Group Health - Design Pricing
Information gathered during underwriting for managed health care
1) Health status 2) Ability to pay the premium 3) Availability of other coverage 4) Historical persistency
Categories of expenses commonly covered by private (supplemental) medical plans in Canada
1) Hospital charges 2) Prescription drugs 3) Health professional practitioners 4) Miscellaneous expenses 5) Vision care 6) Outside-of-Canada coverage
Types of limited benefit medical insurance
1) Hospital indemnity 2) Other scheduled benefits 3) Dread disease 4) Critical illness
Benefits covered by most Canadian provincial Medicare plans
1) Hospital services 2) Physician services 3) Other professional services 4) Physiotherapists if in a hospital setting 5) Other diagnostic services 6) Prostheses and therapeutic equipment 7) Prescription drugs if on social assistance or over age 65 8) Dental care 9) Out-of-province coverage
Key questions to ask when analyzing trends
1) How accurate were the original projected trend and PMPM estimates? 2) Which assumptions were driving any variation? 3) How can the process be modified to achieve greater accuracy? 4) What other factors, expected or unexpected, drove the trends?
Considerations in developing administrative expense assumptions
1) How expenses are allocated to the product a) Activity based allocation b) Functional expense allocation c) Multiple allocation methods 2) How administrative expenses should be allocated to groups 3) What the competition includes as expenses in its pricing
Technological tools used by benefits directors to support customer-driven processes
1) Executive information systems 2) Imaging and optical storage 3) Access to information over the internet 4) Client-server technology 5) Employee self-service
Most common pharmacy benefit tier designs
1) Two-tier 2) Three-tier 3) Four-tier 4) Five-tier 5) Six-tier
Data sources for estimating disability claim costs
1) A company's own data 2) Rate filings of competitors 3) Research of governmental and business publications 4) Data from consulting firms and reinsurers 5) Insurer studies (loss ratio studies and A/E incidence or termination rates) 6) Industry data and tables a) 1987 Commissioners Group Disability Table b) SOA 2008 GLTD Experience Table c) 2012 GLTD Valuation Table d) TSA reports e) 1985 Commissioners Individual Disability Table A (CIDA) f) SOA Individual Disability Experience Committee 1990-2006 Study
Categories of persons the employer may want to or be required to provide benefits for
1) Active full-time employees 2) Dependents of active full-time employees 3) Retired former employees 4) Dependents of retired former employees 5) Disabled employees and their dependents 6) Surviving dependents of deceased employees 7) Terminated employees and their dependents 8) Employees (and dependents) on temporary leaves of absence 9) Active employees whos are not full-time
Types of reserves in disability income insurance
1) Active life reserve 2) Disabled life reserve
Types of disability income claim experience studies
1) Actual-to-expected morbidity a) The rate of disability b) The rate of recovery 2) Loss ratios a) Cash claims ratio - paid claims / earned premiums b) Incurred claims ratio (preferred) - (claims + active life reserve + claims reserve) / earned premium
Desired characteristics of premium rates
1) Adequate 2) Competitive 3) Equitable
Steps in the Medicare Advantage and Part D bid submission process
1) Advance notice of payment plans and draft call letter 2) Announcement of MA capitation rates and final call letter 3) Initial bid submission 4) Desk review 5) Rebate reallocation process 6) Final bid submission 7) Bid or financial audit
Major rating variables for health insurance
1) Age 2) Duration 3) Gender 4) Marital status 5) Parental (or family) status 6) Occupation 7) Geographic area 8) Current health status 9) Past claim history 10) Smoking status 11) Weight 12) Presence and nature of other coverage 13) Situation-specific factors
Common rating characteristics included in manual rates for group health insurance
1) Age 2) Gender 3) Health status 4) Rating tiers 5) Geographic factors 6) Industry codes 7) Group size 8) Length of the premium period
Insured characteristics that impact dental claim costs
1) Age and gender 2) Geographic area 3) Group size 4) Prior coverage and pre-announcement 5) Employee turnover 6) Occupation or income 7) Contribution and participation
Group characteristics that impact disability income claim costs
1) Age and gender 2) Occupation a) Hourly vs salaried b) Blue collar vs grey collar vs white collar c) Union vs non-union d) Commissioned sales personnel 3) Industry 4) Average earnings per employee 5) Area 6) Size of group
Important rating variables when normalizing data for use in the rate manual
1) Age and gender 2) Geographic area 3) Benefit plan 4) Group characteristics 5) Utilization management programs 6) Provider reimbursement arrangements 7) Other risk adjusters (based primarily on claim, diagnosis, encounter, and pharmacy data)
Key dimensions of medical benefit plans
1) Definition of covered services and conditions under which those services will be covered 2) Degree to which the individual participates in the cost of the service 3) The breadth of the network and degree to which the provider participates in the risk related to the cost of the service
Data fields included in pharmacy data fields
1) Age, gender, and date of birth of the patient 2) Fill date 3) Claim ID 4) Prescribing provider ID 5) Pharmacy provider ID 6) Drug name 7) Tier 8) National drug code (NDC) 9) Days supply 10) Units 11) Allowed amount 12) Refill indicators 13) Member and plan cost 14) Therapeutic class 15) Other types of drug codes (RxNorm Concept Unique Identifier and Generic Procut Identifier) 16) Average wholesale price and acquisition cost
Categories of essential health benefits (EHBs) under the ACA
1) Ambulatory patient services 2) Emergency care 3) Hospitalization 4) Mental health and substance use disorder services 5) Rehabilitative and habilitative services and devices 6) Lab services 7) Preventive and wellness services and chronic disease management 8) Prescription drugs 9) Maternity and newborn care 10) Pediatric services, including dental and vision
Mortality assumptions to be considered for life health combo products
1) Assume there is no material impact to the mortality assumptions 2) Apply an adjustment, such as a scalar, to the mortality assumptions 3) Estimate the disability mortality assumption using LTC continuance tables 4) The mix of active and disabled lives is determined by the frequency of acceleration of benefits
