Core SOA exam questions

Describe the three main sources of information in evaluating the financial health of a company based on financial statements, and how they relate to each other. spr 2015

A balance sheet is a financial snapshot, taken at a point in time, of all the assets the company owns and all the claims against those assets. o Assets = Liabilities + Shareholders' equity (definitions of each item in the formula should be provided) Cash flow statement of a company shows principal sources and uses of cash through three activities: Operating activities Financing activities Investing activities o It is easier to understand, provides more accurate information about certain activities, and it is used to evaluate firms' solvency by highlighting the extent to which operations are generating or consuming cash Income statement shows the extent to which net sales generated during the accounting period exceeded expenses incurred in producing the sales. o Formula: net sales - cost of goods sold - operating expenses - nonoperating expenses - taxes = net income o Earnings should also note concepts such as accrual accounting, depreciation and taxes While balance sheet shows the financials at a point in time, the cash flow and income statements show the movement between two dates. Examples of interrelation include: o Cash changes can affect various items in assets and liabilities (e.g. cash, accounts payable, accounts receivable) o Revenue/expense items from income statement can be shown as increases in cash, accounts receivable and accounts payable. o Net income from the income statement is used to determine the change in equity between balance sheets

Describe the differences between a "short duration" contract and a "long duration" contract. fall 2016

A short duration contract provides insurance protection for a fixed short duration. A long duration contract requires the performance of various functions & services over an extended period of time. A short duration contract enables the insurer to cancel the contract or adjust its provisions at the end of each contract period. A long duration contract is not subject to unilateral changes in its provisions.

Describe guidance for actuaries provided within the Actuarial Standards of Practices (ASOPs) that apply to insured group rate filings. fall 15

ASOP 8 - Guidance to actuaries when performing professional services with respect to preparing or reviewing required regulatory filings related to rates or financial projections for health plan benefits, health insurance, and entities providing health benefits. ASOP 21 - Guidance to actuaries when providing professional services while responding to or assisting auditors or examiners in connection with an audit or examination of a financial statement. ASOP 23 - Guidance to the actuary in: Selecting the data that underlie the actuarial work product; relying on data supplied by others; reviewing data; using data; making appropriate disclosures with regard to data quality. ASOP 25 - Guidance to actuaries when performing professional services with respect to selecting or developing credibility procedures and the application of those procedures to sets of data. ASOP 26 -Guidance for actuaries preparing small group health plan rate filing certifications. ASOP 41 -Guidance to actuaries with respect to actuarial communications.

List the ACA provisions that exert upward pressure on individual premiums. fall 2016

Access to insurance is guaranteed and health status can no longer be used as a rating variable Issuers can no longer exclude coverage for pre-existing conditions Comprehensive coverage Guaranteed Issue Industry taxes Age rating compression (upwards pressure for younger individuals)

List and describe key characteristics that should be considered when pricing group LTD and group LTC plans. fall 2016

Age/Gender: maternity may impact LTD, LTC is issue age rated (increase for older issue ages) and females have a steeper slope and higher utilization Group size: in LTD highest claim costs occur for largest and smallest groups (U shaped cost curve) Participation factors: antiselection at low participation rates for both LTD and LTC Marital status: LTC (lower cost for married couples, consideration in composite rating) Area: LTD has significant variation by area, LTC services vary by region: in Midwest - nursing homes, in Florida - home care services

Describe plan provisions common to both LTC and LTD

Both LTD and LTC have benefit triggers i. LTD: inability to perform material and substantial occupation duties ii. LTC: inability to perform ADLs Both have elimination periods i. Typical LTD elimination period is 3 or 6 months ii. Typical LTC is usually expressed in days and varies from zero to 365 days. The most common waiting periods are 30, 60, 90, and 100 days. Both have optional inflation protection Both have spousal benefits Both have death benefits Both have exclusions/limitations

Describe the functional approach for employee benefit plan design.

Classify Employee needs in functional categories Classify the categories of persons Analyze the current benefits in terms of the functional categories of needs and the categories of employees that the employer wants to benefit Determine any gaps in benefits in terms of the functional categories of needs and employees Consider recommendations for changes in the benefit plan to meet any gaps or overlapping in benefits Estimate cost savings from each recommendation above Evaluate alternative methods of financing or securing the benefits above Consider other cost savings techniques Decide upon the appropriate benefits, methods of financing, and sources of benefits Implement the changes Communicate benefit changes to employees Periodically reevaluate the benefit plan

Explain why insurers prefer to have individuals share in the cost of a group benefits plan.

Control of Utilization o Studies show reductions in utilization when there is cost sharing present o Brings individual into issue of cost concerns o Can reduce utilization to the point it can unfavorably impact health status - thus negating any reduction in costs Control of Costs o Lowers premium cost - more affordable coverage Control of Risk to the Insurer o Many benefits are not considered and insurable risk, increasing cost sharing results in benefit program that is more representative of insurable risk

Describe the general purposes served by having the employees share in the cost of the plan.

Control of utilization: EEs are more aware of their behavior which reduces the volume of unnecessary services Control of costs: reduces plan costs leading to lower premiums Control of risk to the insurer: makes the cost a more insurable risk.

Describe the different types of cafeteria plans available.

Coverage of Preventative services at zero cost share to the member Prohibition of lifetime and annual limits Limits on OOP Maximums when using In Network benefits SG and Individual plans must cover Essential Health Benefits Prohibition of exclusions based on pre-existing conditions The ACA extended federal mental health parity requirements to the small employer and individual marketplaces.

Describe the characteristics of the ideal vehicle for prefunding retiree health benefits. fall 15

Current company tax deduction for contributions that adequately fund retiree health benefits; A tax-free or tax-deferred savings mechanism for employees; Investment earnings that accumulate in a tax-sheltered environment; and Tax-free benefits paid to retirees.

Prepare a brief memo for Golden Boomers' management that describes the differences between a dual-eligible SNP plan and a Medicare-Medicaid Financial Alignment Demonstration.

D-SNPs o Provide coordinated provider network and schedule of benefits across Medicare and Medicaid to dual eligibles o But level of integration varies across states o Federal contract for Medicare benefits o Health plan may or may not be at risk for Medicaid-covered services under separate contract with the state o Medicare and Medicaid revenue streams are kept separate o Prospective payments based on plan's bid Medicare Financial Alignment plans o Fully coordinated care for dual eligibles o Medicare and Medicaid revenues are combined and savings are shared between state and federal government o Capitated model - three way contract between plan, state, and CMS; prospective payments that anticipate savings; health plan is fully responsible for providing integrated Medicare and Medicaid benefits; plans receive separate caps for Medicare A/B, Medicaid, and Medicare Part D, quality withhold on Medicare A/B and Medicaid pieces Managed FFS Model - state is responsible for establishing program to coordinate care for duals; in return state will be eligible for share of savings based on retrospective measurement as long as quality thresholds are met

List and describe eight actuarial assumptions used for valuation of life and health group benefit plans. fall 2014

Discount rate - used to discount all future benefit payments in any present value calculation. Health care cost trend rate - the rate used to project current claims costs into the future. Salary increase - used to project the salary to retirement for salary-based benefits such as Life insurance. Termination - used for current active employees who are expected to leave the employer prior to retirement. Mortality - generally not significant until after retirement Retirement rate - likelihood of retirement upon attainment of eligibility Current plan costs and contributions - the costs by age for a retiree Retiree contribution increase - if contributions are required, assumption for future increases

The CFO is preparing a multi-year strategic plan and has asked you to explain the implications if Dr. No's discontinues its health plan in 2020. Assume there are no modifications to the ACA and Dr. No's employee growth is consistent with current projections. (i) Outline additional regulations that Dr. No's will be subject to in 2020. (ii) Calculate the cost impact to Dr. No's of discontinuing coverage in 2020. fall 15

Dr No's would be subject to the employer mandate Since they are 50 or more employees The penalty would be a fee per full-time employee, excluding the first 30 employees from the assessment. (ii) $2,000 annual fee * (EE - 30) = savings

Explain why organizations use an organized system for classifying and analyzing risks to evaluate employee benefits strategies. fall 14

Employee Benefits are viewed as a significant element in total compensation by employees and thus should be planned and organized to be as effective in meeting employees needs Employee benefits are a large part of labor costs and thus effective planning can avoid waste and help control employer costs Employee Benefits may have been adopted on a piecemeal basis, and thus should be periodically reviewed to identify overlaps and gaps Changes in tax laws, regulations, and economic climate occur and thus it is important to use a systematic approach to plan benefits to keep them current, cost effective, and compliant

Describe common provisions aimed at limiting anti-selection in dental plans. fall 2014

Exclusions: Excludes payment for elective (non-essential) procedures or procedures covered elsewhere. Examples include cosmetic treatments, experimental treatments, and services related to on-the-job accidents Pre-existing conditions limitations/Waiting: Most plans do not cover any charges incurred before a covered person was insured, including not covering the replacement of certain prosthetic devices implemented before the covered person was insured Benefits after insurance ends: Payment for charges after termination is often limited in scope and must be completed within 31 days Benefit provisions: Deductibles, coinsurance, copayments, and annual maximums limit the amount of services covered

List the changes to Federal Medicaid guidelines from the ACA.

Expanded program to all non-Medicare eligible individuals with income up to 133% of FPL Provisions for quality improvements Provides higher payments for primary care services (for limited time period)

List and describe the components of gross premiums.

Expected Claim Costs o Claims that will be charged to the plan during the contract period o Determined using manual or experience rates, with credibility adjustments Administrative Expenses Commissions and other sales expenses o Generally marketed by agents or brokers compensated on a commission basis o In addition to commissions, may have other expenses related to sale of product o Allocation of expenses attributable to promotion of product, such as advertising to promote brand recognition Generally a % of premiums Premium taxes o Vary by state, generally 1-3% o Assumption for larger groups reflects distribution by state Other taxes and fees o Federal and state income taxes o State sponsored high-risk pool o Federal assessment on health coverage under ACA totaling $8 billion in 2014, increasing to $14.3 billion by 2018 o Small comparative effectiveness research assessment required by ACA Contributions to surplus / Risk and Profit Charges o Reflect degree of risk involved, the amount of company capital allocated to support the coverage, and return expected on the capital o Risk varies by group size, benefits provided, funding vehicle, degree of resources required to administer o Risk often pooled for smaller groups o Larger groups may have financial arrangements other than full assumption of risk by carrier (ASO, etc) Credit for investment income on assets and cash flow o Typically thought of assets related to medical reserves and on cash flows o Rate of return is generally based on portfolio rate of return o Can be reflected as Explicit rate component Offset to expenses Offset to the provision for risk or profi

Describe the different types of cafeteria plans available. spr 2016

FSA - Flexible spending Account o Employer contributes a set amount into a flexible spending account o Employees can also contribute o Employees can use funds for medical costs, adoption assistance, and dependent care o Funds cannot be rolled over and are not portable Full Flex Plan o Employer gives employees credits which can be used to purchase employee benefits o Employees can sometimes purchase additional credits o Benefits such as health, term life, AD&D, and LTC can be purchased Premium Conversion Plan o Employer does not contribute but employees are able to purchase benefits through the employer with pre-tax dollars o Employees can receive the employer's group discount

List and describe typical group term life insurance plan benefit designs.

Flat Dollar Plan - pays $x,000 per employee Multiple of earnings - pays Y times salary Salary bracket plans - pays X based on salary level; grouped by intervals of salary level: ie, <$20k has $10,000 of coverage, $20-$40k has $20,000 of coverage, etc. Position plans - pays salaried employees receive a different benefit than hourly employees, etc.

Explain the key conceptual differences between US Statutory reporting and US GAAP reporting for group health insurers. spr 2014

GAAP reporting attempts to match the incidence of revenue and expenses, while statutory reporting tends to accelerate recognition of expenses and defer recognition of revenue Statutory reporting attempts to determine the value of the insurance company if it were to liquidate, while GAAP looks at the insurance company as a going concern Many of the conservative assumptions require for statutory reporting can be replaced by a much less conservative margin for adverse deviation in GAAP

A common theory is that broad participation in HBE products across targeted populations is necessary for the ACA to be successful. Identify and explain the ACA provisions that may hinder participation in HBE products for population subgroups. spr 2016

General belief is that premium subsidies have uniform and directionally appropriate effects across the general population Reasons why younger healthy people may not choose to enroll in the HBEs Subsidies will primarily benefit older people as premium rates for younger are more likely to be considered "affordable" before a subsidy adjustment o Maximum premium contribution based on sliding scale of FPL - means greater premium subsidy to older people with higher age rated premiums o Younger will actually pay more for plans with APV less than silver Widely known ACA provision requires employers to allow children under age 26 to remain on their parents' plans Age compression (3:1) of individual market premiums that discourages enrollment when compared to the premiums they would pay for off-exchange products Younger people currently rated on a steeper age curve (5:1 or 7:1) will have a greater propensity to keep their plan than older people.

Identify considerations in establishing an Employer's Total Compensation Policy. fall 14

General compensation policy in line with industry, community, or both. Type of industry and type of organization (mature industrial, nonprofit, sales, etc) Balance between cash and non-cash compensation and short-term versus longterm compensation Balance between compensation/service-oriented and benefit/need-oriented

Describe other components that you cannot influence which could impact medical trend. spr 2015

General macro-economic conditions (such as inflation, population wealth) Random fluctuations (such as a high flu season) Legislation (mandated benefits)

You are the pricing actuary for URHealth, a for-profit HMO. Your company will be offering products both on and off the exchange to the extent allowed. You have been asked to evaluate the 2014 pricing formula for its individual insured, small group insured, and large group self-insured medical products to ensure the rates charged consider all the new Affordable Care Act (ACA) related taxes, fees and assessments. Describe the ACA-related items you need to include in your retention load, including their purpose, and their applicability to each product.

Health Insurer Tax o new tax of $8 billion in 2014 ($8 billion in 2014, increasing to $14.3 in 2018 and indexed thereafter) to be used to fund various ACA provisions o not-for-profits pay 50% of the assessment and certain plans pay 0% so we pay 100% o assessed across all health insurance sector but not assessed on ASO products so applies to individual and small group insured but not on large group ASO Excise Tax for High Cost Health Plans o New tax on rich plans equal to 40% of the excess costs over $10,200 single ($27,500 family) o Tax is to discourage overly rich coverage (as well as just a source of funds for other ACA provisions) o Tax doesn't apply until 1/1/2018 so not applicable for any of the coverage for 2014 pricing Reinsurer Fee o Used to pay for high risk members in the individual products but funded assessed across all products, including ASO. o Covers 80% of the expense between $60K and $250K o So, all three products need to include an estimate of this fee in their retention but you should also factor in any expected recoveries on the individual product claims projections Patient Centered Outcomes Research Institute Assessment o Fee paid to cover the cost of this new not-for-profit institute on the clinical effectiveness of medical treatments o Assessed on health plans and employers so should be included in retention for all three products Health Benefit Exchange Fee o Amount paid to exchange for its services (marketing, enrollment, subsidy checking, etc.) o Since offering individual and small group products off and on the exchange, need to estimate % that will be sold on the exchange so that you can calculate the average amount to include in retention o Do not need to include in large group ASO retention since it is not sold on the exchange Underwriting assessments / requirements (Many candidates included the below information and were awarded partial points) o ACA now requires insurers to only underwrite based on age (3:1); tobacco usage (1.5:1), geography and family tier o Eligibility rule changes - must offer coverage to children up to age 26; guarantee issue and renewability o Plan design restrictions: no pre-existing conditions, no lifetime maximums, preventive care at 100%, cover essential health benefits. Exchanges plans follow metallic plans (platinum, gold, silver, bronze) o Rebates to plans if MLR are not met; Individual / Small Group = 80% MLR; Large Group = 85% MLR

Describe key features of U.S. tax law related to group health and life benefits. spr 2015

Health coverage has a favorable tax status overall o Employer gets to deduct premiums from taxes o Employees receive benefits tax-free o Highly compensated employees may have coverage taxed Life coverage is tax-free for 100% of salary up to the first $50,000 of coverage. Income above that amount is taxable. Disability coverage has either the premiums or benefits taxed, but not both.

Outline some approaches that could improve Medicare solvency. fall 15

Higher payroll taxes Reduce or eliminate some covered services Increase Medicare cost sharing Increase member premiums Increase Medicare eligibility age Adjust reimbursement levels for care providers Adopt initiatives to lower medical cost trend (e.g. ACO's and/or pay for performance)

Outline considerations in developing and allocating administrative expenses.

