enough) RA Refund accounting adds complexity LT (length) Term of liaiblity for some overages would be determined on a seriatim basis POO Reinsurance or pooling - coordinate cash blows among the various parties **VA-G-RA-T LikeTo Chuck POO **chick in starbucks who was like nah I will use the bathroom right here thank you

CONS: Why Ers should NOT self fund

G Third Party Guarantee V Volatilty E Economic cycles R EE Relations A Accounting regulations T Tax/Trust *GrEAT Volaitlity Emerges

ASOP 42 Additional Considerations for Financial Reporting—When determining premium deficiency reserves for financial reporting, the actuary should consider the following:

Group a. Blocks of Business—In order to determine whether or not a premium deficiency exists, the actuary should consider blocks of business in a manner consistent with applicable financial reporting requirements. The characteristics of a block of business may include, but are not limited to, benefit type (for example, major medical, preferred provider organization, or capitated managed care), contract type ( for example, group or individual policies), demographic grouping (for example, group size or geographical area), and length of rate guarantee period. Whatever criteria are used, a block of business should be large enough so that its financial results are material relative to the risk-assuming entity as a whole. The actuary may need to establish a premium deficiency reserve for a block of business where a premium deficiency exists even if the contract period has not started. Time b. Time Period—The actuary should take into account any applicable law, regulation, or other binding authority in establishing the time period of the calculation. The valuation date is the beginning of the time period used to project losses from a block of business. The end of the time period is generally the earlier of the end of the contract period or the point at which the block no longer requires a premium deficiency reserve. (Section 3.4) **we get GROUP TIME when we bury those eggs together

How do you measure antiselection?

H Health Risk Assessments A Risk Adjusters T Traditional Age and Gender Analysis **can you measure them in your hat?

What PDR considerations spawn from STAT priciniples

HOLE Insovency Looking at insolvency fo the whole entity, not subordicnate groupings S Subgroup Even profitable entities may have blocks temporariliy unprofitable F Falso "False Positives" divert regulatory attentsion from the at-risk entities T Timeframe Consider shorter intervals as well as the lifetime of the block **FaST HOLE - pdr is like a hole, stat = fast (I need that heart valve STAT!!!) or FIST

How do we make sure associations are successful (since experience can be bad for these oftentimes)

High High percent / pool of eligible members Small Small aerage employer size Limit Limited plan designs

Overall BEST PRACTICES! What qualities inherent in organizations that succeed under payment reform?

I Integrated Highly integrated system M Managed effective care management N Network select and restricted networks R Relationships collaboratibe relationship between the provider orgs and payers R Ratemaking reasonable methods to establish captiation rates, episode payments A Allocation Equitable allocation of global captiations or quality incnetives among providers **MR RAIN

What makes LTD Credibility Challenging?

I Non-independence of claims H Hetergeneous Claims P Competitive pricing pressures V Claim Duration E Eligibility for other benefits O Outlier Claims R Regulatory Requirements P Estimating prameters **PROVE HIP

What is the formula for Inforce Book Value?

IBV = PV(Book Profits) - PV(Cost of Capital) **So take all the book profits and discount them back and subtract off the cost of capital

What is a 'monthly accommodation policy'?

Instead of normal stop loss that accumulates claims and normally pays out only near the end of the year, with the accomodation, a monthly pro-rata attachment point is set and claims above this are reimbursed each month.

What is a Level Funding arrangement? What five components do they have?

Insurance product that ERS who self fund can buy that contains an ASO proudct and stop loss insurance This limits the disadvantages of Ers self funding their plans A ASO fee to cover the admin and sellign expenses AS Aggregate stop-loss coverage SS Specific stop-loss coverage F paid cliam fund held by the level funding issuer to cover the cost fo the gorup's expected claims cost I IBNR fund P Incurred claims cost projection **cats have SASS And Paws to FIght

ASOp 7 (what is it about?)

Insurer Cash low (for life/health/P&C)

Due Dilligence - Legal and Compliance Issues

Invest Stock deal: Buyer gets seller's assets Cash Reinsurance (asset) deals: Buyer gets cash to invest C read throuh the company's charter and bilaws L compliance with STAT and TAX laws E ee liabilities A Ownership of assets N compliance with reinsurance laws **you are in COMPLIANCE if you Invest CLEan Cash

What happens if the MIPS APM does not get on the APM list on any of the snapshot dates?