Rating approaches for Medicare Supplement
1) Attained age 2) Issue age 3) Community rates
Types of age rating structures
1) Attained age rating 2) Entry age or issue age rating 3) Uni-age rating
Methods of providing inflation protection on LTC policies
1) Automatic inflation protection 2) Simple inflation protection 3) Periodic increase offers 4) Coinsurance
Payment mechanisms for prescription drugs
1) Average manufacturer price (AMP) 2) Wholesale acquisition cost (WAC) 3) Average wholesale price (AWP) (for brand name drugs, WAC equals 83.33% of AWP) 4) Actual acquisition cost (AAC) 5) Usual & customary (U&C) retail price 6) Maximum allowable cost (MAC)
Conditions covered by critical illness insurance
1) Basic - Life-threatening cancer, heart attack, stroke, coronary artery bypass graft 2) Enhanced - multiple sclerosis, kidney failure requiring dialysis, major organ transplants, coma, benign brain tumor, occupational HIV, Parkinson's disease, Alzheimer's disease, motor neuron disease, blindness, deafness, speech loss, heart valve replacement, aortic surgery, loss of limbs, paralysis, major burns, loss of independence
Types of group life insurance benefits
1) Basic group term life 2) Group supplemental (or optional) life 3) Group accidental death and dismemberment 4) Dependent group life 5) Survivor income benefits 6) Group permanent life 7) Group universal life 8) Group variable universal life 9) Living benefits
Plan provisions on LTC insurance policies
1) Benefit triggers 2) Elimination or waiting period 3) Covered services 4) Alternate plan of care 5) Benefit limits 6) Inflation protection 7) Nonforfeiture benefits 8) Spousal rider or discounts 9) Restoration of benefits 10) International coverage 11) Shared lifetime maximum benefit pools 12) Policy exclusions
Typical plan design for dental insurance
1) Benefits (class I/preventive, class II/basic, class III/major, class IV/orthodontics) 2) Cost-sharing (class I/100%, class 2/80%, class 3/50%) 3) Calendar year deductible 4) Annual benefit maximum 5) No annual oop maximum
Reasons for using the functional approach for designing and evaluating employee benefits
1) Benefits must be organized to be as effective as possible in meeting employee needs 2) Avoiding waste in benefits can be an important cost-control measure for employers 3) It is important to analyze where current benefits may overlap and costs may be saved 4) A systematic approach is needed to keep benefits current, cost effective, and in compliance with regulations 5) A systematic approach is needed to ensure that the various benefits can be integrated with each other
Common functions for administering employee benefits
1) Benefits plan design 2) Benefits plan delivery 3) Benefits policy formulation 4) Communications 5) Applying technology 6) Cost management and resource controls 7) Management reporting 8) Legal and regulatory compliance 9) Monitoring the external environment
Methods for calculating gross premiums
1) Block rating (short time horizon) approach Gross premium = G = [N*(1+E^N)+E^F]/(1-E^G) 2) Asset share approach
Using the buildup and density function approach for pricing
1) Buildup approach - each claim type has its own claim cost calculation (copays) 2) Density functions - distribution of expected annual claims for an individual (deductibles and oops) 3) Combining buildup and density functions - could calculate IN with buildup and OON with density
Reasons for the growth of employee benefit plans
1) Business reasons 2) Collective bargaining 3) Favorable tax legislation 4) Efficiency of the employee benefits approach 5) Wage increase limits 6) Legislative actions
Types of disability income experience studies
1) Calendar year loss ratio study a) Ratio of incurred claims to earned premium b) Incurred claims = paid claims + increase in claim reserves c) Might not give a clear picture of historical trends because results are affected by reserve changes 2) Incurral year loss ratio study a) Ratio of incurred claims to earned premium b) Incurred claims = pv of claim payments + pv of the current claim reserve c) Shows historical trends because the full cost of a claim is attributed to the year the claim was incurred 3) Study of actual-to-expected incidence or termination rates
Benefit triggers for LTC insurance policies
1) Can't complete two or more ADLs 2) Cognitive impairment (combativeness, inability to dress appropriately for the weather, poor judgment in emergency situations, and wandering and getting lost)
Adjustments needed for using past claims to project future claims
1) Changes in the covered population 2) Changes in duration 3) Changes in benefits 4) Changes in claim costs 5) Leveraging 6) Other changes Projected claims_t = claim cost PMPM_s * number of members_t * (1+leveraged claim cost trend)^(t-s) * avg durational factor_t/avg durational factor_s * (1+antiselection factor due to lapses_(t-s)) * (1+adj factor for other changes_(t-s))
Methods in which accelerated death benefit riders are typically financed per NAIC Model Regulation
1) Charge an explicit premium ("dollar for dollar method") 2) Discount the benefit using the actuarial present value ("zero premium method") 3) Establish a lien on the base policy
Considerations in setting LTC claim cost assumptions
1) Claim costs will vary by nursing home, assisted living facility, and home health care 2) Substitution effect among the various benefits 3) Increased demand for LTC services due to the presence of insurance 4) Availability of benefits from other programs 5) Availability of LTC services in the geographical area 6) The effect of underwriting selection and underwriting classes 7) The financial benefits to the claimant of remaining eligible for benefits 8) The effect of mortality on termination rates 9) The effect of marketing and claims processes
Methods of adjusting manual rates for specific benefit plans
1) Claim probability distributions 2) Actuarial cost models
Components of gross premiums
1) Claims costs 2) Administrative expenses 3) Commissions and other sales expenses 4) Premium taxes 5) Other taxes and assessments 6) Risk and profit charges 7) Investment earnings
Steps in applying the functional approach for employee benefit plan design and evaluation