How are expenses allocated to the product? o Activity-based allocation Allocates expenses according to some measure or estimate of use for products or functions Example of activity based allocation (postage costs, transfer charges, etc) o Functional Expense Allocation Determine how total expenses for an organization are split by major and minor activity categories, line of business, and new and renewal business Survey employees how much time they spend on each category o Multiple Allocation Methods A financial report may include both activity and functional expense allocation How should administrative expenses be allocated to groups? o Primary objective is to achieve equity among group customers without unduly complicating process Sometimes this is secondary to overriding company strategy o Expressed on one or more of following bases Percent of premium Percent of claims Per policy Per employee Per claim administered o Some particularly demanding customers may have specific charges to provide services (i.e. reporting requirements) o Generally preferable to use basis that reflects activities that generate expense What does the competition include as expenses in pricing? o Adjustments may be necessary to accommodate to marketplace Sources of data o May be internal or external o Internal sources: generally accounting systems (salary, bonuses, rent, postage, travel, etc) o External sources: studies by industry associations, published expense data from annual statements, competitive feedback, special surveys

List challenges associated with offering a medical insurance plan to retirees that generally do not exist with active employees. fall 15

It is harder to communicate with retirees, because they do not come to work regularly. Many retirees have family physicians that they have been seeing for a long time, making it uncomfortable and difficult to change a primary care provider Some retirees move away from where they worked, and it is difficult to physically meet for a company-sponsored event. Coordination of benefits with Medicare and Medicaid for those that are eligible Actuarial and accounting challenges such as access to relevant and credible data, complex liability calculations and accounting treatment.

Describe the challenges posed by the dual eligible population in a managed Medicaid environment.

MCR is funded and regulated outside of state control. 21% of MCR are eligible for MCD, but 60% of ABD are dual eligible meaning a bigger problem for the states than the Feds. Benefit design o MCD is responsible for any MCD benefits outside of MCR benefits. o State doesn't have to pay for acute benefits, but is responsible for cost share amounts on MCR benefits. MCD/MCR operate as parallel systems with little interaction. o The state can be unaware of services provided where MCR is primary. o Leads to more reliance on LTC since the state can't intervene earlier. Many MCR beneficiaries do not become eligible for MCD until an acute episode occurs. o Acute admission followed by nursing home without resources leads to MCD application. o This limits their ability to return to a less restrictive environment and becomes permanent solution. MCR/MCD managed and regulated by CMS in a silo structure. o Independent regulatory requirements affect all parties involved. o Two unique processes for enrollment, grievances/appeals, member materials etc. o Beneficiaries need to manage two systems even though benefits are intertwined. o Little incentive to encourage cooperation and integration.

Describe the managed care continuum and the makeup of existing plans from low to high.

Managed Indemnity - indemnity plans with UM overlay PPO - contract with network of providers, in and out of network coverage EPO - like PPO but no out of network POS - HMO with high cost share indemnity for out of network HMO - in network only, gatekeeper approach o Open - contract with private physicians o Closed - single medical group employed by HMO

Explain how Medicare is financed. fall 15

Medicare is financed on a pay-as-you-go basis. There is no pre-funding. Hospital Insurance is funding through payroll taxes. The tax is 1.45% of employee earnings with a 1.45% match paid by the employer. SMI is financed through contributions from the general treasury as well as beneficiary premiums. General revenues account for approximately 75% of funding, member premiums account for approximately 25%. Part D is financed through a separate account within the SMI trust. Part C is financed through the same sources as A, B, and D, plus additional member premiums where applicable.

Brentwood is considering contracting with a third party for an Employer Group Waiver Part D Plan (EGWP). (d) (2 points) Assess the potential merits of the EGWP Part D plan relative to Brentwood's existing arrangement. spr 2016

Merits of EGWP plan: o EGWP may be tailored to the group's needs o Admin functions are no longer a hassle o Insulation against catastrophic risk o Direct monthly subsidy from CMS Merits of existing arrangement: o No disruption to existing pharmacy network o No disruption to list of pharmacy drugs covered o Coordination of care because both health and pharmacy coverage is provided by one carrier

List and describe reasons for recent increases in prescription drug costs in the United States.

Prescription drug pipeline - recovering R&D costs Biologics - expensive with no generic alternatives Patents - limits generic alternatives Direct to consumer advertising - more consumer awareness Member cost sharing offsets - increases utilization and potentially unnecessary demand Faster approval process - speed to market creates more supply and demand Brand name advertising - steers consumers away from generics Aging population - creates more demand Increase in awareness and test for disease - increases utilization Personalized medicine - leads to increased and potentially unnecessary utilization

Describe the major modifications that must be made when converting from US Statutory reporting for group health insurers to US GAAP. spr 2014

Removal of some of the conservatism in reserving assumptions Full recognition of deferred taxes Recognition of the market value of most assets Recognition of lapses in reserves Capitalization of deferred acquisition costs Recognition of all receivables and allowances Removal of the AVR and IMR

Describe the adjustments needed to restate accounting from a statutory basis to a GAAP basis. spr 17

Removal of some of the conservatism in reserving assumptions (GAAP reserves still include some conservatism, referred to as "provision for adverse deviation"); Full recognition of deferred taxes; Recognition of the market value of most assets; Recognition of lapses in reserves; Capitalization of deferred acquisition costs; Recognition of all receivables and allowances; and Removal of the AVR and IMR. The focus of GAAP is on the income statement, while statutory financial reporting in the U.S. emphasizes solvency and produces a conservative valuation of both assets and liabilities. GAAP financial reporting attempts to match the incidence of revenues and expenses, while statutory financial reporting tends to accelerate expense recognition and delay revenue recognition (or at least offset revenue recognition with corresponding liabilities, producing the same effect). Statutory financial reporting attempts to determine the value of the insurer if it were forced to liquidate. GAAP financial reporting attempts to determine the value of the insurer on a going concern basis. In addition, the conservative assumptions required in many statutory reserve items can be replaced by a much less conservative GAAP margin for adverse deviation.

Define and explain the three financial measures provided by Oingo. spr 2014

Represents the total investments required to meet the demands of the business Net Profit Margin = Net Income/Revenue Represents what portion of total sales results in profit and measures the profitability of the company Total Leverage Ratio = Total Assets/Shareholder Equity Represents how much creditors' money can be magnified to improve the return on assets for the shareholders

Describe the reasons why JB would want to offer a retiree benefits package. fall 2016

Retiree group benefits are a tax-effective means of providing retirement financial security; It is a valuable benefit for those currently receiving the coverage or who are soon to retire; The benefits can support workforce planning and growth opportunities for employees; Providing ongoing health care coverage is a social responsibility of the employer; Providing retiree health care benefits helps provide a competitive package of total compensation; The current cash costs are nominal relative to the total spending on benefits; and Retiree benefits are often at the top of the list of union demands.

Identify and describe ACA provisions that contributed to the 2014 renewal calculation. fall 15

Risk Adjustment - an ACA program designed to compensate insurance providers that take on a proportionally greater risk than others in the same market. ACA transitional reinsurance fees - an ACA program designed to protect carriers against claim fluctuations experienced with the large population influx as a result of the individual and employer mandates Dependent age limit has increased to age 26 - Since most policies may have covered dependents up to a younger age this would increase the number of dependents covered and increase rates. Additional regulations and overview due to ACA would lead to additional administrative costs for the insurance company. Examples include: o Patient-Centered Outcomes Research Trust Fund Fee (PCORI) o HIP (Health Insurers Tax) Minimum Loss Ratio - The expected loss ratio cannot be below 80%. Individual Mandate - As a result of this potential penalty if a member does not have insurance coverage more employees may enroll in the health plan. Geographic Rating Areas - If the rating areas were changed due to ACA there may be a new area factor developed for the employer's particular geographic spread.

Describe the following three provisions of the Affordable Care Act, including the markets and timeframes in which they apply: • Risk Sharing • Reinsurance • Risk Corridor

Risk adjustment: o A tool used to redistribute total payments across health plans to account for the relative risk of plan participants o Mitigate anti-selection among insurers; help ensure plans are appropriately compensated for risks they enroll o Applies to non-grandfathered small group and individual, on and off exchange o Permanent beginning in 2014 Reinsurance: o Protect individual market plans against financial losses from individuals with unusually high claims o Funds for those payments will be collected from all individual and group plans, including grandfathered plans and self-funded plans o Applies to non-grandfathered individual market plans, on and off exchange o Applies 2014 - 2016 Risk Corridor: o Temporary program to limit gains and losses for insurers o Applies to individual and small group plans on exchanges o Applies 2014 - 2016

Describe some of the methods available to help quantify the uncertainty surrounding a financial forecast. spr 17

Sensitivity Analysis o Systematically change one assumption, and see how the forecast responds. o The simplest technique. Scenario Analysis o Considers a scenario that could plausibly befall the company, then reviews/revises multiple assumptions in light of the scenario. o Produces a limited number of detailed projections that describe the range of contingencies the company faces. o Superior to sensitivity analysis in that assumptions seldom err one-at-atime. Simulation o Computer-assisted extension of sensitivity analysis. o Assigns probability distribution to each uncertain element in the forecast. o Allows all uncertain input variables to change at once. o Results can be hard to interpret o Too much "planning" is done inside a computer.

Describe three ways to cope with uncertainty in financial forecasts. fall 14

Sensitivity Analysis - Measuring financial impact by changing one key assumption at a time and reviewing the results Scenario Analysis - Measuring financial impact by changing several key assumptions related to a possible scenario at a time and reviewing the results Simulation - Running thousands of simulations of assumptions as random variables using a computer, measuring financial impact, and reviewing the results

Describe the key components of the net periodic postretirement benefit cost. fall 2014

Service cost - the cost of the benefits that accrue during the period for the P&L statement Interest cost - interest on items like APBO, service cost, and benefit payments Expected return on plan assets - expected fair market value of return on plan assets in the plan year Amortization of the transition obligation - if employer chose to delay and amortize one-time impact of FAS 106 Net amortization and deferral - amortization for prior costs Net amortization and deferral - amortization for plan gains/losses

Describe the long-term financing challenges faced by Medicare. fall 15

The HI fund is expected to be depleted by 2024/2026/2030 because HI expenditures are expected to exceed HI revenues for every year in the future. Total Medicare expenditure is growing faster than GDP. Population is aging causing more expenditure. Slower economic recovery limits the growth of HI and SMI revenue because it results in lower real payroll tax revenues. Part B spending is expected to increase as SGR-related physician payments will likely be over-ridden in future years. Scheduled reductions in non-physician provider payment rates will not be sustainable in long term; further inflating costs. Increase in total Medicare Spending threaten the program's long term sustainability as its share of GDP is expected to grow from 3.6% (2010) to 6%-11% (2085).

Explain the components of health insurance pricing trends and how each applies to prescription drugs. fall 2016

Unit cost trend - Change in the cost of services. Represents unit cost trend on a fixed market basket, severity, and mix of services. For pharmacy this would be the cost of the drugs (AWP). Utilization trend - Change in the utilization of services. For pharmacy this would be the number of drugs used by members. One time changes - Such as legislation, high flu season, internal issue. For pharmacy this could be impact of a new drug or high flu. Expected population shifts - Demographic, geographic mix. Structural changes - Change in cost structure. For pharmacy this could be PBM contract changes that impact discounts/dispensing fees. Capitation or Large claims impact

Explain how the structure of the ACA might discourage younger individuals from buying ACA applicable plans. fall 2016

Upward pressure on premium rates for younger population due to limited age curve. o Generally accepted age curve thought to be around 5:1 - 7:1 o ACA limits age curve to 3:1 o Intended to lower premium costs to older people however also creates less attractive market for younger people Cost sharing subsidies decided based on income only, not age. This causes a bias for subsidies for older population. Children are allowed to stay on parent's insurance plan until age 26. Above along with extension of pre-ACA benefits further give younger individuals higher likelihood of opting out of ACA based plans.

Describe components of medical trend which you can influence to offset the 7% provider contracting increase. spr 2015

Utilization management (such as disease management programs to monitor and coach members with certain conditions) Benefit design (such as increased cost shares to impact member utilization)

List and describe typical features of group term life insurance plans that are intended to protect employees from a lapse in coverage due to disability.

Waiver of Premium- waves premium if disability occurs younger than 60 or 65, and remains disabled continuously until death Total and Permanent Disability- provides a monthly benefit less than or equal to death benefit. Provides difference in death benefit upon death Extended Death Benefit- Benefit is payable if coverage ceases before age 60 and insured dies within the year, while being continuously and permanently disabled between coverage end date and death

List the overall questions to be considered in evaluating any existing or newly created employee benefits plan. fall 15

What are the Employer and Employee Objectives in Establishing the Plan? What Benefits Should Be Provided Under the Plan? Who Should Be Covered Under the Benefit Plan? Should Employees Have Benefit Options? How Should the Benefit Plan Be Financed? How Should the Benefit Plan Be Administered? How Should the Benefit Plan Be Communicated?

Describe the rating variables you should consider when normalizing claim cost data for manual rate development. spr 2016

age and gender - use separate age/gender factors for different major service or plan types geographic area - state, region, or metropolitan statistical area (MSA) benefit plan - adjust to reflect a common benefit plan, usually richest plan group characteristics (e.g. industry type, group size) - manual rate represents average group with regard to group characteristics utilization management - adjust for any significant differences in these types of programs provider reimbursement arrangements - adjust for any significant difference in these arrangements other risk adjusters - the more refined risk adjusters, based primarily on claim, diagnosis, and encounter data, as well as Rx claim info, may eventually replace age and gender adjustments, as well as potentially geographic and industry adjustments, as the primary method of risk adjustment in the future

Describe the requirements for offering prescription drug benefits to retirees via: (i) an employer group waiver plan, and (ii) a retiree drug subsidy.

(i) Group-specific benefits must be on average at least as rich as Part D Plan deductible no greater than Part D deductible Catastrophic coverage at least as rich as Part D catastrophic coverage (ii) Apply for retiree drug subsidy and report actual experience to CMS Pass gross value test, which tests that coverage on average as rich as Part D coverage Pass net value test, which tests whether portion of plan covered by subsidy is at least as rich as that offered by Part D

For future negotiations, one approach would be to control the magnitude of provider contracting increases by reimbursing the hospital according to the Medicare fee schedule. (i) Explain issues with this approach. (ii) Propose three alternate strategies assuming NNG would consider taking on additional risk. Justify your response. spr 2015

(i) Network viability - hospital may leave network Code creep/utilizing more services to make up for lost revenue Different population - maternity and pediatric reimbursement (ii) Capitation - the hospital receives a flat fee and assumes utilization risk Bonus with withhold - hospital paid a lower reimbursement up front and is given a bonus tied to quality incentives DRG - fixed charge per admission based on severity of condition, hospital at risk for higher costs associated with the course of care for the admission

Briefly describe the meaning of these terms in the context of GAAP financial reporting for your company with regard to A&H products: (i) Long-duration contract (ii) Short-duration contract (iii) Long-term benefits (iv) Short-term benefits

(i) A long-duration contract's premium is recognized when due from policyholders; Liability recognized as present value of future expense minus present value of future premium. (ii) A short-duration contract's premium is recognized in proportion to protection provided; Liability recognized as incurred, including estimates for IBNR. (iii) Long term benefits may provide benefits to the policy holder over many years, like a long-term disability plan. (iv) Short-term benefits provide benefits for a short period of time or an acute episode, like a major medical or dental plan.

Between puffs from his cigar, your uncle expresses interest in hearing more about ACOs. (i) Describe an ACO. (ii) Describe the structural requirements of an ACO.

(i) ACO stands for Accountable Care Organization Shared savings program using performance measures Written into ACA Approach to achieve more integrated and efficient care Local organizational accountability for quality and costs (ii) Structural requirements: Can be formed by o Group practices o Network of individual practices o Hospitals o Rural health clinics o Federally qualified health centers Legal entity authorized to conduct business in each state it operates Formed for the purpose of: o Receiving and distributing shared savings o Repaying shared losses o Establishing, enforcing healthcare quality criteria Governing body o 75% board members must by participants o Management structure similar to non-profit Demonstration of ability to repay losses o Purchase of reinsurance o Establish line of credit o Place funds in escrow

Define the any occupation definition of disability. fall 14

(i) Disability defined as the inability to perform the duties of any job

Explain the applicability of ERISA to the group plans below. (i) Group A - government plan maintained by state or local government for their employees (ii) Group B - church plan maintained by a tax-exempt church (iii) Group C - plan required by state law such as disability insurance (iv) Group D - covering self-employed persons (v) Group E - fully-insured group health coverage at a small, publicly-traded company

(i) ERISA does not apply - Government plans maintained by federal, state, or local governments for their employees are exempt from ERISA's requirements. (ii) ERISA does not apply - Plans maintained by a tax exempt church are exempt from ERISA's requirements. (iii) ERISA does not apply - Plans required by state law are exempt from ERISA's requirements. (iv) ERISA does not apply - Plans covering self-employed persons are exempt from ERISA's requirements. (v) ERISA applies - ERISA applies to an employee benefit group health plan regardless of whether the plan is fully-insured or self-insured.

Identify the steps to calculate the payor's portion of each of the following claim types under Original FFS Medicare, Medicare Supplement Plan C and Medicare Advantage (MA): (i) An inpatient admission (ii) A doctor's office visit (iii) Filling a prescription at a pharmacy

(i) FFS: Allowed amount based on PPS/DRG system. Beneficiaries pay costsharing of a deductible and per-day copay, and Medicare pays the allowed amount less the cost-sharing. Med Supp plan C: Pays the deductible and per-day costs for which the beneficiary is liable. MA: Pays contracted amount minus cost-sharing. (ii) FFS: Allowed amount is determined by a fee schedule with adjustments, which pays the sum of the area adjusted unit values multiplied by nationwide conversion factor. Beneficiary pays deductible and 20% coinsurance (no cost-sharing for preventive services), and Medicare pays the rest of the allowed amount. Med Supp: pays deductible and coinsurance. MA: Pays contracted amount minus cost-sharing. (iii) FFS: Retail Rx is not covered under Original FFS (parts A/B). Med Supp: Current plans don't cover it. MA: Doesn't cover, unless it's MA-PD.