It must report under the standard MIPS methods

List the Key updates to the ACO Gain sharing calculation

List the Key updates to the ACO Gain sharing calculatino Equall Equally weight the benchmark years during subsequent agreements Pro-rate Add the ACO savings over three previous years (LATER REMOVED) Regional use the regional FFS instead of National First agreement period benchmarking: - Use assignable Medicare FFS beneficiaries Subsequent benchmarking - Replace National with Regional Rebase the benchmark - using regional and historical Benchmark will be rebased annually for regional trend

What did the ACA put in place to control antiselection?

M Coverage mandates S premium subsidies E same rules onand off exchange L minimum benefit levels O Open enrollment windows R 3 R's - help financial stability if individuals antiselect **LESOR Methods - implemented lessor methods

What did the ACA put in place to control antiselection?

M Coverage mandates S premium subsidies E same rules onand off exchange L minimum benefit levels O Open enrollment windows R 3 R's - help financial stability if individuals antiselect **LESOR Methods - implemented lessor methods

List the Uses of Reserves

M Match revenues and expenses S Solvency S Secuity E Expenses **reserves are a MESS!!! Think back to putting CIA into Prophet

List some factors that affecte the PDR Grouping:

M Materialit of roup SI Similarity of product types M Diffrences in marketing methods R Potential rate restrictions GEO Geographical Rating Areas RG Length of Rate Guaranteed Periods RE Regulaory Requirements LO Line of Business S Case Size

Reminder - what are some underwriting considerations based on the ACA?

M Medal Levels R Premium Refunds (Public justification if MLR too low) D No discrimination in rating by health status - new list of allowable rating charicteristics I Individual Mandate - repealed by trump M Markets created P No Pre-existing condition limitations, no health underwriting L No lifetime or annual limits E Publiz Exchanges created D Depedents can now be covered up to age 26 G Guaranteed Issue Coverage E Essential Health benefits M Minimum Loss Ratio R Coverage recissions only in the case of fraud P Must offer preventatve care at no cost sharing E ER Mandate G Extended grace period to 3 months A Coverage must be affordable T Cadillac Tax W Maximum Waiting Periods (3 years) **MR DIMPLED GEM (obama) + GET WAR

What measure to control antiselection did the ACA get rid of?

M Medical underwriting R Rating according ot heath status P Pre-Ex E exclusions M lifetime or annual maximums I incentivizing healthier lives to enter/disincentivising unhealthy to enter R coveage recissions - except in the case of fraud **got rid of the PREMIeR Methods

What measure to control antiselection did the ACA get rid of?

M Medical underwriting R Rating according to heath status P Pre-Ex E exclusions M lifetime or annual maximums I incentivizing healthier lives to enter/disincentivising unhealthy to enter R coveage recissions - except in the case of fraud **got rid of the PREMIeR Methods

Describe the WEAKNESSES of Episode Based Profiling

M Misidentify system not perfect - can misidentify physicians that are high/low performing D Data data not perfect - can be discrepany in level of detail present C Cost Cost efficiency is not perfect: responsibilty hard to attribute outlier cases risk adjustmet low credibility in case load H Hosptial hosptial charges are not equal - if high cost hosptial, physician may be penalized M Method method is not perfect - credibilty, limited data, performance criteria O Other Other skimming difficult patients, high value vs low value procedures ***Mostly Causes Discrimination or Makes Hurt

What are some claim trend assumptions you sould take into account? when doing PDR

M Trends in medical cost and util P Changes in provider ontracts D Demographic impacts T Improvement in technology D Durational wear off B benfit changes L leveraging A Antiselective impact of pricing increases **pdr is like a hole. BAD if MeLTD Pipes

Compare and contrast the two data banks: NPDB & HIPDB Discuss the two in general

MARG! MERGED These data banks have been merged Who Gives? M Malpractice payers, A Government Authorities P Peer Reviewers P Private Accreditation orgs Who Gets? P Health Plans A Government Licensing Agencies P Peer Reviewers What Info? M Malpractice Payments L Adverse licensing actions CP adverse clinical privledgign actions PR peer review negative actions C civil judgemetns CR criminal convictions **marg gives a CrisP CaLM CRaPR about it

AAA PDR If the company is a startup, describe four options of how to handle expenses and the pros/cons of each

Main problem here is that the high fixed costs are only spread over a small startup volume. Once block large, this will be small, but early on this is a huge burden. We do expect this to go down once the block grows, but for PDR tesing there is some pushback for what to recognize. 1 LONG TERM expenses at a level that is expected to apply when business is mature Low cost burden per policy Adv - intuitive appeal Disadv - at odds with guidajnce which requires total current expenes of the reporting entitiy to be addressed 2 NEARER TERM Base expenses on a near term projection Still lower cost burden than using current expenses no more suportable than in option 1 3 TREND DOWN Start with fulle xpenses, but grade down expenses over course of projection as we would expect would happen as volume grows Small expense savings Adv - small savings Disadv - worst option because going agains guidance but not seeing large expensse savings. If break rules might as well go all the way 4 CURRENT EXPENSES Most straight forward is just to incorporate all the expenses at normal levels. This may lead to large PDR in perpetuity. no savings adv - best compliance with guidance disadv - highest cost burden in testing

What are some product specific considerations (for reserves) for the following products?