1) Classify employee and dependent needs or objectives into logical functional categories 2) Classify the categories of persons the employer may want or need to protect 3) Analyze current benefits with respect to employee needs and the categories of covered benefits 4) Determine any gaps in benefits or overlapping benefits in the current plan 5) Consider recommendations for plan changes to meet any gaps in benefits and to correct any overlapping benefits 6) Estimate the costs or savings from each of the recommendations made 7) Evaluate alternative methods of financing or securing the benefits 8) Consider other cost-saving or cost-containment techniques for both current and recommended benefits 9) Decide upon the appropriate benefits, methods of financing, and sources of benefits, by using the preceding analysis 10) Implement the changes 11) Communicate benefit changes to employees 12) Periodically reevaluate the employee benefit plan
Benefit provisions for group disability income
1) Definition of disability 2) Elimination period 3) Benefit period 4) Benefit amount 5) Benefit offsets 6) Limitations and exclusions 7) Optional benefits
Areas of specific concern for product design of critical illness insurance
1) Definitions 2) Avoidance of anti-selection at issue 3) Potential high cost of long-term guarantees 4) Potential high costs of conditions over age 75
Types of formulary designs
1) Closed 2) Open 3) Tiered/incentive
Steps in developing claim costs for use in a rate manual
1) Collect data 2) Normalize the data for important rating variables 3) Project experience period costs to the rating period
Methods for comparing benefit programs to the competition
1) Compare the benefits payable to representative employees under different circumstances 2) Compare actual costs to the employer for different benefit plans 3) Calculate relative values of the different benefits based on uniform actuarial methods and assumptions 4) Compare benefit plans feature by feature to isolate specific provisions that may be appealing to certain employee groups
Reasons for management adjustments in pricing
1) Competitiveness of the premiums for new business 2) Profitability in other lines of business 3) Relations with the public or the sales force 4) Social policy 5) Desire to manage the block from a long-term perspective
Benefits that cannot be offered in a cafeteria plan
1) Contributions to medical savings accounts 2) Qualified scholarships and education assistance programs 3) Certain fringe benefits 4) Qualified LTC insurance 5) Athletic facilities 6) De minimis benefits 7) Dependent life insurance 8) Employee discounts 9) Lodging on the business premises 10) Meals 11) Moving expense reimbursements 12) No-additional-cost services 13) Parking and mass transit reimbursement 14) Contributions to a college savings account 15) Legal or financial assistance 16) 403(b) plans
Purposes for having the insured share in the cost of the medical plan
1) Control utilization 2) Control cost 3) Control risk to the insurer
Types of cost sharing plans for pharmacy benefits
1) Copay plans 2) Coinsurance plans 3) Combination of copay and coinsurance
Components of medical trend
1) Core cost trend a) Unit cost trend b) Severity c) Change in mix of services 2) Core utilization trend 3) One-time changes 4) Expected population shifts 5) Structural changes 6) Capitation 7) Margin
Main approaches used to develop premium rates for critical illness insurance
1) Costing 2) Pricing Both are used concurrently.
Plan characteristics that impact dental claim costs
1) Covered benefits 2) Cost sharing provisions 3) Waiting period 4) Period of coverage
Major effects of HIPAA on LTC
1) Defined qualified plans 2) Clarified taxation of premium and benefits 3) Standardized benefit triggers 4) Allowed tax reserves to be calculated on a one-year preliminary term basis for tax-qualified plans
Important rating factors for pharmacy benefits
1) Demographics 2) Area 3) Benefit design 4) Formulary 5) Contracting 6) Other factors
Steps for manual rating of disability coverage
1) Determine base rates/premium a) LTD: base rate = probability of a claim * reserve at time 0 / 12 b) STD: base rate = probability of a claim * expected length of claim in weeks / 12 2) Deduct offset credits 3) Demographic adjustments 4) Plan provision adjustments 5) Non-claim adjustments (retention) 6) Add profit
Steps in the claim process for disability
1) Determine eligibility for coverage 2) Determine if the definition of disability is met 3) Determine the payment amount = pre-disability income * benefit percent - offsets 4) Get ongoing proof of disabilities a) STD - approved for a specified period based on type of disablement, reviewed at the end of the period b) LTD - reviewed annually, when the condition or treatment changes, or when the definition of disability changes
Steps for experience rating of disability coverage
1) Determine the group's manual rate with profit and expenses removed 2) Determine the experience-based rate using the last 3-5 years of data 3) Blend the manual rate and experience-based rate to get the case claim rate a) Blended rate = manual claim rate * (1-Z) + experience claim rate * Z b) Credibility Z = N / (N+K) where N = life years 4) Final case premium = blended rate / target loss ratio
Steps for calculating premiums for pharmacy benefits
1) Develop an allowed cost trend which includes a) Unit cost change b) Utilization change c) Mix change 2) Calculate adjustment factors for important rating variables 3) Estimate member cost sharing based on the projected allowed cost 4) Calculate net plan liability and premium a) Projected allowed amount = base period allowed amount * trend factor * other adjustments b) Net plan liability = projected allowed amount - member cost sharing - rebates c) Premium = net plan liability + expenses + profit margin
Steps in the rate formula for managed health care
1) Develop the projection period base rate PMPM 2) Apply group-specific additive adjustments 3) Apply group-specific multiplicative adjustments 4) Add retention loads 5) Convert to a contract rate (per EE)
Manual claim table adjustments for group life
1) Disability factors 2) Effective date adjustment 3) Industry factors 4) Regional factors 5) Lifestyle factors 6) Marketing considerations 7) Contribution schedules 8) Case size factors and volume adjustments 9) Plan options
Types of provider reimbursement
1) Discounts from billed charges 2) Fee schedules and maximums 3) Per-diem reimbursements 4) Hospital diagnosis related groups 5) Ambulatory payment classifications 6) Case rate or global payments 7) Bonus pools 8) Capitation 9) Integrated delivery system
The ADLs allowed by HIPAA and typical definitions
1) Dressing 2) Bathing 3) Continence 4) Toileting 5) Eating 6) Transferring
Major stakeholders in the group LTC policy design process
1) Employer group 2) Insurance company 3) Employees 4) Insurance brokers
Uses of general population data for pricing life insurance