Provide an example of how benefit plan offerings can create antiselection in the post Affordable Care Act (ACA) world from the perspective of a carrier on the Exchange who: (i) has one competitor only on the Exchange (ii) has one competitor only off the Exchange

(i) If a competitor on the exchange offers gold, silver and bronze options and you offer only silver and gold; the bronze plan - which will be priced lower and have less benefit coverage - will attract younger and healthier insureds because they don't anticipate needing healthcare and want to pay as little as possible for insurance. (ii) Situations where the insurer on the exchange may get more unfavorable risk. If a large carrier that mostly underwrote before ACA still only offers products off the exchange, their starting pool (assuming they maintain most of their pre-ACA enrollees) may be healthier to begin with since they were originally underwritten. Subsidies on exchange business may cause anti-selection since people with subsidies generally less healthy, because low income is positively correlated to poor health. Uninsureds who can now buy healthcare on the exchange with subsidies may have more health need. Also, high risk employers may choose to purchase through the exchange because it would be cheaper.

Your uncle has heard about Patient-Centered Medical Homes (PCMH) from a business associate but doesn't fully understand how they work. (i) List the key characteristics of PCMHs. (ii) Explain the similarities and differences to HMOs.

(i) Key Characteristics Ongoing relationship with personal physician Personal physician responsible for coordinating care Patients receive care from a team Patient care integrated across all elements of continuum Quality and safety important Enhanced access to care Payment recognizes added value (ii) Similarities Recognizes team of physicians, medical assistants, RNs, etc. aligned around a PCP Enhanced focus on quality monitoring and improvement (NCQA) Differences Value of patient engagement in decision making o Role of patient not always clear under gatekeeper/closed panel HMO o PCMH mechanism for patients to be more engaged in how/when treated

(i) Identify the overarching means or steps of insurance regulation. (ii) Provide two examples of specific state regulatory actions for each of the steps identified in (i).

(i) Licensing Information Gathering Prior Approval Enforcement Receivership (ii) Licensing Providing licenses to insurance companies to sell insurance with the state. Licensing agents and monitoring their continuing education Information Gathering Collect and review company financial statements to assess reserve adequacy Review company's RBC Prior Approval States approve policy forms before they can be used Rate filings or re-filings (rate increases) Enforcement Investigating consumer complaints Imposing fines on companies when misconduct is found Receivership Monitoring a company's financial status to prevent insolvencies Taking over an insolvent company

Compare and contrast a Medicare Supplement plan and a Medicare Advantage (MA) plan for the following components: (i) Covered Benefits (ii) Filing Process (iii) Provider Contracting and Payment

(i) Med supp covers some of the beneficiary cost sharing from Medicare parts A and B. MA must cover at minimum parts A and B services. They can add other benefits beyond basic Medicare. (ii) Plans must file Med supp forms with state insurance departments. MA plans submit annual bids to CMS. If the bid is higher than the benchmark they charge a premium. If the bid is lower than the benchmark, the plan receives rebates to apply to additional benefits. (iii) Med supp plans don't contract with providers. They pay some of the part A/B cost-sharing. MA plans contract directly with providers for their payment rates.

Describe the communication process you would use when educating various types of employees on their benefits: (i) New Employees (ii) Annual Open Enrollment (iii) Communications through the year (iv) Retirees

(i) New Employees HR departments have developed communication tools that incorporate notification and disclosure requirements and present their benefits program with the most advantageous aspects. Common problems that can arise are misunderstandings about actual benefits offered, missing applications, vendor enrollment delays, and employee challenges to mandatory benefits. (ii) Annual Open Enrollment Process Open enrollment communication process requires a major commitment of HR resources. Much effort is devoted to updating and revising personal data reports, printed materials, and Web-application programs. Best practices entail a communication campaign that motivates employees to take the time to understand the plan changes and their impact, get their questions answered, and make informed decisions on next year's choices. (iii) Communications through the year Using the life-events approach, the plan sponsor extracts from each its benefits plans applicable information for a specific event and then in one place the sponsor communicates step by step the option available and action required to make benefit changes as a result of the particular life-event. An employee who has access to a fully interactive HR Web site that uses a life-event approach is an empowered individual. (iv) Communications to Retirees The mode of communication for the retiree group has been traditionally predominantly printed materials. However, the use of Web-based programs is gaining ground with newly retired works and older retirees having greater access to computers and more familiarity with the e-world. Communication to retirees should state clearly what has not changed, be very specific of how a change

Describe elements that contribute to the potential for adverse selection for LTD plans, with respect to: (i) Plan design (ii) Characteristics of employers (iii) Characteristics of employees

(i) Plan Design Rich benefits contribute to adverse selection, such as: Shorter elimination period Low taxability of benefit (contributory) High % of salary/income (e.g., over 60%) Liberal definition of disability (any occ vs. own occ/specialty own occ) High maximum monthly benefit All sources integration is a rich benefit relative to direct integration or carveout (ii) Characteristics of employers Industry: some industries may be more hazardous, and lend themselves to adverse selection Occupation: the more physically demanding a particular occupation is, the more likely a disability will prevent a return to work and thus be a more costly claim Company size: Smaller companies tend to have more adverse selection due to owner/employee's knowledge of own condition and/or that of employees (iii) Characteristics of employees Age mix influences claim costs Income distribution influences claim costs Gender mix influences claim costs

List social determinants which negatively affect health.

(i) Social Determinants include Poverty Health literacy (comp, language cultural diversity ethnicity) Gender bias Racial bias Complex health care needs Unemployment

Explain how the following laws have impacted the payments made by the Centers for Medicare and Medicaid Services (CMS) to Medicare Advantage plans. (i) The Tax Equity and Fiscal Responsibility Act of 1984 (TEFRA) (ii) The Balanced Budget Act of 1997 (BBA) (iii) Medicare Prescription Drug, Improvement and Modernization Act of 2003 (MMA) (iv) Affordable Care Act (ACA)

(i) TEFRA introduced concept of risk contracting with managed care organizations set payment at 95% of FFS costs (ii) Balanced Budget Act of 1997 created Medicare + choices program and reduced payments to private health plans in attempt to address issue that HMOs had been overpaid due to favorable selection added risk adjustment (first PIP-DCG, later CMS-HCCs) (iii) Medicare Prescription Drug, Improvement and Modernization Act of 2013 created Medicare Part D which expands the revenue (and the costs too) increase MA payments rates in certain parts of country, and required payment rates to keep pace with FFS Medicare added bidding approach introduced with 75% of savings kept by plan (iv) Accountable Care Act new blended benchmarks that are included bonus and savings percentages that are impacted by quality ratings (stars) added 85% MLR requirement as of 2014

Outline each of the following acts and comment on how each one impacted the balance of regulatory power over health insurance in the United States. (i) McCarran-Ferguson Act of 1945 (ii) Federal HMO Act of 1973 (iii) Employee Retirement Income Security Act of 1974 (iv) Health Insurance Portability & Accountability Act of 1996

(i) This Act overturned the Supreme Court ruling that had previously given the federal government regulatory authority over interstate insurance transactions. It was significant in that it put virtually all health insurance regulation in the hands of the states. (ii) This Act was created to promote the growth of HMO's. Federally qualified HMO's were exempt from state laws that prevented them from acting as an HMO. This Act shifted regulatory power away from the states and back to the federal government. (iii) This Act imposed reporting and disclosure requirements (ex. Form 5500) on employers who sponsor welfare benefit plans. Other requirements include a plan fiduciary and Summary Plan Description. This Act shifted more regulatory power back to the federal government. (iv) his Act focused on three areas: 1) Insurance Portability and Availability, 2) Health Insurance Fraud and Abuse, and 3) Administrative Simplification. This Act allows federal regulations to govern when no state laws are present.

Describe how the two primary determinants affect the target population.

(ii) Poverty - single largest factor contributing to poor health outcomes, with a direct correlation between poverty level and health outcomes Examples -- poor housing and crowded living conditions, limited access to adequate and nutritious food, personal safety issues, limited access to technology such as telephone and the Internet {which is widely used for dissemination of information), and suboptimal primary and secondary education, all of which may lead to poor health status and outcomes. Health literacy -- the degree to which individuals have the capacity to obtain, process, and understand basic health information and services needed to make appropriate health decisions" or value-based health decisions. Those with limited health literacy: report poorer health status, are less likely to use preventive care, are less likely to comply with treatment regimens, are more likely to use more costly services, are less likely to do self-care, and lack the skills to navigate the health care system

Identify the financial incentives for consumers to buy on the individual exchange. spr 18

-Premium subsidies: available for individuals between 100-400% FPL and amount of subsidy grades down as income increases -Cost sharing reduction subsidies: available for individuals below 250% FPL and offers lower member cost sharing for silver plans

Describe the consumers most likely to seek coverage on the individual exchange.-spr 18

-Previously uninsured (e.g., due to having pre-existing conditions) -Those who would benefit from premium or cost sharing reduction subsidies -Those with unaffordable or no group health coverage

Identify the common adjustments for revenue reporting used to normalize differences between same-size-income statements. fall 2017

-Reinsurance: some include this as revenue as offsets to health care costs. Helpful when including very large health plans in the comparisons that do not often include reinsurance. -Commissions: An expense of health plan except under certain circumstances. Considered an admin expense, and revenues should include such commissions. • Investment income: Sometimes, investment income is included in operating revenue but there are reasons why excluding investment income from revenues is more useful and analytical. • Administrative Services Only Products: for products that have the sponsor absorbing health costs, you may express administrative costs as a percent of "premium equivalents" by adding health benefits to the fee revenue.

Describe elements of the exchanges that can vary at the state level spr 18

-State or Federal Exchange: states can opt to use the FFM or operate their own exchange - Participation: states can actively promote the exchange in an effort to maximize participation -Risk Pools: states can opt to merge the individual and small group markets - Standard Benefit Plans: states designate the benchmark plan for essential health benefits

List four of the regulations from the Patient Protection and Affordable Care Act that will affect employer-sponsored retiree health plans and describe the expected impact of each. fall 15

1) Benefit Design requirements (e.g. no lifetime limits, 100% coverage of preventive care services, no pre-existing condition limitations, etc) Most requirements will increase the costs of benefits provided under the plan 2) Reduction in Medicare Advantage (MA) plan payments over time Likely result in higher premium rate increases, lower MA plan benefits, or both. 3) Loss of tax deductibility of the Retiree Drug Subsidy (RDS) Result in higher taxes (lower earnings) if maintained or likely cause plan sponsors to consider alternatives 4) Excise Tax (Cadillac Tax) on high cost plans Most retiree plans will likely become subject to this tax so raises employer expenses or causes them to consider lower benefits or drop coverage (sending retirees to exchanges)

Identify decisions that states must make with respect to ACA-required exchanges, and explain which three are the most important. Justify your answer.

1) Should the State Establish an HBE? 2) How will the State Govern the HBE? 3) Should the State Require Carrier Participation in the HBE? 4) How will the State Control Antiselection? 5) Should the State Offer a Basic Health Plan? Most Important: 1) If a state chooses not to establish and HBE the federal government is required to set one up for them. A federal program may not meet the needs of the residents of the particular state. This could have political consequences. 2) Antiselection: If the HBE enrolls participants who are less healthy than those who do not participate in the HBE, premium rates within the HBE will eventually increase to a point where they are not competitive. This will eventually lead to the destruction of the HBE. 3) BHP: A state may wish to offer a separate health plan for residents who fall below 200% of FPL. This might provide this class with a richer benefit or lower premiums but it would remove a significant population from the HBE which could diminish the success of the HBE.

List ways to limit anti-selection in the enrollment for GLTCI plans. spr 2015

1. Actively at work on full time basis a. Underwrite any other class of employee and/or dependent 2. Limit enrollment period to a set time each year 3. If want to enroll outside of open enrollment, submit evidence of insurability 4. If not full time actively at work, lengthy health questionnaire a. Get health-related information directly from physician

List and describe the triple aim of U.S. health policy. fall 2014

1. Better care for individuals - This aim centers on quality and access for individuals Several organizations focus on quality: The Agency for Healthcare Research and Quality (AHRQ), National Quality Forum (NQF), NCQA Institute of Medicine's report lists six characteristics of health care performance: o Safe o Effective o Patient-Centered o Timely o Efficient o Equitable Access refers to the ability to purchase insurance; access is improved via the creation of Health Benefit Exchanges in each state 2. Better health for populations - Public health initiatives should focus on: Environmental Factors - sanitized water, pollution, violence, unhealthy living environment, access to fresh/healthy foods Community Disease Prevention - childhood immunization requirements, free or reduced flu shots, free or reduced preventive screenings Lifestyle - obesity leads to chronic diseases, healthy school lunches, antismoking laws Socioeconomic Factors - Higher stress for low income families, implementation of programs like Medicaid Wellness and Disease Management (DM) Solutions - includes employer strategies around wellness and disease prevention 3. Lower per capita cost - Goal is to reduce cost, can be measured by the percentage of the GDP of a country that is represented by health expenditures US stands out among other countries in terms of the substantially higher portion of GDP taken up by health. Healthcare should be affordable for employers and individuals

Explain how the state could achieve the objectives of reducing costs and improving health outcomes for the dual eligible population. spr 2016

1. Better coordination of acute care a. Currently covered primarily by MCR with MCD paying ded and cost sharing. b. This means limited incentive for MCD to better coordinate care since savings will go to MCR. c. Savings come from: i. Coordinated treatment of multiple chronic conditions. ii. Providing care in the most appropriate setting. iii. Reduce/eliminate unnecessary tests/procs. iv. Improved management of ambulatory sensitive admissions which reduces avoidable ER and IP visits. 2. Better coordination of behavioral health a. Currently shared between MCR and MCD b. Savings come from: i. Improved coordination between services covered by MCR vs. those covered only by MCD. ii. Emphasis on community based care. 3. Delay entry into LTC a. Currently, primarily covered by MCD. b. Savings come from: i. Increased use of home/community based services. ii. Discouraging unnecessary IP admissions. iii. Health plan will have the incentive to modify contracting/coordination to reduce IP admissions from the facilities. 4. Decrease PMPM admin costs a. Savings come from: i. Increased enrollment and fixed expense leveraging. ii. Potentially reduced marketing costs. iii. Integrated MCD and MCR appeals processes.

List rate increase restrictions which may apply to RIC's small group block of business. spr 2015

1. Between Class - the rating differential between the lowest and highest class index rates is limited to 20% 2. Within Class - the rating differential within a class of business cannot vary from the index rate by more than 25% 3. Increase Restrictions - rate increases are limited to the sum of the following: a. Percent change in new business rate measured from the first day of the prior rating period to the first day of the new rating period. b. 15% annually for experience c. Adjustments due to case characteristics and changes in coverage 4. Alternative Increase Restrictions - the change in premium for a small employer shall produce a revised premium rate that is no more than: a. The base premium for the small employer multiplied by b. One plus the sum of the risk load applicable to the small employer during the previous rating period and 15%

Describe four key features of CDHPs and explain how they align with the goals of the Chief HR Officer.

1. CDHPs may feature an individual health account (e.g., HSA) that may be carried over from year to year to pay for health expenses not covered by the plan. a. These accounts promote consumerism by encouraging plan members to budget and save for health care expenses. 2. CDHPs may provide information sources and tools to educate members on health issues or to help members find lower cost or higher quality providers. a. These tools promote consumerism by enabling plan members to compare providers based on price and effectiveness. 3. The plan typically is introduced through a communications program that enhances employee understanding of the plan and encourages consumerism and health behaviors. a. Communications program encourages consumerism and health behaviors. 4. CDHPs may offer access to a health coach or consultant to help plan participants obtain health information, answer questions about health issues, or provide guidance on using providers. a. These services may decrease utilization by providing health advice without requiring an unnecessary office visit. 5. In cases of serious chronic conditions or illnesses, a proactive medical professional may contact plan members to coordinate care among the member and providers. a. These services may decrease utilization, as care coordination can eliminate unnecessary office visits, tests, and diagnostic procedures.

List and describe different formulary options that are available for prescription drug plans.

1. Closed formulary only covers drugs on the formulary must have process to allow for coverage of non-formulary drugs based on medical necessity 2. Open formulary Typically covers all drugs Usually affects the cost of the drug only based on copays or coinsurance 3. Tiered Formulary More than one cost sharing tier Most are open, but can be closed

Describe arguments for and against cost sharing for group medical insurance. fall 2017

1. Control of utilization a. Pro - Places cost concerns in hands of insured so services are used less frequently b. Con - Reduced utilization will result in decreased health or delayed increased costs as health deteriorates. This could lead to larger health expenditures later. 2. Control of costs a. Pro - Provides more affordable coverage b. Con - Federal tax policy relating to the taxability of healthcare costs encourages maximizing premiums and minimizing cost sharing 3. Control of risks to insurer a. Pro - Results in a more insurable risk as more catastrophic type benefits are covered. b. Con - Creates potential plan design and administrative burdens.