Managed Care: - Pre-certificaiton helps with IBNR Calculation - Provider Risk Sharing: Reserve for amounts due end of year Gorup Life & ADD: - Few death claims - Benefit amount clarly defined - Establish IBNR and LAE Disabilty: - Specific tables 87 GCDT for pre 2014 2012 GLTD for 2017 and later - Riders COLA Survivor Benefits Partial and Residtual - Benefit Limitation

ACO Eligible providers

Many groups of providers (where providers have already banded together) Networks of individal Practices Clinics: Critical Acess Hosptials Rural Health Clinics Federally Qualified Health Clinics o It must be capable of: S ▪ Receiving and distributing shared savings R ▪ Repaying shared losses C ▪ Establishing, reporting, and ensuring all its providers comply with program requirements O ▪ Performing the other requisite ACO functions identified in the statute

P4P: What are the major issue with this method?

Measures Unmeasued unmeasured objectives get ignored Measured compliance with protocols rather than need (minimum effort) Choose Patients Choose Avoid severly ill patients Choose slecting healthy patients Miscode Miscode miscoding diagnoses Worth it Revenue revenue may not cover the costs

What types of medical underwriting exist?

Medical Paramedical Nonmedical

What is an ACO?

Medicare Providers • A legal entity composed of certified Medicare providers Medicare FFS Patients • Participants manage and coordinate care for a defined population of Medicare FFS beneficiaries Savings incentives if hit quality/cost targets • ACOs that meet quality performance standards receive payments for shared savings if they can reduce spending growth below target amounts

Mid terminal

MidTerm reserve + UPR = [tV40 + (t+1)V40]/2 + UPR

So, what are autocorrelative models?

Models that recognize the dependence of claims.

Does offering more options cost more or less? Why?

More! A Antiselection Individuals will minimize their out of pocket costs at the expense of the insurer/ER because they have perfect knowledge of their own helath situation S Exonomies of Scale If the provider group is split - there is less negotiating leverage / purchasing power/discounting A Admin burden expense of keeping up with/ communicating/ administering multiple plans goes upp

Describe the assumptions you are allowed to use for PDR and any controvercial ones:

Normal assumptions: Rate increase allowed to include the reasonable level likely to be implemented under mareket and regulatory contstrints Enrollment Use realistic assumptions, should reflet durational wear-off for underwriting Lapses Should reflect antiselection Expenses Shoudl include expenses associated with the policy grouping, may incluse overhead fo other lines if business can cover it Claims trend claims cost inflation should be included Interest rates should be used to discount the present value of deficiencies Taxes after tax basis Provider arrangements Captiations - whatever is currently negotiated, cannot be offset by provider settlements Overall conservatism realistic expensese should be used

Why would a group want to be experience rated?

O Own - desired D Disocunt C Competitive Pressure **if want to DOCtor the rates

What are the differences between Distributable earnings and Inforce Business Value calculations?

One main difference is that PVDE is calculated using a starting level of capital and includes distributions of that capital, where IBV is calculated withoug distributions of capital (with cost of capital instead)

ERISA - what definies a 'highly compensated ee'?

One of the highers-paid officers a shareholder who owns more thatn 10% of the stock of the ER an ee who reanks in the top 25% of highest paid ees

Due Dilligence Preparation for closing and implementation

P Deal is Presented buyer and seller presernt the deal to stockholders, ratign analysts, invetors I buyer must follow that will effective merger integration Shiny Stockholders R Rating Agencies I Invesors N G General public S Defend deal to public Public (rating agencies, stock analysts, investers) wil be skeptical S SOX buyer's Ceo and CFO must certify the financials and controls the due dillgence period is the time fo the actuary to prepart ot support the sign off SOX review will include: A R S E QU **you have two socks - SOX SQUARE **Dude decides to settle down and get married! He is so excited he might PISS his pants! **Dude present the Shiny RING **Dude prepares for their lives to be integrated **Dude defends his love to the public, who will be skeptika **Dude needs to certify that it is all legal

How can wwe mitigate insurance risk?