1) Estimating annual improvements in mortality 2) Determining ratios of mortality by age bracket 3) Comparing male and female mortality 4) Developing rates for the very young and the very old (the non-working population)
Items included in asset share projections
1) Exposure values 2) Revenue values 3) Claim values 4) Capital values 5) Expense targets 6) Profit targets a) Percent of premium b) ROI c) ROE
Services provided by medical policies
1) Facility services 2) Professional services 3) Diagnostic services 4) Xray and lab services 5) Prescription drugs 6) Durable medical equipment 7) Ambulance 8) Private duty nursing 9) Wellness benefits 10) Nurse help lines 11) Disease management benefits
Common purposes for trend analysis
1) Financial reporting 2) Pricing 3) Experience analysis
Typical basic group term life plan designs
1) Flat dollar plans 2) Multiple of earnings plans 3) Salary bracket plans 4) Position plans
Dental plan cost containment provisions
1) Frequency limitations 2) Pre-existing condition limitations 3) Least expensive alternative treatment 4) Waiting periods 5) Exclusions 6) Benefits after insurance ends
Steps of the rerating approach for pricing
1) Gather experience on existing business 2) Restate experience 3) Project past results to the future 4) Compare the projection against desired results 5) Apply regulatory and management adjustments
External factors that impact benefit management activities
1) General business and competitive conditions 2) Governmental policy 3) Workforce demographic shifts 4) New product development 5) New organizational structures 6) Technological enhancement and innovation
Common types of managed care overlays
1) General utilization management 2) Large case management 3) Specialty UM 4) Disease management 5) Rental networks 6) Workers' compensation UM
Types of drugs
1) Generic 2) Brand 3) Specialty 4) Biologic 5) Biosimilar 6) Compound 7) Over the counter 8) Supplies
Actuarial standards for the use of data
1) Good data is rarely available, so the actuary should use available data for analysis 2) Considerations for selecting data 3) Review of data 4) The actuary should use appropriate data 5) Reliance on data and other information supplied by others 6) Confidentiality 7) Limitation of the actuary's responsibility
Underwriting and rating parameters for dental
1) Group size 2) Eligible individuals and group 3) Participation 4) Employer contributions 5) Other coverage 6) New business 7) Geographic area 8) Demographics 9) Waiting and deferral periods 10) Incentive coinsurance 11) Transferred business
Types of voluntary benefits
1) Group term life 2) Dependent life insurance 3) Supplemental life insurance 4) Long-term and/or short-term disability income insurance 5) Dental insurance 6) LTC coverage 7) Adoption assistance 8) Accidental death and dismemberment insurance 9) Automobile insurance 10) Homeowners insurance 11) Benefits under a legal services plan 12) Vision benefits coverage 13) Critical care insurance 14) Cancer insurance 15) Group homeowners and automobile insurance 16) Hospital indemnity insurance 17) Travel accident insurance 18) Student medical insurance
Methods used by disability income policies to adjust for the cost of living
1) Guaranteed insurability 2) Automatic increases 3) Increase benefit payments over time for those on disability
Types of integrated health care delivery systems (IDSs)
1) IPAs 2) Physician practice management companies 3) Group practice without walls 4) Physician-hospital organizations 5) Management services organizations 6) Foundation model 7) Provider-sponsored organizations 8) Hospitals with employed physicians
Disclosure requirements for assumptions and methods used in an actuarial report
1) Identify the party responsible for each material assumption and method 2) If the assumption or method is prescribed by law 3) If a material assumption or method is selected by another party, the actuary has three choices: a) Don't disclose if the actuary agrees b) Note it conflicts with the actuary's judgment c) Note the actuary is unable to judge the reasonableness of the assumption
Types of health insurers and MCOs
1) Indemnity 2) Service plans 3) Managed indemnity 4) PPOs 5) Exclusive provider organizations 6) POS plans 7) HMOs 8) CDHPs 9) Third-party administrators 10) Consumer operated and oriented plans (COOPs)
Dental reimbursement models and delivery systems
1) Indemnity a) Scheduled indemnity plans b) UCR plans 2) PPO a) Managed indemnity plans b) EPO plans 3) Dental HMO a) IPA plans b) Staff model dental HMO plans 4) POS 5) Discount dental plans
Steps of the product development cycle
1) Innovate a) Understanding of the company's strategic perspective b) Idea generation c) Idea screening d) Market assessment 2) Design the product 3) Build the product 4) Sell the product 5) Assess the product 6) Revise the product
Common drivers of product ideas
1) Innovator or follower 2) Changing laws and regulations 3) Consumer demand 4) Marketing and sales 5) Leveraging insurer capabilities 6) Social need 7) Changing demographics 8) Changing economy and financial markets 9) Competitive advantage
Organizations that sell dental insurance
1) Insurance carriers 2) Blue Cross Blue Shield Plans 3) Dental service corporations 4) Dental HMOs 5) Dental referral plans/discount dental plans 6) Third party administrators
Major types of business protection coverage
1) Keyperson coverage 2) Disability buyout coverage 3) Business overhead expense
Types of living benefits for life insurance
1) LTC benefits 2) Critical illness benefits 3) Terminal illness benefit
The natural hedging that is formed by combining life and health benefits into one product
1) LTC insurance is "lapse-supported" 2) When the persistency for a life insurance policy is greater than expected, more premium is collected 3) The two products together reduce volatility of earnings
Typical definitions of disability for group disability income
1) LTD - can't do some or all of the duties required by occupation a) Own occupation - first 24 months/ loss of 20% of pre-disability income b) Any occupation - after 24 months/loss of 40% of pre-disability income 2) STD - can't do all of the duties required by occupation
Features that differentiate HMOs from health insurers
1) Licensed under different laws than health insurers 2) Must provide adequate access to providers within their service areas 3) Must require "no balance billing" clause in all provider contracts that are stronger than those found in non-HMOs 4) Must allow direct access to PCPs and ob/gyns 5) Must have written policies and procedures for physician credentialing, utilization management, and quality management 6) Must maintain defined minimum levels of capital reserves 7) Usually share some financial risk with the physicians 8) Most require members to see a PCP for routine services and to access specialty care 9) Most are accredited by an accrediting organization