List and describe different prescription drug coverage types that are typically available.

1. Drug Card Program Not integrated with medical benefits Self-contained, often administered by a PBM Benefits obtained through the use of a card Can have broad or narrow networks 2. Major Medical Integrated Integrated with medical benefits - under same deductible and MOOP Common with HDHPs

List common attributes that are central to private exchanges. fall 2017

1. Employee choice 2. Employer subsidies 3. Ancillary product offering 4. Online enrollment and decision-making tools 5. Benefit administration

List the notable exceptions to Social Security coverage for U.S. workers. fall 2016

1. Federal employees hired before 1984 2. State and local government employees covered by retirement plans similar to Social Security 3. Those with religious objections to government programs 4. Railroad employees 5. Certain agricultural (farm) and domestic workers

Describe the pros and cons of four forms of provider contracting (also referred to as provider cost sharing) other than the current arrangement.

1. Fee schedules and maximums Pro: simple to implement Con: provides no incentives to reduce utilization 2. Per diem reimbursements Pro: Hospital takes on some risk of the plan Con: provides no incentive to reduce lengths of hospital stay 3. Bonus pools based on utilization Pro: provides incentive for a provider to control utilization Con: raises ethical concerns about the potential for providers to withhold medical care to attain bonus levels. Capitation Pro: virtually all risk passed to provider Con: raises ethical concerns about withholding medical care (similar to Bonus Pool arrangement)

Outline and describe four common assumptions used for valuing both pension and retiree group benefits. fall 2014

1. Inflation Base for all other economic assumptions General inflation over last 50yrs averaged 3.0 to 3.5 percent 2. Discount Rate Used to discount future benefit payments in PV calculation Accounting discount rates typically 2 to 4 percentage points above inflation 3. Salary Increase Used to project benefits at retirement for salary based pension plans Pension and other Benefit Plans should use consistent salary assumption 4. Termination Individuals who terminate employment before retirement are usually not eligible for post-retirement benefits. This reduces the employer's liability. Termination rates are typically higher for less-tenured employees who may not care about post-retirement benefits.

Describe assumptions that impact retiree group benefits. spr 2016

1. Inflation 2. Investment rate of return 3. Discount Rate 4. Salary Increase 5. Termination / turnover 6. Mortality 7. Disability 8. Retirement Incidence 9. current retiree plan costs 10. current retiree contributions 11. Health care cost trend rate 12. Medicare Part B premium increase 13. PPACA Excise Tax (2nd Ed Only) 14. Retiree contribution increase 15. Plan participation 16. Spouse plan continuation after death of retiree 17. Dependent children plan termination 18. Health plan options (if not considered in plan costs above)

Identify assumptions not discussed in part (a) which impact retiree group benefit plan valuations. fall 2014

1. Mortality 2. Disability 3. Retirement rate 4. Current retiree plan costs 5. Current retiree contributions 6. Retiree contribution increase 7. Spouse benefits after death of retiree 8. Projected plan costs (from current costs)

Describe what risk SFO needs to consider when accounting for a possible benefit from Social Security Disability Insurance, and how SFO can mitigate this risk. fall 2016

1. Overinsurance - Greater total income after disability (Disability plus SSDI) than before), causing no incentives for recovery 2. Offsets designed to maintain a targeted replacement ratio 3. Base policies at face mounts that assume the insured will receive payments under Social Security 4. Optional benefits can be added to the base policy with additional payments that pay if a claimant is considered disabled by the insurer but not by Social Security 5. American Beauty could help the insured pursue appeals of the Social Security decision if the claimant is initially denied for OASDI benefits.

Outline key elements required in the actuarial rate filing memorandum based on ASOP 8.

1. Purpose/Scope of the filing 2. Assumptions such as premium levels, covered lives, trends in morbidity, mortality and lapses, non-benefit expenses, taxes, and profit. 3. Reasonableness of Assumptions 4. Rating Calculations 5. Rating Factors 6. Use of Business Plans to Project Future Results 7. Use of Past Experience to Project Future Results 8. New Plans or Benefits 9. Projection of Future Capital and Surplus 10. Applicable Laws 11. Regulatory Benchmark 12. Reliance on Data supplied by others (ASOP 23) 13. Communication and Disclosures (ASOP 41)

List and explain ACA provisions established to mitigate pricing risks that Buy My Insurance is facing with this new product.

1. Risk Adjustment - Permanent Program beginning in 2014. Used to redistribute total payments across health plans to account for the relative risk of plan participants. Payments will flow from plans that disproportionately enroll low-risk individuals to those that enroll a greater percentage of high-risk individuals. Helps ensure that health plans are appropriately compensated for the risks they enroll but it is unlikely to compensate health plans perfectly for their risk mix differences. Helps make payments to competing plans more equitable and can reduce the incentives for competing plans to avoid individuals with higher-thanaverage health care needs. It can reduce the effects of adverse selection between plans because risk adjustment transfers funds between plans based on the relative risk of their enrollees. 2. Reinsurance: limit insurers' downside risk (cover large-claimants) Mitigate financial loss risk and further reduce the incentives for competing plans to avoid individuals with expected high claims. Goal is to stabilize premiums in the individual market during the first three years, 2014 through 2016, that health insurance exchanges are operational. This is a supplement program to the risk adjustment since typically risk adjustment is not able to compensate plans fully for unusually high claims. 3. Risk Corridors: Provide a government subsidy if insurer losses exceed a certain threshold while on the other hand, limit an insurer's gain - plans would pay the government if their gains exceed a certain threshold. Mitigate risk that insurers face when their data on health spending for potential enrollees are limited. ACA contains symmetric risk corridors: come within +/- 3 percent of the target, the plan bears the loss or keeps the gains. Temporary for the first three years, 2014 through 2106, until data becomes available on the health spending patterns of the newly insured. 4. Encouraging Participation in the HBE Individual Mandate: The ACA requires that all individuals, with a few exceptions, have health insurance coverage or they must pay a financial penalty. o Maximize the number of participating carriers and consumers through the individual mandate to enroll a broad cross section of risks to avoid the higher average premiums associated with adverse selection. o Without the penalty, there is more exposure to antiselection as less healthy people choose to purchase insurance through HBEs and more healthy people may choose to not purchase coverage at all. Premium subsidies and cost sharing subsidies available to lower income individuals who enroll in HBE plans. Tax credits available to small businesses that participate in the HBE. 5. Plan design and pricing rules that will mitigate antiselection because they apply to plans both inside and outside the HBE. Must cover at least the essential health benefits. Cannot offer plans more lean then bronze or catastrophic inside or outside the HBE. Prohibitions on lifetime and annual benefit limits, and on pre-existing condition exclusions. Requirement to use adjusted community rate. Offer the same premium rates in or out of the HBE. 6. Medical Loss Ratio: Share of premiums that a health insurer spends on medical benefits vs. the share spend on administration costs Requires >= 80% for individual market. Mitigate the risk of insurers overpricing.

Explain how ASOP 23 applies to this situation.

1. Selection of data consider the scope of the assignment and the intended use of the analysis being performed in order to determine the nature of the data needed and the number of alternative data sets or data sources 2. Reliance on Data Supplied by Others: accuracy and comprehensiveness of data supplied by others are the other's responsibility subject to the guidance in section 3.5 reliance on data from others should be disclosed 3. Reliance on Other Information Relevant to the Use of Data may rely on such information supplied by another, unless apparent to the actuary during the time of the assignment that the information contains material errors or is otherwise unreliable 4. Review of Data a. Data Definitions Make reasonable effort to define of each element in the studies b. Identify Questionable Data Values data values that are materially questionable or relationships materially inconsistent questionable or inconsistent data values: if possible material effect on the analysis, the actuary should consider further steps, when practical, to improve the quality of the data. c. Review of Prior Data If similar work has been previously recently, review the current data for consistency with the data used in the prior analysis. If no prior data, should consider requesting the prior data. If no review, it should be disclosed. 5. Limitation of the Actuary's Responsibility: actuary does not have to : Determine if the data from others is falsified or intentionally misleading Develop add'l data solely for the purpose of searching for questionable or inconsistent data. Audit the data 6. Use of Data: professional judgment as to if the data is : sufficient quality to perform the analysis; require enhancement before the analysis or needs to be adjusted for judgmental or assumptions to perform the analysis. If data with adjustments may cause material may cause material bias or uncertainty, it may be disclosed contains material defects, the actuary should determine nature of extent and checking before doing the analysis. Is so inadequate, actuary should obtain other data or decline to complete the analysis. 7. Documentation: comply with the requirements of ASOP No. 41, Actuarial Communications, process to evaluate the data, including the review or consideration of prior data description of any material defects description of any adjustments or modifications made to the data, including their rationale other documentation necessary to comply

Describe the pricing risks and the implications of these risks when considering offering an individual plan on the exchange.

1. What it is: Insurers generally lack detailed data and experience regarding health spending for the uninsured. Implication: Under or over pricing premiums 2. What it is: Understating premiums (price too low) Implication: Could results in larges losses to private insurers, threatening plan solvency. Implication: Adverse selection - sicker members join the plan 3. What it is: Overstating premiums (price too high) Implication: Could results in large gains to the insurers and/or reduce participation in the plan. Lower membership might not be enough to offset fixed administration costs. Implication: Adverse selection - healthier members leave the plan 4. Both under and over pricing can lead to adverse selection Adverse Selection - where individuals with higher expected medical needs are more likely to purchase coverage, thus skewing insurance risk pools.

Describe the types of GLTCI plans that are available for purchase. spr 2015

1.) Service Reimbursement (reimburse after benefit trigger and waiting period are satisfied) 2.) Service Indemnity model - fixed benefit payment made for any day or week that services are received once benefit trigger and waiting period are satisfied. 3.) Disability or cash model: fixed benefit payment made for any day or week that benefit trigger and waiting period are satisfied

Calculate Quantum Health Insurance Company's Affordable Care Act (ACA) 2014 MLR prior to the credibility adjustment. Assume Quantum had $300,000 of quality improvement and fraud reduction expenses. Show your work. fall 2017

ACA MLR: (Health care claims + Quality Imp Expenses) / (Premiums - Taxes, Licensing Fees, and Regulatory Fees) • Individual ACA MLR (#'s in 1,000's): o (40,872 + 300 * % of Premium=56%) / (47,823 - (1,703+2,568) * 56%) o = 90.3% • Small Group ACA MLR (#'s in 1,000's): o (30,983 + 300 * % of Premium=44%) / (37,305 - (4,271) * 44%) o = 87.8%

Describe the application of ASOP 23 to the rate development. of small group PPO products

ASOP 23 is about data quality. When selecting data for the rate development the actuary should: Consider the data elements needed Decide if the data is appropriate for the analysis Review reasonableness, comprehensiveness, and consistency of the data Understand material limitations of the data Consider alternative data sources - cost and benefits of the data, along with feasibility of obtaining the data in a reasonable time frame Describe sampling methods, if used to collect the data Disclose reliance on data provided by others Review the data for any defects

Describe the characteristics of the ACA Medicaid expansion population fall 2016

Adults under age 65, and Income < 138% of FPL, and Not Pregnant, and Not covered by Medicare

Identify advantages and disadvantages of implementing a Private Exchange from the point of view of Yates Inc. spr 2016

Advantages Increased employee choice Cost-savings potential from increased competition across carriers and best-inclass carrier pricing in a multi-carrier model Increased consumerism from members buying-down benefits as a result of a transparent defined-contribution approach Robust online decision-support tools and customer service Benefits administration simplification Shift financial and regulatory risks (fully insured model) Cost predictability under a fully insured model Improved cost transparency Disadvantages Additional expenses for exchange operator financing and risk assumed by carriers in a fully insured model Less control/flexibility over plan design, clinical management, member outreach, etc. Need to increase defined-contribution amount over time, otherwise plan cost could become overly burdensome to beneficiaries Other member concerns such as loss of plan-sponsor support, less generous benefits and general fear of change

List the advantages of cafeteria plans to employees and employers. spr 2016

Advantages to Employees Can pay for their share of benefits on a tax favored basis Specifically exempt from Federal Income Tax, FICA, FUTA Increases employee choice and flexibility Advantages to Employers Payroll tax savings - no FICA or FUTA Deferral amounts not considered wages for purposes of workers comp premium and other expenses Helps employees conceptualize overall value of benefits Can help contain health care costs by reducing waste and duplication

List common rating characteristics and group specific adjustments used in determining and using manual rates for group insurance.

Age Gender (often restricted in many products and states) Health status (risk adjustment scores) Rating tiers/Family Tier Geographic factors Industry codes Group Size Length of premium period Marketing, competitive, and regulatory issues Value of benefits ("Actuarial value") Rating Characteristics Override/Additional Points Group specific adjustments New business discounts Past or estimated claims experience

Describe alternatives to an employer-funded PDP including advantages and disadvantages of each. spr 2016

Alternatives could include: Offer a Medicare Advantage plan that includes both prescription drug and health coverage o Advantages Cost savings since third party can be more efficient Less administrative burden o Disadvantages Third party administrative fee could be high Possible disruption to existing network 800 Series EGWP is an option where employers can contract with CMS using a third-party Part D sponsor o Advantages Cost savings and tax savings No regulatory burden and risk avoidance Drop coverage altogether o Advantages No cost, risk, regulatory burden or administrative overhead o Disadvantages Employees may not appreciate this option

Define the own occupation definition of disability. fall 14

An insurance policy that covers individuals who become disabled and are unable to perform the duties that they have been trained to perform.

Explain why dental insurance is typically only offered in the group market. spr 2017

Anti-selection: Individuals are aware of their dental needs and will wait to obtain insurance until they need services. This is less of an issue in the group market. Tax advantage: Group dental products are paid for with pre-tax dollars unlike individual.

Describe challenges small companies face when offering group medical insurance.

Because they are most often fully insured, they are subject to state-mandated plan design options Because the employees of most small companies are in a relatively small geographic area, the plans must be designed using options available in that area. Small companies in general, and start-up companies in particular, may have to provide additional documentation not required for larger companies in order to put a new plan in place so that insurance carriers can verify the existence of an actual company, and not just banding together of people solely for the purpose of obtaining insurance. Most states do not allow companies and organizations to join forces to form larger purchasing pools in order to get group discounts.

Describe advantages of cash flow statements relative to income statements and balance sheets. spr 18

CF includes all cash flows during the reporting period, and only those cash flows. IS and BS include accrual accounting items. CF can be easier to understand due to only showing cash flows. CF can be more reliable because accrual estimates are more easily manipulated. CF can provide insight into cash use and firm solvency.

Outline the different approaches available to integrate Medicaid with Medicare.

Capitated Model Three way contract between state, CMS and health plan. Health plan gets prospective capitation payments based on anticipated savings from the integrated plan Health plan is responsible for fully integrating care CMS and states get to share in savings up front. Managed Fee for Service State is responsible for integrating care States get to share in savings on a retrospective basis with CMS Medicare Wrap Allows for MCR to assume financial responsibility for certain MCD plans Improves coordination and reduces administrative burdens

Define the components of cash flow from operating activities. spr 18

Cash flow from operations = Net income + noncash items (depreciation, amortization, etc.) +/- change in current assets and liabilities

List the major eligibility groups under Medicaid. fall 2016

Category 1. Children and pregnant Women Category 2. Non-aged, non-disabled and non-pregnant adults who have incomes less than the Federal Poverty Level Category 3. Those aged 65 and over and people with disabilities.

Describe key pricing considerations for group long term care which aren't considered in other group pricing.

Certification for initial rate filings o Rate schedule is sufficient to cover anticipated cost under moderately adverse experience o Statement that policy design and coverage have been taken into consideration o Statement that underwriting and claims adjudication have been reviewed and taken into consideration o A complete description of basis for contract reserves Long-term care policies are typically in effect for much longer than other group coverages, with longer payment patterns There is much lower participation in GLTC than other products. 5-10% is considered high participation. Claims costs often have a very steep slope, requiring pricing projections that last a long time LTC is a young industry with long payment periods, so emerging experience is often not fully credible Morbidity shifts over time, including morbidity improvement, have been more pronounced in LTC products GLTC often has higher start-up expenses as compared to other group coverages

You are an actuary for Keene Health Consulting. Your current assignment is to assist two insurers, DerbyHealth and Churchill Insurance Company, with understanding and implementing the Minimum Loss Ratio (MLR) requirements of the Affordable Care Act (ACA) in the individual and small employer markets. (a) (2 points) Summarize the changes created by the ACA and the associated pricing challenges in these markets.