P Larger population siz R Risk-adjusteing population cost targets S Stop-loss provisions R Risk Corridors C Carving out services prone to high cost variation **PuRCheS Reinsurnace

What claim liabilities fall between Approved and Paid dates?

P PVANYD R Reported but Unprocessed O Outstanding Accounting Feeds U Unaccrued D Due and Unpaid **I know you are reserved, but you just got approved...you need to be PROUD!!!!

What information is important for underwriters to have when underwriting? (List) Other

P Plan design C comepttion E expereince (in SL specifically) K Known loss data (known losses are those individual with high claims cost diagnoses) D Data Quality *Plug the DECK - - the leak is under the deck

What are Self Funding Arrangements? Why would you want to do one of these? (PROS)

P Predictability R Resonpsiblity S Set-up Cost A Admin Cost C Cash Flows O Other risks *SCRAP o turds - this is what cats are

HIPAA - list the five rules that help simplify administratio

P Privacy rule T transactions and code sets rule S security rule U unique identifiers rule E enforcement rule **SETUP

Adjustment and Projection Enhancements

P Projection method R Loss ration method E Experience Credibilty weighting P Adjust for claims processing changes S Adjust for seasonabilty M Changes in medical practice **PRESs for More Power!!!

Due Dilligence - Product Management

P&C R Product Risk Managemetn Un Underwriting S Pricing Strategy C Claim Settlment Practices R Renewal Trategy D Product Design **apartment MANAGEMETN RUnS CRD for PROPERTY rentals LIFE Target review target practices - how they will be integrated into the buyer's G formal guidelines C how do corporate services and RBC work R rate classess align with buyer? If not, may be arbitrage opportunities P how are pricing goals being met relative to pricing standards A appropriate claim adjudication processes **apartment MANAGEMENT does not allow Target PRACtice - risk for LIVES

What is the Required Documentation:

PRIOR Analysis prior to valuation data used? PURPOSE Puroose of analysis ad risks analyzed TYPE Tyep fo Analysis Performed DAM Data/Assumptions/Methods - make sure enough claritythat anogher actuar could evaluate the reasonableness RES Results of Analysis CON Actuary's Conclusion/Recommendation STOP Sensistivity Test conclusions or recommendations **PREviously, Porposes Tried to get into the DAM. Recently, Construction to Stop them

Credibilty can be set either FORMALLY or SUBJECTIVELY What are the pros and cons of using subjective judgement when setting credibility thresholds?

PROS: simplicity, flexibilty CONS: difficult to justify

Large Group - Monitor

Paid Claims IBNR

Specific Stop Loss (describe the following) Completion factor method? Loss ratio method? Bornhelter-Ferguson method?

Paid Claims (by policy effective date)/(completion factor) = estimated total clasim for each effective month Reserves = Premium * ultimate LR - paid claism as of valuation date Reserve = Expected Losses x (1- completion factor)

How do we model antiselection? ( in order manage it )

Partition model take all insureds and line them up from worse risk to best risk create a partition between health and unhealthy risk - - - CAST cutoff is chosen so the ratio of unhealy to healthy is afixed multiple - - - MNAM uses boundary conditions - - - internal antiselection price sections separatly Then run model - stochastic may be better than deterministic - if more than 2 partitions - use a markov process

What is complex about the struture of the contract?

Per Diem Contract the days paid will get reduced peroportionally by the length of stay Case Rate Cotnract Payer will have to pay same rate regardless fo how long the individual tays inte h hosptial If a contract has an outlier per diem payent when days are above a certain level, reduction in days will decrease payment Reduction in length of stay (LOS) will also affect billed charges some claims will no longer be subject to the stop loss provision as they will nto reach the stop-loss threshold

Describe how the Stop Loss Marketplace works - what players are involved?

Plan Policyholder Financial Advisor Stop Loss Underwriter Risk Takers Plan's Administrator Plan Beneficiaries and their providers

How can an underwriter deal with a known loss?

Premium add expected liability into premium Risk modify risk margin Laser laser Laser allows the claimant to be removed from the SLI, all other claimants are coverd. Having a laser will lower premiums, but the risk of the known high claims will fall on the ER.

Definition of PDR

Premium deficiency reserves are liabilities set up to account for the present value of future projected underwriting losses. Premium deficiency reserves are typically established for financial reporting purposes and are one category of a health insurance organization's liabilities. They may also be established for other purposes such as management reporting.

How do you evaluate claim reserve adequacy?