Types of individual health insurance
1) Major medical 2) Limited medical 3) Medicare supplement and Medicare select 4) Medicare advantage and Part D 5) Group conversions 6) Disability income 7) Business protection coverage 8) LTC 9) Dental
Layers (participants) within the prescription drug distribution channel
1) Manufacturers - sell to wholesalers based on AMP or WAC 2) Wholesalers - sell to retailers based on WAC plus a markup or a discount off AWP 3) Retailers (pharmacies) - sell to customers based on U&C retail price 4) Consumers 5) PBMs and insurers
Sources of internal data
1) Medical claim systems data 2) Pharmacy benefit manager (PBM) data 3) Premium billing and eligibility data 4) Provider contract system data
Tools of the claim process for determining and handling disabilities
1) Medical evaluation 2) Rehabilitation plans 3) Financial evaluation of the claimant 4) Settlements 5) Fraud review 6) Managed disability
Common loss exposures covered by employee benefit plans
1) Medical expenses 2) Losses due to employees' disability 3) Losses to due death 4) Retirement needs 5) Capital accumulation needs or goals 6) Needs arising from unemployment, temporary termination, or suspension of employment 7) Needs for financial counseling and retirement counseling 8) Losses resulting from property and liability exposures 9) Needs for dependent care assistance 10) Needs for educational assistance 11) Needs for LTC 12) Other employee benefit needs or goals
Enrollment requirements for Medicare Advantage and Part D plans
1) Medicare advantage a) Enrolled in Medicare parts A and B b) Don't have ESRD c) Applied during a valid enrollment period (initial enrollment period, annual open enrollment period, special enrollment periods) d) Live in the plan's service are e) Abides by the terms of the insurance contract 2) Part D - same as MA but 1) Enrolled in Medicare parts A, B, or C 2) Can have ESRD
LTC pricing assumptions
1) Morbidity 2) Mortality 3) Lapses 4) Expenses 5) Taxes 6) Investment return 7) Mix of business 8) Change over time
Medicare Supplement pricing assumptions
1) Morbidity 2) Mortality 3) Persistency 4) Investment earnings 5) Selection factors/underwriting 6) Age and sex distribution 7) Smoker vs non-smoker 8) Area factors 9) Expenses and taxes 10) Other considerations
LTC pricing assumptions that often drive the need for a rate increase
1) Morbidity 2) Persistency 3) Interest
Regulatory bodies that commonly apply to life insurance accelerated death
1) NAIC Accelerated Benefit Model Regulation 620 2) NAIC LTC Model Regulation 640 3) Interstate Insurance Product Regulation Commission Additional Standard for Accelerated Death Benefits
Formula for disability income net monthly premium
1) Net monthly premium = incidence rate * sum of (benefit*continuance*interest discount) 2) The summation runs for the length of the benefit period
Tabular method formulas for calculating net premiums
1) Net premium = sum of (Pr(Clm_z)*AC_z*v^z*l_z) 2) AC_z = sum of (Cm$_s*Pr(1-Tn_s)*v^s)
Activities required for serving plan participants
1) New employee benefits orientation 2) Policy clarification on benefits eligibility, coverage, and applicability of plan provisions 3) Dealing with exceptional circumstances and unusual cases 4) Collection and processing of enrollment data, claims information, and requests for plan distributions 5) Benefits counseling and response to employee inquires for active employees 6) Benefits counseling for employees who are terminating, retiring, disabled, or on leave
ACA rating requirements effective in 2014
1) No pre-existing condition exclusions 2) Rating variation is only allowed based on: a) Age b) Geographic area c) Smoking status d) Family composition e) Plan design and network relativities 3) Individual and small group plans must be offered on a guaranteed issue and renewal basis 4) Waiting periods cannot exceed 90 days
Common exclusions for medical plans
1) Non-medically necessary services 2) Experimental services 3) Cosmetic surgery 4) Other specified services (ex: vision, dental) 5) Transplants 6) Services where payment isn't otherwise required 7) Services required due to an act of war 8) Services required due to self-injury 9) Services provided by a provider related to the patient
Factors that determine leverage when negotiating rebates from drug manufacturers
1) Number of lives represented 2) Control of market share 3) Consistency of behavior
Benefits that may be covered by LTC policies
1) Nursing home care 2) Assisted living facility care 3) Hospice care 4) Respite care 5) Home and community-based care 6) Home modifications and equipment 7) Care management services 8) Bed reservation benefit 9) Death benefit 10) Caregiver training 11) Cash alternative benefit
Parameters to consider in a disability income claims or persistency study
1) Occupation class 2) Occupation 3) Policy form 4) Extra benefits 5) Age 6) Duration 7) Elimination period 8) Benefit period 9) Indemnity (benefit amount) 10) Income 11) Geography 12) Agent and agency 13) Sex 14) Mode of premium payment 15) Smoking status 16) Combinations of the above parameters
Common rating tiers for group health insurance
1) One tier: composite 2) Two tier: EE only, family 3) Three tier: EE only, EE and one dependent, family 4) Four tier: EE only, EE and one dependent, EE with children, family 5) Five tier: EE only, couple, EE and one dependent, EE with children, family
Characteristics of the group technique of providing employee benefits
1) Only certain groups are eligible 2) Steady flow of lives through the group 3) Minimum number of persons in a group 4) A minimum portion of the group must participate 5) Eligibility requirements and waiting periods are imposed 6) Maximum limits for any one person 7) Automatic determination of benefits 8) A central and efficient administrative agency
Types of HMOs
1) Open-panel a) Independent practice association model b) Direct contract model 2) Closed-panel a) Group model b) Staff model 3) True network model 4) Mixed model HMOs 5) Open-access HMOs
Provisions included in medical plans
1) Overall exclusions 2) Mandated benefits 3) Coordination of benefits 4) Subrogation 5) COBRA continuation
Data sources for developing dental claim costs
1) Own company data 2) Outside databases 3) Consulting firms 4) Rate filings of other carriers 5) Third party administrators 6) Reinsurers