Change #1: Expands private insurance coverage by Requiring guaranteed issue Mandating coverage Making premium subsidies available to lower-income people Pricing Challenges: Predicting who will enter the exchange for various reasons: flux of previously uninsured, young/healthy may elect to pay the penalty, % of employers electing to stop providing coverage, etc. Change #2: Requires new benefit designs to be offered Including four "metal levels" corresponding to different levels of actuarial value for a benchmark package of essential health benefits Pricing Challenges: Benchmark plans are left to the states so there is uncertainty as to what the benefits will be; the potential for "rate shock" as the benefits will be richer for many as a result. Change #3: Eliminates premium differentials by health status and gender and restricts age variation to a 3-to-1 ratio. Pricing Challenges: Adverse selection may result when younger people see rates go up and older find coverage more affordable; Rules vary by state so selection effects are complicated. Change #4: Contains three risk mitigation strategies Temporary reinsurance Risk corridors Risk adjustment program Pricing Challenges: Full design parameters of these programs are unknown; limited data for actuaries to use to model expected impact. Change #5: Adherance to Minimum Loss Ratio >80% SG and Individual Pricing Challenges: Maintain admin and profitability while maintaining MLR. Additional administrative costs related to tracking MLR and paying rebates as necessary.

Compare the core attributes of private exchanges and public exchanges established under the Affordable Care Act (ACA). fall 2017

Chart in book

Describe the three dental classes listed in the table above and identify possible causes of the discrepancy between the experience and benchmark. fall 2017

Class I is preventive and diagnostic services, such as routine cleaning, x-rays, etc. Class II is basic services, such as periodontics, endodontics, fillings, etc. Class III is major procedures, such as crowns, bridges, dentures, etc. Class I • Significantly different demographics • Experience group more educated about benefits Class II • Higher class I utilization reducing the need for class II procedures • Possible benefit design differences Class III • Inadequate provider network for dentists performing major procedures • Insufficient waiting period or pent up demand for new enrollees • Significantly different demographics • Lack of utilization management

List criteria to consider when developing a credibility standard and characteristics you should consider when selecting relevant experience.spr 18

Considerations • Does the procedure produce reasonable results? • Is the procedure appropriate for the intended purpose? • Is the procedure practical to implement • Does the procedure satisfy applicable laws? Characteristics • Homogeneity • Demographics • Coverages • Frequency • Severity • Other risk characteristics the actuary expects to be similar to the subject material

Define eligibility requirements for ACA subsidies for individuals and explain how each is intended to lower individual purchasers' costs. spr 2016

Cost Sharing Subsidy Available only for individuals with income below 250% of Federal Poverty Level (FPL) who must select a Silver metal plan from the exchange The benefits are adjusted to gross up Actuarial Value (AV) from 70% to 73% if 200%-250% of FPL, to 87% AV if 150%-200% of FPL, and to 94% AV if 100%-150% of FPL Premium rate for these eligible individuals remains at 70% AV level Federal government subsidizes the difference between 70% and the grossedup AV This helps lower an individual's out-of-pocket expenses such as deductibles, copays, and coinsurance. There are three levels of cost sharing reduction depending on the household income level (up to 400% FPL) There is benefit design flexibility to achieve the right cost share level, a minimum requirement is adjusting the maximum out-of-pocket limit to $2,250 for individuals at 100-200% FPL, and to $5,200 for individuals at 200-250% FPL All cost sharing is zero for Native Americans below 300% FPL for all metal plans Premium subsidies Available for qualified individuals and families with incomes between 100- 400% of FPL for qualified coverage purchased through the Exchanges lesser of premiums paid and the excess of a benchmark over a percentage of household income the subsidy goes down as income increases until it reaches zero at 400% FPL Premium credits are tied to the second-lowest silver plan in the individual's geographic area - known as the benchmark plan

Critique the manual rate methodology suggested and recommend a preferred approach. Justify your response. of using paid claims from another different department and using historical average cost per service to develop claim cost trends fall 15

Critique: Paid claims were not completed which will understate actual costs. Did not adjust for difference in HMO and PPO data, such as provider network, utilization management, demographics, and benefits. A full calendar year was not used, which introduces seasonality issues and deductible/out-of-pocket maximum accumulator issues. Individual experience is not necessarily representative of small group. No demographic adjustments were made for assumed changes in the population. Trend only included unit cost changes, not utilization changes. Recommendation: Use full year Jan 2014 - Dec 2014 Use small group Use incurred claims Use unit cost and utilization trends Can use HMO and PPO, but adjust for differences between the two Apply demographic adjustments to reflect expected population

Describe ACA provisions that help control anti-selection against the Exchange.

Describe features that encourage as much enrollment on the exchange as possible. Individual mandate requires individuals to purchase healthcare insurance or pay a penalty. Premium subsidies, cost sharing subsidies, tax credits for lower income individuals make insurance more affordable and those are only available on the exchange. Describe features that level the playing field on and off the exchange: Must cover essential health benefits both on and off Must be one of the metal plans or a catastrophic plan Single risk pool on and off exchange Pre-existing exclusions, no lifetime/annual maximums, rating restrictions same on and off exchange

Describe the rationale for developing a Commercial Risk Adjustment model rather than applying the Medicare Advantage Risk Adjustment model. fall 15

Differences related to prediction year and population are the key reasons using a separate model for Commercial Risk Adjustment is appropriate. Rationale detailing each of these key points is described below: Prediction year Medicare HCC risk adjustment model uses base year diagnoses and demographic information to predict the next year's spending Commercial risk adjustment model uses current year diagnoses and demographics to predict current year spending Population Medicare based on aged (>65) and disabled (<65) populations Medicare population has low volume of certain conditions more prevalent in commercial populations (e.g., pregnancy and neonatal complications)

Outline coverage offerings which are subject to ERISA.

ERISA governs any employee benefit plans of an employer organization including: Medical / Health Pension / 401k Vacation benefits Disability

Define each of the following LTD benefit provisions and assess how each incents a change in claimants' behavior: (i) Elimination period (ii) Benefit period (iii) Benefit amounts (iv) Offsets for other sources of income (v) Pre-existing condition exclusion

Elimination Period: A period of time that covered employees must be disabled before they are eligible to collect disability income benefits...often 3-6 months. This reduces the costs of the program by eliminating less severe claims (ii) Benefit Period: An insurer will establish a fixed time period over which benefits are paid. Typically 12 or 24 months, or to age 65. A shorter benefit period just eliminates claims cost, but doesn't actually alter behavior. (iii) Benefit Amounts: Monthly benefits are typically equal to a defined percentage of pre-disability earnings. A lower percentage of income replacement will incent more people to return to work faster. (iv) Offsets for other sources of income: The LTD benefit is usually offset by income from other sources. This ensures that the sum of disability income does not exceed pre-disability earnings. Examples of offsets include Social Security, worker's compensation, or part-time work. Depending on the offset method, insureds may be dis-incentivized to seek part time work. (v) Pre-existing condition exclusion: The plan would not pay benefits for conditions that already exist. For instance, a plan may not pay for disabilities during the first 12 months of the policy for conditions which manifested themselves within 3 to 12 months prior to the issuance of the policy. This reduces anti-selection in the plan.

Describe the advantages of voluntary benefits. fall 14

Employer Perspective i. Can offer more benefits without significant added cost to employer ii. Can supplement or replace employer sponsored benefits that have been reduced or eliminated iii. Can act as a recruitment or retention tool iv. Employer could only pay for administrative costs v. Can use as incentive by providing benefits to employees that meet performace targets vi. Can offer some benefits to a specific subset of employees (e.g. vision) Employee Perspective i. Benefits are generally portable ii. Benefits are generally cheaper under group plans vs individual plans iii. Benefits may have tax advantages

Evaluate the relative financial positions of Royale Life and Quantum Health using same-size-income statements. Show your work. fall 2017

Evaluation: Royale had more total revenue than Quantum Quantum had a lower admin expense ratio than Royale Quantum had a lower total expense ratio than Royale Quantum had a greater operating profit ratio than Royale Quantum had a greater profit level than Royale

Critique each of the provisions in part (a) with respect to the elements of the Triple Aim. spr 18

Expansion of Medicaid eligibility: Ensures access to health care, therefore ensuring better care for individuals. Targets an entire population of people who tend to be less healthy, therefore promoting a healthier population. Does not lower per capita costs. • Medicaid PCP payment increases: This increases per capita costs directly but promotes better population health by making more doctors willing to accept Medicaid patients. • New fraud and abuse screening: This lowers per capita costs, by targeting dollars that should not be spent on healthcare. It could also promote better health for populations if it helps to deter abuse of medical treatments. • Ensuring Medicare's sustainability: Making sure that the program remains solvent and able to provide coverage to eligible participants for a long time; better care as ensures access. This helps both individuals and the population. Also helps to lower per capita costs. • Coordination of care for dual eligibles: Coordinate care so that better care is provided without any waste of extra services. This ensures better care for individuals and lowers per capita costs. • Establishing a national strategy for healthcare improvement: Directly promotes better care for the individual and the population. Does not address lower per capita costs. • Linking Medicare Payments to Quality: Promotes better quality of healthcare provided, thereby promoting better care for individuals and lower per capita costs.

Describe the principal functions of a Health Benefit Exchange (HBE) and the general features of benefit plans that can be offered. spr 2016

Facilitate the purchasing of insurance by allowing consumers to find, compare, and purchase insurance from multiple companies Serve as a financial clearing house for premiums, subsidies for low income participants, and employer contributions, directing funds to the appropriate parties Facilitate improvements in cost and quality, through the transparency and comparability of competing products, prices, and quality ratings General features of benefit plans that can be offered: Benefit plan must be "qualified" to sold on the Exchange and provide Essential benefits - supposed to those offered by a typical comprehensive employer insurance plan States have options they can use to define the benchmark plan Metal levels - defined by the actuarial plan value of their benefits Bronze (60% of APV), silver (70% of APV), gold (80% of APV), platinum (90% of APV), catastrophic

Compare and contrast federal and state opportunities to mitigate antiselection on health benefit exchanges.

Federal - focuses on max enrollment and consistency between plans: 1. Individual Mandate - requiring all people to be covered 2. Premium Subsidies / Cost Sharing for low income individuals helps increase the size of the HBE 3. Establishing plan and pricing rules for plans inside and outside the HBE 4. Risk Adjustment - plans with healthier participants subsidize plans with less healthy participants State - focuses on carrier participation, benefit offerings, and pricing: 1. Focus on maximizing carrier participation in the HBE 2. Can prohibit a carrier from re-entering the HBE for a period of time if the carrier drops out of the HBE 3. Restrict benefit plans offered outside the HBE 4. Ensure consistency of rates inside and outside the HBE

Describe the types of waivers and approval processes for alternative Medicaid programs. fall 15

Federal Waiver Authority - Various authorities have the ability to allow states flexibility in operating Medicaid programs Section 1115 - Research and Demonstration projects o Provides Health and Human Services (HHS) broad authority to approve projects that test policy innovations likely to further the objectives of Medicaid o Application submitted by state Medicaid agency to CMS o Work collaboratively with CMS to develop program o Subject to CMS, OMB, HHS approval o No specific timeframe requirements for approval Section 1915(b) - Managed Care / Freedom of Choice Waivers o Provides HHS authority to grant waivers to allow states to implement managed care delivery systems or otherwise limit provider choice o Must demonstrate program is cost effective and show Federal expenditures are not greater under the waiver. Section 1915(c ) - Home and Community Based Services Waiver o Provides HHS authority to allow long term care services to be delivered in a community setting o Alternative for providing comprehensive long term care in institutional settings o Can be targeted (e.g. seniors, physical disabilities, HIV/AIDS) o Must be "cost neutral", or costs cannot be greater than if an individual had resided in an institution o State Medicaid agency submits application to CMS o Program requirements: Demonstrate waiver services to targeted population are no more costly than cost of services in an institution Ensure measures taken to protect health and welfare of consumers Provide adequate and reasonable provider standards Ensure that services are provided in accordance to a plan of care

Describe two sources of financial or moral risks to the U.S. insurance industry associated with group medical insurance. fall 2017

Federal income tax treatment (financial and/or moral risk) - US federal income taxes are favorable to medical insurance or benefits in that benefits paid by employer do not generate taxable income to employee. As a result, dollars paid by employer are of greater value to employee than dollars paid directly to employee because they would be taxable. This creates a risk because services are now subject to a level of anti-selection that may cause the system to fail. Preventive services (financial and/or moral risk) - legislative requirements that certain preventative services be covered with no cost-sharing creates a moral and/or financial risk because preventative services fail all the conditions of an insurable event. They are not random or catastrophic and are within the control of the insured. Lack of cost sharing and provider restrictions - indemnity benefits, which involve limited or no cost sharing or provider restrictions are a source of financial and/or moral risk of overspending on the part of the insured.

7d-7g fall 2013

For group basic and group supplemental term life: (i) Outline provisions common to both Eligibility Full-time working minimum number of hours Actively at work Waiting period from hire date Continuity of coverage Ability for insured to covert the group term insurance coverage to an individual life insurance policy upon termination of employment Disability Waiver of premium for disability Total and permanent disability Extended death benefit Benefit payment provisions Accelerated benefits Beneficiary Minimum participation

For group basic and group supplemental term life: (i) Outline provisions common to both (ii) Compare the tax treatment applicable to Lovestar and its employees

For group basic and group supplemental term life: (i) Outline provisions common to both Eligibility Full-time working minimum number of hours Actively at work Waiting period from hire date Continuity of coverage Ability for insured to covert the group term insurance coverage to an individual life insurance policy upon termination of employment Disability Waiver of premium for disability Total and permanent disability Extended death benefit Benefit payment provisions Accelerated benefits Beneficiary Minimum participation (ii) Compare the tax treatment applicable to Lovestar and its employees First $50k of ER paid group term coverage is tax free Amounts above $50k results in imputed income for EE Premiums paid by employer are generally deductible on employers income tax return Death benefits payable are excludable from a beneficiary's gross income Group supplemental Generally EE pay all avoiding imputed income (if premium step rates are all at or below the Table I premium step rates or all at or above Table I premium step rates) Advantageous for basic and supplemental group life to be treated as separate plans

You are given the following information for a male, age 35 with a monthly benefit of $1 and a 90 day waiting period: • Reserve at time 0 is $50 • Incidence rate is 0.004 (c) (1 point) Calculate the monthly premium for $5,000 of monthly benefit based on the above information. Show your work. fall 2013

Given information: Reserve at time 0 is $50 Incidence rate is 0.004 Monthly Premium = $5,000 * Base Rate35, m, 90, 65 / 12 = $5,000 * I35,m,90 * Reserve35, m, 90, 0 / 12 = $5,000 * 0.0040 * $50 / 12 = $83.33

List common underwriting and rating parameters for group dental coverage, and describe considerations in using each. fall 2014

Group Size: Smaller groups are typically rated higher, and more credibility is given to experience with larger groups Eligible individuals: Some plans cover spouses and dependents, while others are employees only Participation: Plans typically include minimum participation requirements, anti-selection increases as participation declines Employer Contributions: Non-voluntary plans require a minimum contribution level of 50%, plans that cover 100% of premiums are typically given a rate discount Demographics: Groups with more females typically receive rate loads. Also important is geographic area and industry. Unions typically have higher utilization. Waiting and Deferral Periods: To limit anti-selection, there is typically a waiting period or limited coverage of certain

Discuss how a company can "grow broke" and related actions to avoid this peril.

Growing broke can occur if a company's growth outpaces their sustainable growth rate. If growth outpaces the sustainable growth rate, actions need to be taken to raise the sustainable growth rate by improving the profit margin, asset turnover, or financial leverage. Alternate solution - other acceptable actions: Sell new equity Increase financial leverage Reduce the dividend payout Prune away marginal activities Outsource some or all of production Increase prices Merge with a "cash cow:

Identify consumer protection features added by ACA.

Guarantee issue/renewability No rating on health status Dependent coverage to 26 No rescissions No pre-existing conditions for kids beginning in 2010 or 2011 and for adults beginning in 2014 Preventive care at 0% cost share No annual maximums/no lifetime maximum Essential health benefits package OOP Limits Capped at HSA limits Waiting periods cannot be more than 90 days Standardized disclosure documentations Rating restrictions MLR requirements Premium rate increase reviews Cost sharing subsidies

Describe the characteristics of HRAs and HSAs.

HRA's Set up by ER EE cannot contribute Does not require use of HDHP No federal income tax limits, ER may set limits Carryover at discretion of ER Not portable Used for qualified medical expenses and health insurance premiums EEs are not taxed on distributions HSA's Must be used with an HDHP ER and EE can contribute Limits on EE contributions Carryover each year Portable Not used for insurance premiums except in special circumstances EE contributions tax deductible Earns interest, not taxable Distributions not taxed if used for qualified medical expenses, all other subject to 20% penalty and taxed

Define the key components of CDHP.

High Deductible Health Plan Paired with a savings account (HRA or HSA) Tools to assist members with finding high quality providers at the lowest cost Communications program that encourages consumerism and healthy behaviors Health coach or consultant provided to assist members as needed Health professional to assist with management of chronic conditions

A colleague comments to you that your initial analysis of Suspenders' eligibility for the retiree drug subsidy may be flawed because it doesn't include the impact of trend. Respond to your colleague's criticism, and list any key items omitted from your initial analysis.

I agree with my colleague. Due to deductible leveraging, trend could have an impact of on the results, as the deductibles and coverage limits are different between the employer plan and the Part D plan. Key items omitted from initial analysis: Available experience data Other data sources Expected cost trends Expected rebates Formularies The cost of drugs not covered by Part D Anticipated population characteristics

Recommend a new provider contracting strategy that will incentivize Hospital Moraine to reduce length of stay. Justify your response.