RE Recast IS with new reserve estiemates RUN Run Out Studies to see Provides insight into DA data problems OP operations canges CON levels of consumeris actual Required in acruarial reports tested test reserves AE A/E Claim Termination Rate Studies EX Experience Studies Evaluate Evaluate long term assumptions IMPortant Important for product with contract reseres GoP can be done with a GPV **what does a reserved person do? Sit at home and watch TV! **watch RERUNS to see DA OPERA CONs ACTUally TESTed! (reality show **or watch AE for the EX GOP candidate Evaluate Important issues

What is the formula for the Medicare benchmark rate?

Rate = (Relative Value Units) + (Geographic Practice Cost Index) ] * Conversion Factor so we end up doing the sumproduct to accommodate these indexes Rate = (GPCIw* RVUw + GPCIf*RVUf+ GPCIm*RVUm) *conversion factor

Differentiate Real-World vs. Risk-Neutral Probabilities

Real-world probabilities - used for scenarios that lead to best-estimate (expected value) of future cash flows o Examples or real world probabilities: estimates of volatility and interest rates Risk-neutral probabilities - used for scenarios lead to a market-consistent current value of an asset or liability o Actively traded options are usually valued on a market-consistent basis The CFO Forum's original EEV principles do not require valuing TVFOG on market-consistent basis, but the practice appears to be evolving toward market-consistent o Called market-consistent EV (MCEV) When valuing TVFOG on a market-consistent basis, the actuary should properly reflect the cost of guarantees in the cost of capital and RDR

List and describe the special funding arrangements that exist:

Reserveless Plans Insurer foregoes the amount of premium roughly equal to the amount of claim reserves they would have set up. ER promises to pay the insurer upon termination. Fully Insured plans Normal - pay prem and insurer bears the full risk of adverse deviation. Self Insured Plans Normal - ER witholds from EE's paychecks to fund a pool it uses to pay out medical claims. Normally have an ASO. Still need to comply with ACA minimum essential coverage Minimum Premium plans The policyholder keeps the premium and uses it to pay claims. Insurer covers claims > expected. Minimum amount of premium changed hands. Stop Loss Reinsurer for self insured plans. Can have stop loss thresholds for individual and aggregate. Retrospective Premiums Lower up front premium, if risk is bad, premiums increase

What would you have contracts for?

S Direct Submission B No Balance billing H Hold Harmless U Utilization Man Q Quality Manag A Agrees to audit D No Discrimination **SQUAD HB

Why would a provider contract?

S Favorable Pricing E Obtain Large ER P Direct Pyment by the payer T Timely payment I Usage increase N Not lose D Claim Disputes **make a contract to provide: PrESIDeNT

Due Dilligence - Financial

S Financials C controls R receivables, payables, lease committmetns E expense by functon A assets S systems *SCREAmS

What does a DRG normally consist of?

S Rate schedule M Max days C Carve outs S stop loss T transplants A re-admissions P per diem contract **SAT ads for CaMPS

Due Dilligence - HR

S Scheudle Schedules of personnedl H Hiring Turnover and hiring plans T Turnover Turnover and hiring plans E Benefits Benefits given to ees - retiremtn packages, severance, stock options, bonuses L Liabiliteis Liabilities thaty may be triggered by the transaction X Experience Underfunded pentions or health liabiliteis **the dude is always in trouble with hr for SEXual Harrassment - need Training and Leadership

What does an Actuarial Appraisal typically include?

S Sensitivity Analysis O Opening BS position A Alternative Accounting methodology basis P Pro Forma Earnings P Projection of stat earnings and capital requirements V Value fo a company M Performance Measurement **SOA Preaches Present Value Measurement

Second, what to consider during Commercial ACO contract negotiations?

S Shared Savings A Attribution categoris (member choice, geo, clinical prequalification, retorspective visist-based) T Target Costs T Trend V random vairation A Risk Adjustmetn D data and reports S stop loss Qu quality measures ICS infastructure cost support **SAT TV ADS for bisQUICS

5. Validating the model - what is needed to validate that the model is good?

S Starting Values P Period to Period R Reasonableness checks S Stress/Sensistivity

What is a simplification tactic often used for K2?

Set K2 = K3

When do you not need to perform CFT?

Short Short Term Insulated Business block is insensitive to influences such as changes in economic conditions Small Small - immaterial risk of large claims **how are Kristen and I different? I am Short, Small, Insulation (fat)

Describe common adjustments that need to be made to these studies:

Smoothing Techniques A Average Simple Averaging W Average Weighted Average G Average Harmonic and Geo means D Weighted Dollar weighted vs Ratio Weighted M Weighted Per member age to ratios R Bumps Removing Bumps **AveRaGe WeighteD Mean "Adjsuted" = "Averages"

Claims Stabilization reserve (CSR) What is is this?