Key characteristics of patient-centered medical homes
1) Patients have a ongoing relationship with a personal physician 2) Patients receive care from a team of individuals led by the personal physician 3) Personal physicians take responsibility for providing and arranging all of the care for the patient 4) The patient's care is coordinated or integrated across all elements of the health care continuum 5) Quality and safety are key parts, enhanced by evidence-based medicine 6) Patients have enhanced access to care through open scheduling and expanded hours 7) Payment should appropriately recognize the added value provided to patients
Types of bases used for allocating expenses
1) Percent of premium 2) Percent of claims 3) Per policy 4) Per employee 5) Per member 6) Per claim administered 7) Per case
Entities in the pharmacy benefits system in the US
1) Pharmaceutical manufacturers 2) Pharmaceutical wholesalers 3) Pharmacies 4) Pharmacy benefit managers 5) Third party payers 6) Beneficiaries 7) Prescribing health care providers
Claim administration procedures used by dental plans
1) Predetermination of benefits 2) Least expensive alternative treatment 3) Coordination of benefits 4) Dental review 5) Maximum reimbursable charge (UCR)
Comparison of dental reimbursement models
1) Premium 2) Patient access 3) Benefit richness 4) Cost management 5) Utilization 6) Quality assurance 7) Fraud potential 8) Provider contracting
Types of cafeteria plans in the US
1) Premium conversion plans 2) FSAs 3) Full flex plans
Factors that influence prescription drug cost
1) Prescription drug pipeline 2) Brand patent protection period 3) Specialty drugs 4) Biologic drugs 5) Direct to consumer advertising 6) Member cost-sharing offsets 7) Faster FDA approval process 8) Aging population 9) Increase in awareness and use of testing 10) Personalized medicine
Key players in the product development cycle
1) Product development cycle 2) Senior management 3) Marketing 4) Sales 5) Underwriters 6) Information technology (IT) 7) Operations 8) Compliance 9) Actuarial 10) Finance
Steps for building a new product
1) Project enrollment 2) Price the product 3) Perform financial assessments 4) Implement the infrastructure needed to administer the product 5) Get senior management approval
Methods for reducing benefits for income earned during a disability
1) Proportionate loss formula 2) 50% offset 3) Work incentive benefit
Purpose of the cancer claims cost tables work group and its report
1) Propose new valuation tables for cancer policies a) First occurrence benefit b) Hospitalization benefit 2) Document the processes followed in preparing the proposed tables 3) Make the experience gathered for this effort available to practitioners in the industry. The should aid actuaries pricing and reviewing product filings.
Network and care management practices that impact dental claim costs
1) Provider reimbursement levels a) FFS based on UCR b) PPO networks c) Capitation with dental HMO plans 2) Care management practices
Considerations for analyzing current benefits in the employee benefit plan
1) Types of benefits 2) Levels of benefits 3) Probationary periods 4) Eligibility requirements 5) Employee contribution requirements 6) Flexibility available to employees 7) Actual employee participation in benefit plans
Major effects of the year 2000 changes in the NAIC LTC Insurance Model Act
1) Requires disclosure of rating practices at the time of application 2) Requires an actuarial certification at the time of initial rating 3) Eliminates minimum loss ratio requirements in the initial rate filing 4) Places limits on expense allowances in the event of a rate increase 5) Requires reimbursement of unnecessary rate increases 6) For policies in a rate spiral, guarantees policyholders the right to switch to currently-sold insurance without underwriting 7) Authorizes the commissioner to ban companies for 5 years if they persist in filing inadequate initial premiums
Rate setting approaches
1) Rerating 2) Fundamental pricing a) Tabular method (long-term, non-inflation-sensitive products) b) Buildup and density functions (inflation-sensitive products) c) Simulation
Stages of the prescription drug lifecycle
1) Research and development 2) Brand patent protection period 3) Generic exclusivity period 4) Generic drug lifespan
Methods of prescription drug distribution
1) Retail pharmacies 2) Mail order pharmacies 3) Specialty pharmacies 4) Health care providers 5) LTC facilities 6) Hospice facilities 7) Home health professionals
Optional product features on critical illness policies
1) Return of premium on death 2) Return of premium on expiry 3) Return of premium on surrender 4) Face amount increasing or decreasing over time 5) Assistance benefit 6) Partial benefits payable for non-life threatening conditions 7) Premium guarantee
Functions performed by PBMs
1) Run pharmacy benefit drug programs 2) Negotiate rebates with manufacturers 3) Negotiate discounts with pharmacies 4) Manage relationships with third party payers 5) Perform utilization management 6) Run drug adherence programs 7) Integrate drug benefits with medical plans 8) Establish a formulary of drugs 9) Build a network of pharmacies
Types of LTC insurance plans
1) Service reimbursement model 2) Service indemnity model 3) Disability or cash model
Types of nonforfeiture benefits on LTC insurance policies
1) Shortened benefit period 2) Reduced paid-up 3) Extended term 4) Contingent nonforfeiture benefit
Goals of the graduation method chosen for creating the values in the new cancer tables
1) Smooth the inherent volatility in the data collected 2) Provide a good fit to the initial data 3) Demonstrate flexibility to control the risk of negative reserve calculations due to declining data patterns for younger and older ages 4) Demonstrate flexibility to develop reasonable patterns where data over a number of attained ages had to be aggregated
Types of critical illness insurance policies
1) Standalone a) Basic (heart attack, stroke, cancer, coronary artery bypass graft) b) Enhanced (+15-20 other conditions) 2) Accelerated
Steps for developing critical illness incidence rates
1) Start with general population age-specific incidence rates from government sources and research 2) Adjust these rates to fit the condition definitions in the policy 3) Apply any applicable trends 4) Use ratios of insured lives to population mortality to adjust rates from the general population to an insured population 5) Use ratios of select to ultimate insured mortality to create select and ultimate rates 7) Compare the rates to any available insurance experience and adjust as deemed necessary 8) Sum the rates for each of the major conditions covered, then add small amounts for each additional covered condition