I recommend using a capitated arrangement with Hospital Moraine to reduce length of stay. Since the hospital's income per patient is fixed under a capitated arrangement, there is no incentive to keep patients longer than necessary, or to over-utilize services during their stay. Efficiency of care is encouraged in order to reduce expenses and maximize profit. XYZ should consider that capitated arrangements, if not designed and implemented appropriately, can incentivize hospitals to withhold care from patients in order to maximize their profits. In order to address this concern, consider implementing quality standards that must be met for Hospital Moraine's contract to remain in force.

Valley Insurance Company is going to launch a new group pharmacy product offered to retirees aged 65 and older. Recommend a credibility threshold (N) for this new product. Justify your response.

I would recommend N=1,500. This is the threshold CMS uses for Part D coverage. In addition Rx claims have a much higher frequency (especially for retirees) and less variability in their severity than transplant claims. For insurance product that covers population age 65+, the underlying demographics are more homogeneous.

Explain the advantages of a health savings account over other forms of individual accounts in the United States. spr 2017

In the United States, an HSA has the following advantages: • HSA allows contributions from both employee (EE) and employer (ER) o By contrast, HRA only allows ER contributions, and FSA usually is only EE contributions via salary reduction • Unused HSA funds carry over from year to year indefinitely o By contrast, FSAs are "use it or lose it" each year • HSA funds can be used for more than just qualified medical expenses, though a 20% penalty tax applies • HSA funds can be invested and grow tax free • HSA funds are portable to EE if they change jobs

Explain how enrollees in the individual market may be impacted by the ACA expansion of Medicaid in the state.

Individual members in the 100% FPL to 138% FPL will be now be eligible for Medicaid and no longer eligible for advanced premium tax credits The risk pool of those in the individual market will be impacted due to a shift in the underlying risk. As for the members who will now be enrolled in Medicaid, their financial barriers to access care will be lowered due to a reduction in cost sharing in comparison to the Individual market.

Describe each type of SNP and the circumstances under which each can be offered fall 2017

Institutional SNP - for beneficiaries that are confined to a facility. In certain cases, beneficiaries that are in the community but are eligible to be admitted to a facility may also qualify • Chronic SNP - for beneficiaries with certain chronic conditions e.g. diabetes, cancer etc • Dual SNP - for beneficiaries that are eligible for both Medicare and Medicaid

You are the CEO of ABC Insurance Company. ABC is considering entering the critical illness market. (a) (1 point) Outline the advantages and disadvantages of using internal vs. external sources of data for determining expenses for a given policy. (b) (2 points) Your company's goal is to increase the small group block of business. You have agreed to the approach of realigning the commission structure to achieve this goal. Explain the items that need to be considered. (c) (1 point) Identify state and federal taxes and fees that should be accounted for when a policy is priced.

Internal data shows what is needed to cover the company operating costs. Internal data is specific to actual company experience and often driven by expense treatment in the financial statement or tax calculations; provides a better definition of what is required. Internal data allows for the use of functional cost studies to measure resources required for each function. Internal data allows for the use of functional cost studies to measure resources required for each category (group size, coverage, line of business). External data shows what the market demands. External data could include studies from industry associations, surveys, competitive feedback (primarily based on quotes or state rate filings); caution in comparing as data may not be defined the same way. Caution in comparing internal data with other companies as there may be distortions because of differences in how companies define and account for expenses. External data may not be accurate. External data may provide more credibility than internal data based on volume and appropriateness to the line of business. c. ACA tax i. (Federal assessment tax), allocated through products and customers of the company ii. (Federal): comparative effectiveness research assessment, supports the non-profit Patient-Centered Outcomes research Institute (PCORI) and is used to identify and conduct research to compare the clinical effectiveness of medical treatments. Premium tax (state): in pricing, either based on average premium tax charges over the states or reflecting each state's exact premium tax rate Federal and State income tax; common percentage of premiums across all products, or allocations based on pre-tax operating results of each product or product segment. High risk pool surcharge (state): provides insurance to those who were denied from all other sources. Partially subsidized by certain product lines, assessments are in line with the volume across the carriers doing business in the state.

Describe the three characteristics which set pricing GLTC apart from other group product pricing.

Issue age rated Offered as optional coverage Unique set of eligible insureds Additional credit was given for married persons claims lower with built-in caregiver o shared pool of benefits available for spousal coverage o restoration of benefits option o non-forfeiture or contingent non-forfeiture o voluntary lapses lower than other coverages

State reasons employers offer retiree group benefits.

Key reasons that employers offer retiree group benefits include: Retiree group benefits are a tax-effective means of providing retirement financial security. It is a valuable benefit for those currently receiving the coverage or who are soon to retire. The benefits can support workforce planning and growth opportunities for employees. Providing ongoing health care coverage is a social responsibility of the employer. Providing retiree health care benefits helps provide a competitive package of total compensation. The current cash costs are nominal relative to the total spending on benefits. Retiree benefits are often at the top of the list of union demands

Explain how Company ABC can control adverse selection in choosing its voluntary benefits. fall 14

Limit the frequency of choice o The longer the period of coverage the more difficult it is for the employee to predict expenses or influence the timing of incurring expenses Limit the degree of change o Makes it difficult for an employee to make makor changes based on knowledge of upcoming expenses Level the spread between options o Promotes a larger covered employee group, thereby spreading the financial risk over a wider population Group certain coverages together o Reduced employee's ability to predict specific benefit plan utilization Delay full payment o Prevent a "windfall" accruing to employees included to move in and out of coverage Offer a health spending account o Reduces insurance element from these types of elections (thereby fixing the benefit cost) Maintain parallel plan design o Consistency in plan option design helps to avoid differences in coverage that employees can manipulate Test the program with employees o Testing may bring to light potential weaknesses in the design that later could produce adverse selection Add/increase participation requirements o Provides a better mix of healthy vs unhealthy insured's

Compare the U.S. group LTC market to the U.S. individual and Canadian LTC markets.

Market for LTC insurance in the U.S. is much more developed than the Canadian market because Canadian Medicare covers some long term care expenses The group LTC market in the U.S. is much smaller than the individual LTC market However, the group LTC insurance market has been growing at a rapid pace

Describe ways company management uses medical loss ratio information.

Measuring the financial performance of products By subgroup - individual vs. group, etc. Used to manage care provider groups Preparing business plans that project earnings Can be used for applications for license for a new company or expansion to operate in a new jurisdiction Support filings for new or renewal rates and policy forms Reporting information concerning results to policyholders such as employer groups Used by them for budgeting purposes, monitoring experience, and/or understanding rate increases Setting incentive target earnings for management, employee, and provider compensation Agents and brokers may be compensated based on loss ratios Loss ratios may trigger payments to providers subject to profit sharing arrangements

Identify the provisions of the ACA related to public programs. spr 18

Medicaid: • Expanded up to 133%/138% of FPL (Supreme Court Decision renders this state optional) • Quality improvement. • PCP payments increased to 100% of Medicare through federal funds • New demonstrations such as health homes, bundled payments, global caps to safety net hospitals, pediatric ACOs, and emergency mental health services. • Increased federal match to CHIP • Increased drug rebates • New fraud and abuse screening • New dual eligible coordination office Medicare • Quality outcome payments (bonus stars program) • National strategy to improve quality • New patient care model development • Medicare plan improvements • Medicare sustainability • Health care quality Improvements • Prevention and wellness provisions • Dual coordination • Payment refinements

Identify the key types of services provided by Medicare Parts A and B.

Medicare Part A provides Hospital Insurance, including: Inpatient hospital coverage Skilled nursing facility benefits Home health agency / skilled nursing facility benefits Hospice care for terminally ill patients Medicare Part B provides Supplementary Medical Insurance, including: Outpatient hospital benefits (including emergency room and outpatient surgery) Medical care (services provided by physicians, diagnostic tests, supplies, durable medical equipment, prosthetic devices, and ambulatory surgical center care) A one-time initial wellness physical within six months of enrollment Ambulance Clinical laboratory and radiology Physical and occupational therapy Speech pathology Outpatient rehabilitation including partial hospitalization Radiation therapy Transplants Dialysis Home health care (beyond what is covered in Medicare Part A) Certain drugs and biologicals (primarily those that cannot be selfadministered) Certain preventive services

List key assumptions used to determine if LTC rate increases are required fall 15

Morbidity: Product is priced on an issue age, not attained age basis. Large discrepancy between average issue age and average claimant age. Misses in original morbidity assumptions may not become credibly apparent for many years based on company experience. Experience in early years primarily reflects underwriting selection period. Persistency: LTC rates are priced to be in effect over a period of 50 or more years. Original pricing assumptions may have been extrapolated from other products. Policyholders understand the value of LTC insurance and as a result are lapsing at a much lower rate than originally anticipated. Mortality has also improved over the years. Interest: LTC insurance is designed to be pre-funded, so interest is key to ensuring that contract reserves grow enough to support future liabilities. Contract reserves held by the company to back its LTC liabilities earn less than originally expected. As a result of the economic recession that began in December 2007, many companies' long term investment earnings rates are much lower now than they were at the time of original pricing. When premiums come in or assets in the portfolio mature, companies are force to invest at a lower new money rate.

Small companies want to attract top talent and have considered not requiring employee contributions for medical care insurance. Describe why small companies should require employee contributions.

Most employees are accustomed to paying some level of contribution Requiring a contribution usually motivates or forces employees who have coverage, or the option to get coverage elsewhere to decline the coverage under their small employer's plan. It is much easier to set policy and precedent, and plan for future growth, by introducing the concept of contributions at the inception of the plan when there are only a few employees Having a contribution also can help to avoid potential legal problems.

Determine Suspenders' plan eligibility for the retiree drug subsidy next year assuming: • A 5% total two year trend, • All Defined Standard Part D and Suspenders' Retiree Plan benefit parameters remain the same. Briefly comment on how these results compare to the determination in part (b) above. Show your work.

Need to calculate the Gross Values by Tier: $0 - $300 Tier: o Part D Plan Value = $0 because of deductible o Employer Plan Value = $0 because of deductible $300 - $500 Tier: o Part D Plan Value = ($473 - $300) x (1 - 25% ) x 30/215 = $18.05 PMPY o Employer Plan Value = $0 because of deductible $1,000 - $3,000 Tier: o Part D Plan Value = ($1,838 - $300) x (1 - 25%) x 70/215 = $375.44 PMPY o Employer Plan Value = ($1,838 - $500) x (1 - 7%) x 70/215 = $404.98 PMPY $3,000 - $6,000 Tier: o Part D Plan Value = [($3,000 - $300) x (1 - 25%) + ($4,421 - $3,000) x (1 - 70%)] x 55/215 = $627.04 PMPY o Employer Plan Value = ($4,421 - $500) x (1 - 7%) x 55/215 = $932.71 PMPY $6,000+ Tier: o Part D Plan Value = [($3,000 - $300) x (1 - 25%) + ($6,000 - $3,000) x (1 - 70%) + ($7,455 - $6,000) x (1 - 5%)] x 20/215 = $400.67 PMPY o Employer Plan Value = [($6,000 - $500) x (1 - 7%) + (7,455 - $6,000) x (1 - 5%)] x 20/215 = $604.40 PMPY To Get Plan Gross Value for Each Plan, sum together calculated PMPYs: Part D Plan Gross Value = $0 + $18.05 + $375.44 + $627.04 + $400.67 = $1,421.20 PMPY Employer Plan Gross Value = $0 + $0 + $404.98 + $932.71 + $604.40 = $1,942.09 PMPY The plan passes the gross value test because $1,942.09 > $1,421.20 Part D Net Value Test Part D Plan Value = $1,421.20 - $75 x 12 = $521.20 PMPY Employer Plan Gross Value = $1,942.09 - $0 = $1,942.09 PMPY The plan passes the net value test because $1,942.09 > $521.20 Commentary: The results of the test didn't change, which is expected given that the plan passed the first time, and the employer plan is richer in the later tiers (that have most of the claims) vs. part (d), which should exacerbate the spread between them.

Define "Net Periodic Postretirement Benefit Cost" and list the components. fall 15

Net Periodic Postretirement Benefit Cost definition: Represents the cost of providing postretirement benefits attributed to the current accounting period. Consists of the current year's cost plus other amounts recognized on a delayed or amortized basis. The components are: Service Cost Interest Cost Expected Return on Plan Assets Amortization of Transition Obligation Net Amortization and Deferral o Amortization of prior service costs included in accumulated other comprehensive income (AOCI) o Amortization of net gain / loss included in AOCI

Describe the different types of income eligible members and compare and contrast the components in the Part D program that apply to each. spr 18

Non-Low Income Deductible 25% cost sharing before ICL After ICL and before TrOOP: Coverage Gap/Donut Hole (100% cost share) After TrOOP: Catastrophic phase/federal reinsurance: Greater of 5% / small copay after TrOOP • Low Income Eligible o Group 1: Dual Eligibles No deductible No cost sharing if institutionalized Small copays if not institutionalized No cost sharing in catastrophic phase Group 2 (MSP (QMB, SLMB, QI) SSI w/ Medicare, w/o Medicaid) & Group 3 (Income<135% FPL) Same as non-institutionalized Group 1 o Group 4: Income <150% FPL Reduced deductible 15% coinsurance before catastrophic phase Small copays in catastrophic phase

Describe the pricing components, other than claims cost, of group disability manual rates. fall 15

Once claim costs are determined, several non-claim components must be applied to claims in order to develop the final rates. This includes fixed costs related to product development that must be recouped, ongoing administrative costs, agent and broker commissions, taxes and/or fees, risk and/or profit margins, as well as any investment income offsets. As this LTD product is new, there are likely several fixed costs related to designing, developing, marketing and underwriting the product. Depending on the projected enrollment, it may be difficult to appropriately amortize these costs over the entire block. Ongoing administrative expenses are a variable cost, and can be better priced as a percent of premium, a percent of claims, or a per group or per certificate amount. Commissions are typically priced as a percentage of premium, and are typically level between first and renewal years. Taxes are also typically added on as a percent of premium, although some fixed fees may need to be accounted for, as well. To offset these expenses, the insurer may apply an investment income credit due to anticipated income on assets and cash flows from IBNR and reserves on claims not yet due. Finally, the final rates should also include a profit/contribution to surplus margin. This margin may reflect the risk of the group: smaller groups with more fluctuation may dictate a higher risk margin while larger, more stable groups would require a smaller margin against adverse claim deviations.

List considerations used in analyzing the benefits presently available at Company ABC and explain the rationale for reviewing these considerations. fall 14

Outline the different types of benefits i. To ensure the coverage is for services needed by the employees Determine levels of benefits i. If the benefits are too rich, then could be too costly for value ii. If not rich, then of little value to the employee Consider probationary periods i. The longer the probationary period, the greater the exposure of employees and others to a loss not covered by the plan ii. Helps manage the loss exposures of the plan Determine eligibility requirements i. Cover appropriate population (ex: retirees, actives, etc) ii. The greater covered, the greater the cost Determine contribution requirements i. Contributions can impact participation and how well the plan meets the needs of the employee group as a whole ii. Trade-off on cost of employer and participation of employees Determine flexibility available i. The more flexibility employees have the more likely the benefit will meet their needs ii. Too much flexibility and employees may misperceive or not understand their needs Consider bundling products i. Lowers costs by combining predictable benefits with less predictable benefits

Discuss the strengths and limitations of various sources of data that could serve as the basis for risk adjustment models.

Outpatient Data One strength of OP data is that it provides a more complete picture of relative morbidity even in the absence of IP admissions. On the other hand, OP data tends to be more susceptible to gaming than IP diagnosis data. RX Data In comparison to medical data, RX completes quickly which is a benefit for this type of data. However, caution should be exercised due to off-label prescribing and the rapid adoption of new drugs.

Explain how PBMs add value.

PBMs provide value by: Negotiating contracts and developing pharmacy networks Negotiating better AWP discounts Giving advice on formulary design Providing MAC lists for generics

3aii. - Calculate the savings for this retiree in changing from the current COB method to each of the other methods. Show your work. (math) spr 18

Part (a)(i): Define C as covered expense, M as Medicare payment, and % as representative of the application of the employer's benefit provisions. 1. Standard Coordination of Benefits: pays the lesser of the employer plan benefit in the absence of Medicare and the difference between covered expenses and Medicare plan benefit. Formula: MIN(C*%, C-M) 2. Exclusion: excludes the benefit paid by Medicare, then applies the provisions of the employer plan to pay the remainder. Formula: (C - M)*% 3. Carve-out: applies the provisions of the employer plan in the absence of Medicare, then subtract the Medicare payment to pay the remainder (if any). Formula: C*% - M 4. Supplement: pays expenses for which the primary plan does not pay (copays, deductible, coinsurance)

(i) Calculate the 2018 revenue PMPM that this plan should expect to receive from CMS for its projected population. Show your work. (ii) Calculate the 2018 monthly beneficiary premium for this plan. Show your work. fall 2017

Part (i) Step 1: Trend Parts A and B costs two years forward to calculate the "bid amount" For example, Inpatient Hospital = 300*(1+2%)^2*(1-1%)^2 = $305.91 Projected Part A benefits = $409.95 Projected Part B benefits = $382.05 Bid amount = $792.00 Step 2: Calculate benchmark as a weighted average of the county benchmarks Weighted average benchmark = (12,500*800 +15,000*900)/(12,500+15,000) = $854.55 Step 3: Calculate plan savings and rebate Savings = $854.55 - $792.00 = $62.55 Rebate = 0.7 * $62.55 = $43.79 Step 4: Calculate total CMS revenue CMS revenue = Bid amount + Rebate = $792.00 + $43.79 = $835.79 PMPM Part (ii) Step 1: Since CMS isn't responsible for supplementary benefits, start by projecting these costs forward Projected supplemental benefits = $72.84 Step 2: Use the plan's rebate to reduce supplemental benefits Adjusted supplemental benefits = $72.84 - $43.79 = $29.05 = Monthly premium due by member

Describe the components of Medicare Part A and B that must integrate with Medicare Part D.