Sometimes we have agreements where we will pay back money to the ER if the claims experiene is favorable. In this case, must create a liability for the refund of premium. These can be paid out, or used to offset future losses reudce future rate increases

What are some stop loss variations?

Specific - NO Laser Guarantee - Aggregating specific Aggregate - Attachment poitns below the typical 125% - Aggregate-only Stop loss (NO specific condition)

What are some stop loss variations?

Specific - NO Laser Guarantee no lasers will be added at policy renewal - Aggregating specific plan retains the risk for an aggregate amount > specific deductible Aggregate - Attachment poitns below 100% - Attachment poitns below the typical 125% - Aggregate-only Stop loss (NO specific condition) Optional Features - Advance funding, specific accommodation , specific reimbursemetn, or sepecific advance - Aggregte accommodation benfits advance monthly - Terminal Liability Option offers the self-insured plan the option ot add run-out portection at the end of the policy year - must be decided on at the beginning of the policy year - Level funded products use combinations of stop loss within structure

ASOP 22

Statements of Opinion based on Asset Adeqacy **Drinking by 21, by 22 drunk and in AA making statement like "I have been sober 22 days",

ERISA - What disclosure reports must be generated?

Summary Plan Description (SPD) Summary Annual Report (SAR) Summary of Material Modifications( SMM) if not updating the SPD

What are Self Funding Arrangements? Why would you want to do one of these? (PROS)

T Taxes E Expereince P Profit *PET

1. Describe the process fo choosing the structure of the model:

T Tools A Asset share or no? R What type of reserve method will be used A Predict behavior? S Stochastic or no? D Cell determination D Durational **TSAR DAD built us this house/model

What are the implications of Episode Based Phyician Profiling?

T Transparency Greater transparency I Infastructure Physicians with better infastructure are differentiated _ and give a 'seal of approval' E EHR Physicians get a better score if they sue HER M Performance Measures helps to develop performance measures P Pros/Cons policymakers need to weigh the pros/cons of profilin **TIMEly Performance measures

What items would we adjust for in the credibility formula?

T Turnover of Ees A Variance of age/sex factors P Pooling Points S Stop Loss Coverage E Experience Periods different than 1 year **TAPES - if newspaper claims there are age/sex tapes, will need to adjust your crediblity of that newspaper

How do you turn the quality data from MSSP into the quality percent we use to distribute shared savings?

Take the results from each of the four categories: 1 Preventative care: points earned/total points = 2 Care coordination: points earned/total points = 3 At risk population: points earned/total points = 4 Patient/Caregiveer Expereience: points earned/total points = Then do a simple average of those four *if year one, automatic 100%

What is a Terminal Liability Option?

Terminal liability option (TLO) offers the self-insured plan that purchases SLI on a paid contract basis the option to add run-out protection at the end of the policy year - must be purchased and decided at the BOY

What should be done if a company has a guaranteed-renewable block of business that will be in a deficient financial position forever?

The company should project the deficiency as a perpetuity, and discount it at an appropriate rate of interest.

What is the aggregate corridor?

The difference between the expected claims and agregate attachment poing

After computing EV and comparing it to RDR, what can we conclude?

The effective EV rate can be compared to the RDR o If EffEVRate < RDR, it means actual EV was below expected (below target) - the combined effect of experience variations and assumption changes lowered EV o If EffEVRate > RDR, it means the opposite - experience gains and/or assumption changes raised EV above expected The effective EV rate should be based on end of period assumptions o This may mean updating VNB, etc. to reflect any assumption changes in the final IBV

What should you consider when determing a PDR time frame

The following factors should be considered in determining the appropriate time period for PDR projections: • Terminations • Rate increases (restrictions/limitations) • Claims trend • Regulatory restrictions • Renewability provisions • Prior company practices regarding cancellations and exiting lines of business

AAA PDR Interaction with other reserves

There are three types of possible reserves - Contract reserves, additional actuarial reserves, and PDRs The decision to use one over another will affect future patterns of earnigns or losses: 1 Health contracts with no contract reserves, will likely use a PDR 2 When company closes a block and it enters runoff mode, AND if assets will need to be sold to fund claims payments AND if the asset book value is higher than market value (so would lose money when selling assets to fund claims) THEN may set up a reserve to account for this loss in asset value 3 when the block expereiences adverse assumption changes (LTC and decreased lapse rates from expected), the actuary may revise the reserve assumptions to increase to the approriate level.