Recommended practices for using credibility procedures
1) The actuary should use an appropriate credibility procedures 2) The actuary should exercise professional judgment in selecting relevant experience to blend with the subject experience 3) The actuary should use professional judgment when selecting, developing, or using a credibility procedure 4) The actuary should consider the homogeneity of the subject experience and the relevant experience
Reasons plans are outsourcing benefits administration
1) The complexity of administering benefits 2) The efficiencies of specialized service providers 3) The ability of specialized providers to obtain favorable pricing because of their business volume 4) The ability of service providers to more readily implement technology and monitor regulations and market trends
Categories of appropriateness of data used in an actuarial analysis
1) The data is of acceptable quality to perform the analysis 2) The data requires enhancement before the analysis can be performed 3) Judgmental adjustments or assumptions can be applied to the data or the analysis results 4) The data has significant defects 5) The data is so inadequate it cannot be used
Factors that may influence future trends
1) The impact of exchanges 2) Cost savings initiatives 3) The economy
Definition of critical illness insurance
1) The insured is diagnosed with a covered condition 2) Condition meets the definition in the policy and is not excluded in another policy provision 3) The insured survives a specified period following diagnosis
Disclosures required in an actuarial report
1) The intended users 2) The scope and intended purpose 3) The acknowledgement of qualification as specified in the Qualification Standards 4) Any cautions about risk and uncertainty 5) Any limitations or constraints on the use of the findings 6) Any conflict of interest 7) Any information which the actuary relied on and which the actuary does not assume responsibility for 8) The information date 9) Subsequent events 10) Documents comprising the actuarial report
Major considerations in the rate setting process
1) The market 2) Existing products 3) Distribution system 4) Regulatory situation 5) Strategic plan and profit goals
Considerations in selecting data to use in an actuarial analysis
1) The scope of the assignment and the intended use of the analysis 2) The desired data elements and possible alternative data elements 3) Whether the data is appropriate and sufficiently current 4) Whether the data is internally consistent 5) Whether the data is reasonable given relevant external information that is readily available 6) The degree to which the data is sufficient for the analysis 7) Any known significant limitations of the data 8) The availability of alternative data, and the benefit and practicality of obtaining this data 9) Sampling methods that were used to collect the data
Required documentation related to data quality
1) The source of the data 2) Any limitations on the use of the actuarial work product due to uncertainty about data quality 3) Whether the actuary reviewed the data, and any limitations due to data that was not reviewed 4) A summary of unresolved concerns the actuary may have about questionable data values 5) A summary of any significant steps the actuary has taken to improve the data 6) A summary of significant judgmental adjustments or assumptions the actuary applied to the data or to the results 7) The existence of results that are highly uncertain or potentially biased due to the quality of the data 8) The extent of the actuary's reliance on data and other information supplied by others 9) Disclosures in accordance with ASOP #41
Misconceptions regarding LTC rate increases
1) These products are annually renewable 2) Using historical loss ratios to determine performance is appropriate 3) Companies have time to wait and see show experience will unfold
Structural requirements of accountable care organizations (ACOs)
1) Those eligible to form an ACO include group practices, networks of individual practices, hospitals, rural health clinics, and federally-qualified health centers 2) Must be a legal entity that is authorized to conduct business in each state in which it operates 3) Must be formed for the purposes of: a) Receiving and distributing shared savings b) Repaying shared losses or other monies owed to CMS c) Establishing, reporting, and ensuring provider compliance with health care quality criteria 4) At least 75% of the ACO's board seats must be held by ACO participants 5) Management structure must be similar to what is found in a nonprofit health plan 6) Participants must have a sufficient investment such that ACO losses would be a significant motivator
Considerations in developing a manual table for life insurance
1) Two approaches can be used: manual premium tables or manual claims tables 2) Data sources 3) Changes in mortality 4) Reinsurance 5) Conversions to individual life policies 6) Manual adjustments are made for group-specific traits 7) Rates for the group are based on age and gender mix, but they end up charging a composite rate to all employees
Assumptions needed for a LTC pricing model
1) Voluntary lapses 2) Mortality (1994 Group Annuitant Mortality table) 3) Morbidity a) Marital status b) Gender c) Benefit trigger d) Area e) Case management 4) Selection factors 5) Expenses 6) Interest 7) Reserve basis 8) Other assumptions 9) Profit
Concerns about the Canadian Medicare system from recent reports
1) Waiting for months to see a specialist is common 2) Shortage of equipment, specialists, and technicians 3) Waiting for elective and non-emergency services is common 4) Emergency rooms are overcrowded 5) People who need LTC tend to wait in hospital beds 6) Technology-intensive services are not available everywhere 7) The demand for services exceeds the supply 8) Some essential services are not covered
Group term life disability provisions
1) Waiver of premium 2) Total permanent disability 3) Extended death benefit
Questions to ask in evaluating employee benefit plans
1) What are objectives of the employer and employee? 2) What benefits should be provided? 3) Who should be covered under the benefit plan? retirees? dependents? 4) Should employees have benefit options? 5) How should the benefit plan be financed? 6) How should the benefit plan be administered? by the employer, an insurer, or a TPA? 7) How should the benefit plan be communicated?