Part A covers inpatient care • Part B covers outpatient care and some drugs

Determine whether Suspenders' retiree drug plan is eligible for the retiree drug subsidy next year using the prior year claims data. Show your work.

Part D Gross Value Test Tests that, across whole plan, value offered under plan is better than standard Part D In order to do this must evaluate claim costs across all members under both plans Need to calculate the Gross Values by Tier, candidates also received points for writing down basic equation: $0 - $300 Tier: o Part D Plan Value = $0 because deductible o Employer Plan Value = $0 because of deductible $300 - $500 Tier: o Part D Plan Value = (Claims Costs in Tier - Deductible) x (Plan Responsibility in Tier) x Number of Members/Total Pop to get Aggregate PMPY = ($450 - $300) x (1 - 25% ) x 30/215 = $15.70 PMPY o Employer Plan Value = $0 because of deductible $1,000 - $3,000 Tier: o Part D Plan Value = ($1,750 - $300) x (1 - 25%) x 70/215 = $354.07 PMPY o Employer Plan Value = ($1,750 - $500) x (1 - 7%) x 70/215 = $378.49 PMPY $3,000 - $6,000 Tier: o Part D Plan Value = [($3,000 - $300) x (1 - 25%) + ($4,210 - $3,000) x (1 - 70%)] x 55/215 = $610.88 PMPY o Employer Plan Value = ($4,210 - $500) x (1 - 7%) x 55/215 = $882.63 PMPY $6,000+ Tier: o Part D Plan Value = [($3,000 - $300) x (1 - 25%) + ($6,000 - $3,000) x (1 - 70%) + ($7,100 - $6,000) x (1 - 5%)] x 20/215 = $369.30 PMPY o Employer Plan Value = [($6,000 - $500) x (1 - 7%) + (7,100 - $6,000) x (1 - 5%)] x 20/215 = $573.02 PMPY To determine Plan Gross Value for Each Plan, sum together calculated PMPYs: Part D Plan Gross Value = $0 + $15.70 + $354.07 + $610.88 + $369.30 = $1,349.95 PMPY Employer Plan Gross Value = $0 + $0 + $378.49 + $882.63 + $573.02 = $1,834.15 PMPY The plan passes the gross value test because $1,834.15 > $1,349.95 Part D Net Value Test The Part D Net Value Test simply values the gross value minus plan premium Part D Plan Value = $1,349.95 - $75 x 12 = $449.95 PMPY Employer Plan Gross Value = $1,834.15 - $0 = $1,834.15 PMPY The plan passes the net value test because $1,834.15 > $449.95

Describe the core components of the rate filing requirements that pertain to group Charlie. 2-b. spr 18 (math)

Part I - Unified Rate Review Template (URRT) Excel spreadsheet that the carrier must provide showing summary values pertaining to the rate increase request Part II - Written Explanation of the Rate Increase For products with an average increase that equals or exceeds 10%, the carrier must provide a plain language narrative explaining the major reasons for the increase. Part III - Actuarial Memorandum The Part III Actuarial Memorandum provides descriptive detail of the URRT components, the need for the requested rate change, and support for assumptions made. Unique Plan Design Supporting Documentation and Justification If there are cases where the carrier's actuary needed to make a special actuarial adjustment to account for a unique plan design feature, the actuary must provide special documentation and certification.

Describe the tax issues of a personal account. spr 2014

Personal accounts can cover many items, ranging from health-related items such as gym memberships to personal items such as gas or vacations. Reimbursed items generally count as taxable income to the employee Employers tax the account based on the allocations rather than the reimbursements Balance remaining in account at year end can be rolled over indefinitely

Describe four pharmacy benchmarks.

Pharmacy benchmarks include: • AMP = Average Manufacturer Price: the price manufacturers sell to wholesalers • WAC = Wholesale Acquisition Cost: suggested list price for sale to wholesalers • AWP = Average Wholesale Price: WAC plus a markup, regularly published based on available data but not truly an average of prices paid by anyone • AAC = Actual Acquisition Cost: the price paid by retailers to wholesalers • U&C = Usual and Customary: the price retailers sell to customers

Describe general approaches to control adverse selection in flexible benefit plans.

Plan Design: • Level spread between options - wide differences increase adverse selection; may do core with buy-up or maximum benefit cap to reduce risk. • Limit frequency of choice - limit how frequently one can move in/out of predictable coverages, like dental and vision. Longer time periods required in a coverage option reduce predictability. • Limit degree of change - only allow change of level per year or only allow change in one direction or require multi-year commitment. • Group coverages together (e.g., group LTD with dental) • Require proof of insurability when increasing coverage. • Delay payment - don't provide full benefit until enrolled 6-12 months • Maintain parallel design - Group coverages that are prone to selection with all other coverage options, e.g., group orthodontia with all dental coverage options, or group vision (or pharmacy) with all medical coverage options. Pricing: • Raising price of highest option - so employees staying in that option must pay more to get same coverage. (allocate all adverse selection costs to highest option). This may result in buy-downs of healthier lives, but they may still end up saving the plan money because the cheaper options may have more cost-sharing & deductibles. Still, risks EE dissatisfaction. Can lead to phase out of expensive option as price becomes prohibitive charge more for most risky option • Raising prices of lower options - to discourage healthy lives from buying down coverage (reduce reward of buying down) • Risk-based pricing - price options according to expected cost. Common with life insurance, where probability of claim is directly related to age. (Flat rate would result in older risks buying more and younger risks buying less). Disability costs are also age-related (in part). But unlike group life, disability insurance is usually charged as a flat rate (based on an EE census). • ER subsidy to encourage participation - encourages broad spread of risk through higher overall participation. Better to have all employees in some kind (high, low) of (dental, vision) coverage rather than just those who need it most. • Spreading cost of adverse selection over all options. • Anticipating adverse selection in pricing - one must anticipate some degree of selection and choose how much to reflect in pricing.

Identify plan design features for which you would adjust the manual rates. fall 2013

Plan design features for which you would adjust the manual rates could include: Benefit Percentage Maximum Benefit Minimum Benefit Elimination Period Benefit Period Definition of Disability Offsets from various sources Limits on Mental Health and Drug and Alcoholism Optional Features (pension, survivor, COLA) Underwriting Variations

Describe considerations DerbyHealth should take into account when performing the loss ratio comparison.

Plans/products, geographical footprint, and benefit designs Financial arrangements such as non-refunding and refunding as their loss ratios can present very different results How expenses are treated; for example, managed care organizations and commercial insurer treatment of medical care expenses as claims The effect of combining/pooling 'cells' in order to achieve credibility Reinsurance transactions The presence of conservatism in pricing and IBNR, particularly for new business or markets

The data available for the risk adjustment weights is from various states but does not represent your state. List adjustments that should be considered.

Possible adjustments: • Benefit carve-outs - state by state, mandated benefits will vary • Geographic adjustments • Demographic differences to include age and gender • The number and type of eligibility categories and sub-categories • The need or desire to include individuals with limited exposure

Explain how ACA risk adjustment is designed to promote competitive premium offerings in the small group marketplace. fall 15

Premiums should reflect differences in benefits, quality and efficiency and not the health status of the enrolled population. Without risk adjustment, plans that attract a high proportion of high risk enrollees would have to charge a higher average premium. With risk adjustment, plans will be compensated by the risk adjustment program if they attract a higher than average level of risk. Therefore, premium does not need to increase based on the expected high risk population of a block of business. This stabilizes premium in the marketplace.

Discuss trends in the prevalence of retiree health benefits in the public sector versus the private sector. fall 2016

Private Sector Trends Fewer private employers are offering retiree health benefits Employers have been making plan changes to reduce future obligations Reasons FAS 106 because it forced employers to recognize cost while employees work, rather than when they receive benefits This also brought attention to the cost of these benefits ACA due to the exchanges and guaranteed issue Public Sector Trends Not currently experiencing the same decline in retiree benefit offerings However they may begin to see the trend Reasons for no decline Union involvement / collective bargaining Constitutional requirements Reasons for potential future decline Changes in accounting standards that require employers to report benefits on an accrual basis (GASB 45)

Describe the pros and cons of a straight discount off billed charges arrangement.

Pros: --Simple and easy to understand and implement --Applies to all services billed Cons: --No risk shared between insurer and provider --No incentive to manage utilization --Billed charges could be increased to offset discount

List and describe ACA provisions intended to lower individual premiums. fall 2016

Rate review: Exchange qualified plans must be reviewed at the federal level (as well as typical state review). o Some states have increased scrutiny on review due to receiving federal grants Minimum Loss Ratio: allows for 80% of premium to be reserved for medical expenses o Adjusted for quality improvement costs (QIA), taxes and assessments o If ratio of adjusted claims : premium below 80% threshold, must refund different to the policy holder o Calculation includes adjustments for risk adjustment, reinsurance and risk corridor Individual Mandate Requiring most individuals to purchase insurance. Some exemptions do exist for tax penalty. o Intended to entice healthier individuals to enroll and subsidize older/sicker insured population o Penalty increase in 2015 and 2016: 2014: Max($95, 1% Income) 2015: Max($325, 2% income) 2016: Max($695, 2.5% Income) Metal Tiers: Health plans required to standardize coverage by requiring plans to meet actuarial value criteria o Allows for greater transparency on the marketplace o Some flexibility of plan design required Risk Adjustment: zero-sum game across each market intended to compensate insurers who attract more than their fair share of high risk members. o Ensures issuers compete on ability to provide quality affordable care with an efficient administrative system o Foster stability and competition Premium subsidies: large financial commitment from federal government to subsidize low income premium and cost sharing

State reasons why savings may vary from state to state under a Medicare-Medicaid Financial Alignment Demonstration Plan.

Reasons for variations in savings Populations included under the demonstration may vary Services covered under the demonstration may vary Penetration of managed care prior to implementation of demo varies Historical acute care and long-term care utilization pattern of the targeted population Other State Medicaid program structure differences not listed above

Describe the three carrier risk management tools within an HBE. spr 2016

Reinsurance provides carriers with protection against high cost members temporary/transitional program for 2014-2016 funded by payments from all health insurance carriers in individual and group markets, including self-insured plans through third party administrators reinsurance payments to insurance carriers in Individual market to cover some portion of claim cost above the attachment point Risk Corridor temporary/transitional program 2014-2016 provides carriers protection against total claims across all members being higher than expected a carrier will receive payments from the government if their cost-to-premium ratio is greater than 103% a carrier will make payments to the government if its cost-to-premium is less than 97% Risk Adjustment a permanent program "a zero-sum game" across each market in each state lessen or eliminate the incentives for carriers to avoid sick enrollees or to attract a less risky membership carriers with healthier participants have to subsidize carriers with less healthy participants by making a transfer payment each year

Define four key relationships between pharmacy benchmarks.

Relationships for these benchmarks: • WAC = AWP / 1.2 or WAC = 0.833 * AWP • AMP = AAC if retailers buy directly from manufacturers • U&C = AAC + retailer markup • U&C > AWP

Recommend whether MonCo should invest in Oingo based on MonCo's return on equity requirements. Justify your answer. spr 2014

Return on Equity = Total Asset Turnover x Net Profit Margin x Total Leverage Ratio Oingo Return on Equity = 70.0% x 3.5% x 150% = 3.7% Since MonCo's ROE requirement is 5%, but Oingo ROE is 3.7%, therefore MonCo should not to invest in Oingo.

Describe ACA provisions that help control anti-selection among carriers on the Exchange.

Risk corridor - a temporary program from 2014-2016. Federal government shares the risk for loss ratio variances. Variances between 3-8% share 50% of gain/loss and 8%+ government covers 80% of gain/loss Reinsurance also a temporary program from 2014-2016. All fully insured and self-funded plans pay into a reinsurance pool to pay for individual claims on the exchange exceeding a prescribed threshold. Risk adjustment is a permanent program where carriers will make or receive payments based on the risk profile of their members. Applies to both individual and small group risk pools. It is a zero sum program. Credit was also given for mentioning that the same rules apply on and off the exchange.

List the risks Your Eyes faces in entering the individual dental market and describe strategies available to Your Eyes to mitigate these risks. spr 2017

Risks: • Pent-up demand • Anti-selection Strategies: • Waiting periods • Pre-existing condition exclusions (missing tooth) • Prior authorization for expensive procedures • Least Expensive Alternative Treatment (LEAT)

Explain reasons why pharmacy cost growth has slowed in recent years.

Rx cost increase has slowed in recent years because of: Wave of patent expirations: Additional generics have been able to come on the market as patents have expired on brand drugs Economy: Economic recession has led to decreased spending in several areas, including pharmaceuticals Lower overall spending in important therapeutic classes, such as Lipitor, and increased use of generics

Determine the employee contributions for enrollees electing the lower cost carrier in each region that would result in no change to Prince Corporation's costs. Show your work. fall 2017

Sample Solution 1: Price Corporation's current cost = X EE contribution, higher cost carrier = $600 /year EE contribution, lower cost carrier = Y /year Price Corporation's cost with Private Exchange (75% select lower cost carrier): Region1 = 50 x ($4,800 - $600) + 150 x ($4,500 - Y) Region2 = 150 x ($4,200 - Y) + 50 x ($4,500 - $600) Region3 = 50 x ($5,400 - $600) + 150 x ($5,100 - Y) Total all regions: $2,715,000 - 450 Y = X Y = ($2,715,000 - X)/450 or = $6,033.33 - X/450 or = $600 - (X - 2,445,000)/450 Alternatively, candidates could state an assumption for the current cost, leading to a $ value. For example, assuming PRPL insurance only, or assuming 50% PRPL and 50% REDCOR insurance (without discount on employee contributions). Following is the solution for if the current cost was assumed to be PRPL insurance only:

Identify sources of potential savings from Medicare-Medicaid Financial Alignment Demonstrations.

Savings sources Acute o Coordinate treatment of multiple chronic conditions o Provide care in most appropriate setting, emphasizing community-based care o Reduce or eliminate unnecessary tests or procedures o Better manage ambulatory sensitive admissions to reduce avoidable emergency room visits and inpatient admissions or readmissions Behavioral Health o Improve coordination between Medicare and Medicaid with emphasis on community-based care Long-term care o Delay members entry in to nursing homes by use of HCBS waiver services o Discourage unnecessary hospital admissions from nursing homes Admin o Increase enrollment in order to help spread fixed costs o Reduce marketing costs o Integrate Medicare and Medicaid appeals process

Describe common challenges in trend analysis.

Seasonality - trends may need to be adjusted to a 12-month annual basis to dampen impact One-time events, such as a severe flu season, can cause a spike in monthly trends Margin - may need to assume higher than best estimate for certain purposes Changes in prior period estimates - include restatements in correct period to produce most accurate trends Legislative changes - can cause impacts that change prospective trends

Describe the characteristics of a Section 1115 waiver to expand the population, and identify how each element differs from expansion criteria set forth in the ACA.spr 2017

Section 1115 waiver allows a state (upon Federal approval) to address their state's unique Medicaid circumstances provided budget neutrality can be achieved. For example, a state may alter the populations covered from the criteria set forth in the ACA (residents below 138% FPL.) A state can choose to cover additional populations or create more restrictions. Another difference is that states can alter the delivery system and provide coverage via exchange plans instead of directly through the Medicaid program.

Describe the similarities and differences between Health Savings Accounts and Health Spending Accounts.

Similarities Both can be used for eligible medical expenses Both have tax advantages such as tax free distribution for qualified expenses, as well as tax penalties for misuse Both have states/provinces that dictate tax treatments of accounts Differences Spending accounts do not need to be tied to a High Deductible Health Plan Eligible expenses broader for Spending Accounts than Savings Accounts Spending accounts have only one annual election unless life event. Savings accounts can change elections throughout the year. Spending accounts have time-limiting rollover/forfeiture characteristics. Savings accounts do not have limits. Savings accounts are owned by the employee (portable), whereas Spending accounts are not.