Define: Issuing Insurer Fronting Insurer Reinsurer Captive Reinsurer

These have some overlap compay that issues the policy (aka 'writing company') Provide basic policy form compliance and payment of premium taxes, taking little risk on the SL insurance itself Insures the insurer (can be quota share or excess basis) a captive insurance company can be formed to take on the ceded risk of a company in return for the captive's capital as security against loss exposure

What is a pioneer ACO?

These were organizations that were already providing some aspect of care coordination. They wer the first to become ACOs (back when that was first a thing) only 32 to start they have different benchmark and bonsus levels - more risk and more reward

List the models that qualify as Advanced APMs

Think about the models that share more risk - so if they have a tiered structure, the riskier tier, if they choose between one sided or two sided, choose two sided) E o Comprehensive ESRD Care (CEC) Model (Only the 2 sided Arrangements) C o Comprehensive Primary Care Plus (CPC+) Model S o Shared Savings Program Tracks 2, and 3 N o Next Generation ACO Model O o Oncology Care Model (OCM) (Two-sided Arrangements) **CONES

Big Picture: in 2015, the MACRA bill was passed that created the "Quality Payment Program" what is it?

This allows you to chose an Alternative Payment Model It has 2 tracks: MIPS and AAPM MIPS = merti based AAPM = innovative, more risk

EV - How are investment returns generally generated?

Through a combination fo the performance of actual asset portfolios, company investment expenses, and expected defaulsts. Unless assets are perfectly matched to the liabilities, it would be usual for a reinvestment assumption to be part of the investment return assumption.

Describe Financial Options and Guarantees in EV

Total value of financial options and guarantees = Intrinsic Value + TVFOG · Intrinsic value = O/G value assuming current in-the-moneyness of the O/G does not change in the future o Assumes current in-force is projected with best estimate assumptions (deterministic scenario) oExample 1: VA GMDB= 1000 and AV = 800. The deterministic projection would start with a NAR of 200, which would steadily shrink as the AV grows. No allowance for the possibility that the AV could drop in future scenarios. o Example 2: VA GMDB= 1000 and AV = 1100. The intrinsic value would be zero. Essentially this means a deterministic projection would put a zero value on the GMDB, never accounting for the possibility that the GMDB could come back into the money. · Time value of financial options and guarantees (TVFOG) = additional value (to the policyholder) reflecting potential changes in financial markets that will increase/decrease the value of the options and guarantees before their expiry o TVFOG= Deterministic PVDE - Mean Stochastic PVDE o The mean stochastic PVDE reflects both the intrinsic value and time value o The stochastic projection will result in a lower mean PVDE because there will be some scenarios where the options and guarantees become very valuable (e.g. VA guarantees that become very valuable when equity markets fall) EV reflecting TVFOG= Deterministic EV - TVFOG · This effectively "swaps in" the stochastic PVDE to replace the deterministic PVDE

What are the four Remuneration Models? (List and describe)

Traditional FFS Physicians is self employed, but bills for each service provided. Each province establishes a schedule of benefits Enhanced FFS In addition, pays bonuses for complex and chronic disease managemetn, guaranteed block funding for rural areas, and more money for remote/rural care Alternative Payment Plans Complex payment system involving a variety of payments, such as: captiation, FFS, academic payemts, bonuses, etc. Salary Salary payments (small number of phys here)

What is a Taft-Hartley Group?

Type of union group formed a long time ago They may have different laws when it comes to eligibilty, allowed coverage, and EE contributions. Success ful plans are 100% ER pay

What are the populaiton pricing implications of provider payment arrangements Considerations

U Unintended behaviors What unintended behaviors may occur due ot paymnat model incnetives M Material deviations Whaat factors could jeopardize the achievement of forecasted results? RR Replicate Results How can we replicate results T Time Will the payment model change over time? P Phased-in Phased-in approach? I Improvement How will the payment model promote continuous improvement of servcies **TIPsy on RUM

All payment arrangements have the potential for advers risk as well as opportunity, depending on the circumstances. List the categories of risks we see:

Utilizatoin Risk Changes in utilization that result from the payment model Technical Risk Risk of appropriately structureing technical elements of a conract to match population and circumstances (like contract language) Insurance Risk Related to normal variation in demand for medical services over time (sement differences - pockets of the population) Performance Risk relatesto inefficiency, and high cost of care

What are the main case charicteristics that can drive poor financial profitability in small case

V Viability • Financial viability I Industry • Industry/occupation S Size • Group size WC WC • Workers compensation P P • Participation E ER contribution • Employer contributions P Prior experience • Prior coverage and experience **use your xray VIsion to look into the Employee'S WC ahhhh PooP

EV - how do you calculate the VNB

VNB = the present value of after-tax book profits less the cost of capital change in EV as a result of sales in the reporting period