Questions answered by a market assessment
1) What exists in the market today? 2) What is the product objective for the consumer? 3) What is the regulatory environment for this product? 4) What are the financial value and other benefits for the consumer? 5) What are the price targets? 6) What is the likely reaction from competitors? 7) How will the sales team react?
Situations in which ASOP #25 applies
1) When the actuary is required by applicable law to evaluate credibility 2) When the actuary chooses to evaluate the credibility of subject experience 3) When the actuary is blending subject experience with other experience 4) When the actuary represents the data being used as statistically or mathematically credible
Advantages and disadvantages of closed-panel HMOs
Advantages: 1) Ability to more closely manage care 2) Delegation of many routine medical management functions to the group, which reduces administrative costs 3) Convenience for members of having lots of services available in one location Disadvantages: 1) Not as easily marketed to new members who would have to change doctors 2) Locations of medical offices may not be convenient for all members 3) Only feasible in medium to large cities 4) More complex and costly to set up and maintain
Cafeteria plan advantages and disadvantages to the employee
Advantages: 1) Employees can pay for benefit expenses on a tax-favored basis 2) Employees can have more control over their health spending Disadvantages: 1) Benefit elections must be made prior to the beginning of the year and cannot be changed 2) For FSAs, the benefit dollars unused at the end of the year are forfeited 3) Since there is no FICA tax, participants might see a slight reduction in social security benefits
Advantages and disadvantages of open-panel HMOs
Advantages: 1) More easily marketed and sold due to the large panel of private physicians 2) Easier for members to find a participating provider conveniently located 3) In IPA models, routine medical management functions may be delegated to the IPA 4) Easier and less costly to set up and maintain Disadvantages: 1) Because the HMO is not providing medical care itself, it has little ability to manage care 2) Premiums are often higher than those of closed panels
Cafeteria plan advantages and disadvantages to the employer
Advantages: 1) The employer doesn't have to pay FICA or FUTA taxes on contributions 2) Deferred amounts do not could when determining workers' compensation premiums 3) Creates increased awareness of the overall cost and value of employee benefits 4) Helps to contain health care costs and prevent wasting benefit dollars on duplicate/unneeded benefits Disadvantages: 1) The large cost of administration and operation 2) If a medical reimbursement account is included in a plan, the total amount of the account must be available at any time 3) Adverse selection can result in increased costs 4) Plans are subject to complex coverage and nondiscrimination testing
Definition of employee benefits
Any form of compensation other than direct wages, including: 1) The employer's share of legally-required payments (social security) 2) Payments for time not worked 3) The employer's share of medical and medically-related payments 4) The employer's share of retirement and savings plan payments 5) Miscellaneous benefits More limited definition - excludes legally-mandated benefits
Formula for group term life imputed income
EE is taxed for ER-provided group term life coverage in excess of $50,000 Monthly imputed income = [Table I Rate * (Coverage Amount - $50,000)/$1000] - EE Contributions
Advantages of voluntary benefits
Employer advantages: 1) More benefits can be offered without significant added cost 2) Can supplement or replace employer-sponsored benefits that have been reduced or eliminated 3) Can act as an employee recruitment or retention tool 4) Can offer to employees that meet performance goals Employee advantages: 1) Can get the employer's group discount 2) In some cases, can purchase with pretax dollars 3) Convenience of obtaining benefits through the workplace and during worktime 4) They are often portable
Optional benefits that may be added to group disability contracts
For LTD: 1) COLA 2) Spousal benefits 3) Survivor benefit 4) Pension benefit 5) Portability 6) Conversion option 7) Catastrophic benefits For STD: 1) Survivor benefit 2) 24-hour coverage 3) First day hospital coverage
Benefits that can be offered in a cafeteria plan
Qualified benefits (pre-tax): 1) Employer-provided accident or health coverage 2) Individually-owned accident or health policies 3) Employer-provided group term life insurance coverage 4) Employer-provided dependent care assistance 5) Employer-provided adoption assistance 6) Contributions to a 401(k) plan 7) Contributions to an HSA Permissible benefits (taxable): 1) Cash 2) Paid vacation days 3) Group term life insurance in excess of $50,000
Loss ratio standards for Medicare Supplement products
The following loss ratios must be the greater of the original expected loss ratio that the company filed and the statutory minimum (65% individual, 75% group): 1) The lifetime loss ratio 2) The future loss ratio 3) The expected third-year loss ratio
Criteria for provincial Medicare plans to qualify for federal contributions
These come from the Canada Health Act: 1) Comprehensiveness 2) Universality 3) Accessibility 4) Portability 5) Public Administration Extra billing and user charges are allowed, but reduce the federal grants to the province.