ERISA - What is a fiduciary?

anyone who exercises discretion or conrol over a group plan self insured plans retain more risk, but even fully insured plans retain some risk ERISA requires every plan to thave a plan sponsor AND a 'named fiduciary'

What are the six important risks we are testing?

b. Six risks important to cash flow testing i. Morbidity, mortality, lapse, asset credit quality, reinvestment, disintermediation ii. Morbidity and premium increase limits drive the cash flow projections for individual medical market iii. Medical coverages tend to be short term, with lower asset accumulation

What special requirements do DI and LTC have? for CFT

c. DI and LTC develop substantial reserves and require conventional cash flow testing i. Time period at least 20 years ii. Assets modeled stochastically

List the MODELS underwriters can use to perform initial underwriting

debit manual conditions are assigned points, conditions can be broken out to granular leve genetic testing not actuallyused predictive models do not replace underwriters, but can help predict claims/calc credibilty,

When is the CAST model not a good idea?

first 3-4 durations (when underwriting wear off is the stronger force) far out duration where few policyholders remain difficult to calibrate factors to use

What method do we use to determine LTD credibilty? What assumptiosn does this method rest on?

limited fluctuation credibility LTD claim terminations are independent No Two arguments: INCREASE One argument: a concentration of non-independent risks increases the credibility DECREASE The other view: non-independence reduces credibility because it increases the volatility of the expected outcome.

What are the three strata group types? (really four sizes)

o Small groups (1-50 employees). o Pooled groups (51-200 employees). ACA requires this to (100-200 employees) o Experience-rated groups (200-1000 employees) o Large groups (1000 or more employees)

QP: What would be the process for one to qualify?

o Step 1 Define the Entity ▪ Qualifying APM Participant determinations are made at the Advanced APM Entity level, except for: • Individuals participating in multiple Advanced APM Entities, none of which meet the QP threshold as a group, and • Clinicians on an Affiliated Practitioner List when there are no eligible clinicians on a Participation List for the Advanced APM Entity. o Step 2 Define the Threshold - amount of threshold coverage giving ▪ CMS methods to calculate a percentage "Threshold Score" for each Advanced APM Entity Two methods: • Payment amount method = ($$$ for Part B services to attributed beneficiaries / $$$ for Part B services attribution eligible beneficiaries) • Patient count method = (# of attributed beneficiaries given Part B services / # of attribution eligible beneficiaries given Part B services) ▪ CMS will use the method that results in a more favorable QP determination for each Advanced APM Entity. o Step 3 Cross Threshold? ▪ The Threshold Score for each method is compared to the corresponding QP threshold table and CMS takes the better result.

What are the two approaches to WACC? When thinking about generating it for a company

o Top-down approach: group WACC Calculated using the equity cost of capital with allowance for the impact of debt financing on market-value basis Reflect the market's view of the effect of all types of risk of a company's business o Bottom-up approach: product-specific WACC Reflects the differences in risk inherent in each product group Use product-specific betas Add additional risk margin for non-market risks at the product or group level o Multinational companies often create country-specific RDRs

Products That Have a TVFOG Component

o VA and VUL with guarantees like GMDB, GMIB, GMAB, GMWB o UL and fixed deferred annuities with guaranteed minimum crediting rates § For these, the TVFOG would capture the value to the policyholder (hence cost to the insurer) arising from the possibility that interest rates could fall below guarantees o Options and crediting floors in EIA contracts and other fixed annuities and investment contracts o UL with no-lapse guarantees (a.k.a. UL with secondary guarantees, or ULSG) · The company's asset portfolio can also contain investments with a TVFOG component (e.g. CMOs) o This is also a cost to the company because embedded options in assets like CMOs usually work against the investor (e.g. falling interest rates cause CMO prepayments to speed up) o The stochastic projection The stochastic projection should also capture this assuming the asset assumptions are set up accordingly

what is parameter risk?

potential for the SL underwriter to misestimate the expected claims

What is a 'risk adjuster'?

predictive mdoels base on diagnoses or drug history. Becomong more popilar

ASOP 25 CREDIBILITY 5 Major Considerations

r epair recency (recent should get higher weight) r reasonable i intended uses p practical s subject + relevance

ACE Deomonstration

• Medicare began a three-year demonstration program involving bundled payments for acute care episodes (ACE). • Involved competitive bids for select inpatient procedures. • Bundled payments include all Medicare Part A and B services during an inpatient stay plus preadmission testing, but no postoperative care. • Under this demonstration, Medicare shares its savings with the participating sites as well as with patients. **ace in the hole