Describe sources of data your firm could use to develop independent premium rates. fall 2013

Sources of data your firm could use to develop independent premium rates include: Insurer studies Use company's own LTD claims experience to conduct loss ratio studies and actual-to-expected incidence and termination rate studies TSA Reports - 1984 Reports Containing annual claim incidence rates per 1,000 by age group, gender and elimination period and ratios of actual to tabular incidence rates SOA 2000 Basic Experience Table Intercompany studies performed by the SOA Disability Experience committee 1987 Commissioners Group Disability Table Includes rates that vary by gender and elimination period

Describe the Gross Value Test and Net Value Test and how the results impact employers and employees. -spr 2016

The Gross Value Test examines whether the plan's PDP benefit provides coverage that is, on average, at least as rich as standard Part D coverage. The Net Value Test examines whether the portion of the group health plan benefit subsidy offered by the plan sponsor is at least as much or greater than the subsidy offered by CMS. In the event both tests fail and do not meet CMS requirements: Employer will not be eligible for the RDS Employees will have to pay a penalty and potentially pay more in out of pocket costs

Describe reasons why insuring an STD plan may be more efficient than small companies self-insuring the risk.

The cost is not expensive when intelligently designed It takes the employer out of the role of having to deal with privacy issues and claim adjudication Just one claim per year could pay for the cost of the annual premium

Identify the main drivers of growth in pharmacy costs.

The growth in Rx costs has been driven by: New drug pipeline: Drugs continue to be developed at a rapid pace and are pharmaceutical companies are eager to recoup the Research & Development costs Biologics: Very expensive specialty/ injectable drugs Patents: These protect brand name drugs and can preventer cheaper, generic alternatives from being able to enter the market. Direct-to-consumer advertising increase the public's awareness and knowledge of drugs available Manufacturing cost-sharing offsets in the form of rebates make it easier for consumers to purchase pharmaceutical drugs Faster approval process by the FDA Aging population

Describe state provisions that can help mitigate the risk of antiselection.

The question asked for specific actions states can do on their own outside of federal regulation to mitigate anti-selection in the market. Some examples are: Allow every carrier that applies to be on the exchange to participate Require all carriers to be on the exchange Require all carriers to offer the same plans on and off the exchange Require all carriers to offer all 4 plans (or specified plans) Place additional restrictions on plans offered outside the exchange Actively managed the rate review process Don't let carriers in/out of the exchange at will - i.e. must stay out of exchange for x years if they leave; or accept new carriers every other year Ensure risk adjustment is effective and timely, or administer own risk adjustment Provide additional tax credits/subsidies Continue reinsurance beyond 2016 or set up additional reinsurance Expand Medicaid - reduces anti-selection on the individual market Choose not to establish basic health care plan to increase exchange participation Combine individual and small group on the exchange Expand definition of large group to 100

Identify which aim the Affordable Care Act (ACA) best targets. Explain how specific components of the ACA address this aim. Defend your answer. fall 2014

The triple aim best targeted by the ACA is better care for individuals, and specifically the objective of increasing access. The following components of the ACA support this aim: 1. Health Benefit Exchange (HBE) - primary function is to facilitate the purchasing of insurance by allowing consumers to find, compare and purchase insurance from multiple companies in a single online source. Benefits - plans must cover essential health benefits, must have an out-ofpocket limit at or below the Health Savings Accounts limit, and must fall into one of the metallic tiers Risk Pool - individuals and small group enrollees are each considered as a single risk pool Guaranteed Issue/Removal of Pre-Existing Conditions - coverage in the individual market is now guaranteed issue, with no ability to deny or rate based on pre-existing conditions 2. Incentives to purchase through an HBE Small Employers - tax credit on health insurance premiums. Individuals - government will provide premium and cost sharing subsidies to low income individuals who buy through an exchange. Premium subsidy - Tied to second-lowest cost silver plan in the area and set on a sliding income scale for people with incomes between 133%- 400% of FPL. Cost sharing subsidy - Helps with out-of-pocket expenses such as deductibles, copays and coinsurance for people with incomes between 100%-250% of FPL enrolled in a Silver level plan 3. Medicaid Expansion - States have the option to expand Medicaid to all nonMedicare eligible individuals with incomes up to 133% (or 138%) of FPL. States were to receive supplemental federal funding to support this expansion. Quality improvement in Medicaid - payments for primary care services will increase to 100% of Medicare rates, and the increase will be federally funded.

Compare and contrast major features of health spending accounts in Canada with health savings accounts in the United States. spr 2017

There are several aspects of these accounts that vary between Canada and the US. 1. Who Can Contribute CANADA: Usually, only ER. But bonus-eligible EE's may allocate some bonus towards it US: EEs and ERs may contribute. An HSA requires an HDHP 2. Taxability of payments CANADA: Payments not taxable to recipient (except Quebec), if structured properly US: tax-free distributions for qualified medical expenses 3. Taxability of contributions CANADA: Employer contribution is tax deductible US: Contributions and interest earnings not taxable 4. When elections of contribution is made CANADA: Annual election amount made in advance (irrevocable). Exceptions for changes in family status US: EEs may prospectively elect, revoke, or change salary-reduction elections at any time during the plan year 5. Carryover CANADA: Choice for unused end of year balances: 1) roll over unused balances for up to one more year; any year one amounts remaining at the end of year two are forfeited. 2) roll over unpaid claims; any eligible expenses in excess of the balance in one year may be paid out in the subsequent year once that year's contribution is made, up to the account balance US: funds in the account can be carried from one year to the next 6. Unused funds CANADA: Unused deposits/accruals to terminated EEs revert to the ER US: funds are fully owned by the employee (do not revert to ER) 7. Ability to use to pay premiums CANADA: Can use to pay insurance premiums (medical, dental, other health, vision) US: Limited use to pay insurance premiums (LTC, COBRA, Medicare, unemployment benefits)

Recommend a cafeteria plan to Management. Justify your response. spr 2016

To: Broughton Management RE: Employee Benefit Plan In Lieu of the recent employee survey, I recommend Broughton should offer a full flex plan. Employees want benefits, like life insurance, which cannot be purchased through an FSA. So while an FSA would keep the costs stable for Broughton, it is not the best option. Such benefits, however, can be purchased with a full flex plan. Vision and STD plans can also be offered through a full flex plan. Note that Parking, transit, gym membership reimbursement, and dependent life insurance cannot be offered through any type of cafeteria plan, and therefore should not be part of the pre-tax offerings. A full flex plan will allow Broughton to allocate credits as they wish, which helps control employer costs. Credits can also be given for service recognition or performance recognition, which will help to motivate employees. Credits can also be used to purchase coverage for dependents. There will be some costs to setting up and administering the plan, but Broughton is a larger company with 500 employees, so costs should be manageable. Employees will enjoy the flexibility and will have allowed benefits they desire at minimal extra cost to the company

Explain how and why insurers use these definitions in combination in a policy. fall 14

Typically, an insurer will use "own occupation" for a set time period, and then enforce the "any occupation" provision, which is more restrictive. This accomplishes the following: Keeps claim costs down because fewer qualify Prevents malingering with less severe disabilities During the "own occupation" elimination period, provides a time period for training for another job

You are given the following for a block of group Long Term Care business: • Total annual premium for this business is $5,000,000 • Premiums are due semi-annually on January 1 and July 1 • Expected loss ratio is 86% • Acquisition expense is 12% • Maintenance expense is 10% Calculate the UPR, DPAC, and PDR as of March 31. Show your work.

UPR Semi-annually means 6 months per period => Premium received at Jan 1 = (6 / 12) x Annual Premium = (6 / 12) x $5,000,000 = $2,500,000 March 31 -> 3 months left in current period => UPR = (3 / 6) x $2,500,000 = $1,250,000 DPAC First test recoverability. (Expected Loss Ratio) + (Acquisition Expense) + (Maintenance Expense) = 86% + 12% + 10% = 108% Since 108% > 100%, will need to write down Acquisition Expense to get to 100%. => "New Acquisition Expense" = 12% - (108% - 100%) = 4% => DPAC = (New Acquisition Expense) x Unearned Premium = 4% x $1,250,000 = $50,000 PDR Premium Deficiency Reserve is only needed if: 1) Recoverability is not demonstrated. AND 2) (Expected Loss Ratio) + ( Maintenance Expense ) > 100%, after writing down Acquisition Expense to 0%. In this case: 1) Recoverability is not demonstrated. BUT 2) Acquisition Expense was only written down to 4% to achieve Recoverability, and ( Expected Loss Ratio ) + ( Maintenance Expense ) = 98%< 100%. Therefore PDR is not needed.

Describe the following balance sheet items as they relate to GAAP reporting for group insurance, and explain their purpose. (i) Unearned premium reserve (UPR) (ii) Deferred policy acquisition costs (DPAC) (iii) Premium deficiency reserve (PDR)

Unearned premium reserve (UPR) UPR is a reserve held for premiums in advance of their due date. It is treated as a LIABILITY equal to the premiums received, but not recognized. Since group contracts are generally short in duration, straight-line depreciation is used in calculated UPR. (ii) Deferred policy acquisition costs (DPAC) DPAC is an ASSET that is equal associated with unearned premiums. It should be recognized/timed similarly to that unearned premium. DPAC is generally relatively low for group coverage. It should only be held up to the point of RECOVERABILITY. RECOVERABILITY is demonstrated when: (Loss Ratio) + (Total Expense Ratio) <= 100% (iii) Premium deficiency reserve (PDR) PDR is a reserve held if a loss is projected in advance. It can be established if: (Loss Ratio) + (Maintenance Expense) > 100% It applies to the entire premium guarantee period, even if the period extends beyond the current contract year. Investment income may be used to determine recoverability

As part of the union negotiations, Mission's employees have requested the following changes: • Elimination of the $100 deductible on Type II/III services • An increase in Type I/II/III coinsurance levels to 100%/80%/70% • A new orthodontic benefit, with coverage at 60% In return, the union has conceded to make the plan contributory, with employees covering 30% of expected claims and expenses in the form of payroll deductions. Evaluate both the favorable and unfavorable impacts the proposed changes would have on Mission's costs. - Recommend next steps to enable Mission to make a counterproposal.

Unfavorable: o Union groups are typically more aware of benefits, so announcement of a new benefit will likely increase utilization, which increases the total costs o Ignoring utilization, removing deductible and cost-sharing are benefit increases, which will increase total costs o In addition, removing deductible and cost-sharing are likely to increase utilization, which will increase total costs o Adding orthodontia will increase total o Making the plan contributory will increase anti-selection and would increase costs on a PMPM basis Favorable o However, Mission now covers only 70% of associated claims and expenses so Missions costs will reduce o Making the plan contributory may reduce total costs because of lower participation percent

Critique the position that LTD should not be offered because it's similar to LTC

While LTC and LTD may have some similar plan provisions, they insure against very different events. Long term care insurance prefunds future expenses for skilled or custodial care and services—which may be due to accident or illness, but is commonly just from aging—when they cannot perform basic activities of daily living (ADLs). Disability insurance replaces lost income during working years (pre-65) when the member has had a serious accident or sickness. The LTC coverage to be offered will be voluntary, so other than administrative burden, there won't be any cost to Loony Lakes.

Describe typical tasks that a PBM performs for an insurance company. spr 2015

a) Handle administrative and clerical tasks related to adjudication and management b) Pricing negotiations, c) provide mail order services d) Plan design (formulary development) e) Rebates

You have been asked to calculate claims reserves on a GAAP basis for a number of lines of business for your company. Kandi, your supervisor, requested you provide additional information on developing claim reserves with respect to: (a) (2 points) Claim reserve development in general (b) (2 points) An established major medical block (c) (2 points) A newly released critical illness line of business

a. Claim reserves consist of incurred-but-not-reported (IBNR) and pending claims (also known as in-the-course-of-settlement). The relative magnitude of IBNR and pending claims depends on the risk/precision of the benefit amounts, policyholder behavior, and administration. Large claims and DI take longer to adjudicate, and may have longer reporting lags. Large claims with high deductibles or long waiting periods may have long reporting lags. DI may pay over a long period of time, and therefore has a large reported-but-unpaid reserve component. b. The appropriate claims method is the "lag table" ( or, "development method", "completion factor" or "claim triangle") o As the block is established, claim reserves based on pricing are inappropriate o As the block is not DI, disability income benefit claims are not appropriate The initial working assumption is that future payment patterns will be similar to the recent past. Past claim payments are sorted according to the date incurred and the date paid. Special adjustments may be necessary as items can impact future claims payments o Changes in contractual provisions o Changes in admin systems o Large claims Large claims are typically adjusted by using a case reserve method. If the lag table is from incurral to payment, the reserve calculated is the total unpaid claim liability (IBNR plus pending)—this is the most common approach. c. New Critical Illness Line Determine reserves based upon pricing New lines typically are insufficient for lag table methods Lag studies typically need 2 or 3 years of experience Reserve would be set equal to pricing loss ratio minus actual claims paid The anticipated loss ratio by duration should be reflected Loss ratios are typically lower in the first few years that ultimately due to underwriting selection or presumption of good health at outset

List components of effective LTC care management programs and the role of care managers for each component.

a. Clinical Delivery - Develop comprehensive care plans and work with multiple providers b. Identification and intervention - face to face comprehensive assessment c. Comprehensive Care Management developing a care plan that ties primary care to specialty care. d. Transition Management - understand each individual's circumstance and needs e. Network Development and Increased Access no impact.

Explain product features that Giant Group could use to provide its employees with inflation protection spr 2015

a. Periodic Increase offers - periodic offering to employees for increases in coverage on a guaranteed issue basis b. Automatic Inflation Protection - plan provision that provides automatic increases in benefits without employee interjection. This can be done via two methods: 1.) Simple inflation protection - benefit payments are increased using simple interest. 2.) Compound inflation protection - benefit payments are increased using compound interest

List common requirements imposed on firms providing utilization management services to HMOs.

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Explain reasons why: (i) Communicating employee benefit programs is challenging to plan sponsors. (ii) Employees of a small company should share in the costs of medical benefits. fall 15

i- The workforce could be diverse in composition, with various levels of education, financial sophistication, and interest in understanding plan provisions. Some benefits may be of little/no interest to a majority of employees until access is needed. It is difficult to find a medium of communication that would successfully engage such employees. Multiple regulatory requirements often affect plan features and lead to confusion, thus making it difficult for both employees and sponsors to keep up with the changes. ii- Most employees are accustomed to paying some level of contribution in today's benefit climate. It is much easier to set policy and precedent, and plan for future growth, by introducing contributions at the inception of the plan. Because the company is no longer new, introducing employee contributions now would run the risk of employee anxiety and ill will. Employee contributions can help avoid legal problems (arise from not clear on who is covered) Requiring a contribution motivates employees who have other coverage to decline the employer's plan. The current plan is "free" for all employees, so all will enroll. Employees are more responsible when using benefits that they have paid for. It helps them understand the value of the benefit and promotes a culture of consumerism. It also helps the employer in the form of reduced utilization of services and cost containment.

1-d (math) fall 2016

later

10c-10d spr 2016

later

11b fall 2016

later

14b spr 2016

later

2b-2g fall 2016

later

All of 12 fall 2016

later

all of 10 spr 2018

later

all of 11 and 12 spr 2016

later

3b-3e. spr 18

long

5c-5f spr 2018

long

All of 6 spr 18

long

all 6 (math) spr 2018

long

12b spr 2018

long later

7c-7d spr 18

long later

8a-8b spr 2018

long later

9-c spr 18

long later

Compare and contrast the use of the following underwriting and rating parameters for dental versus medical group insurance: Group size Geographic area Age and gender Waiting periods Minimum level of participation requirement Credibility thresholds fall 2017

long later

All of 3 and 4 spring 2014

math

Determine which program Insurer XYZ should implement in 2016 and which program(s) will be in-force in 2017. Justify your position and show your work. spr 2017

math long

3c fall 2013

math-long

3d fall 2013

math-long

9-3 fall 15

no

Budget constraints mean the state must trim the costs of the program for 2015. (i) Identify general approaches to reduce overall program costs. (ii) Identify one specific action the State of Bliss could take for each strategy.

no

Define each component listed above with respect to retrospective experience rating.

no

Define prospective experience rating and retrospective experience rating.

no

Describe beneficiary protections related to formulary design which ensure necessary drug treatments are provided to enrollees in Part D plans. spr 15

no

Describe how this affects the care delivered to the beneficiary. fall 14

no

Describe why the state of Euphoria might not want to switch to an integrated approach. fall 14

no

Explain how acute care services delivered to dual eligibles in a nonintegrated program result in limited cost savings. fall 14

no

Identify the steps an enrollee would take to get a Part D plan to pay for a drug that is not on the plan's formulary. spr 15

no

List and describe the four pricing objectives employers frequently want to achieve with their flexible benefit pricing structure. spr 2015

no

List and describe the various flexible benefit pricing structures available. spr 2015

no

New Albanian Health Insurance Company (NAHIC) wants to grow membership in its U.S. disability portfolio: • Noncancellable renewable individual disability insurance • Guaranteed renewable group long term disability (LTD) insurance • Optionally renewable group short term disability (STD) insurance (a) (2 points) Describe how renewability impacts each of these policies.

print

Describe the applicability, under FAS 60, of the following items for each of New Albanian's disability products: • Accrued experience refunds • Active life reserves • DAC reserves • Maintenance expense reserves • Premium deficiency reserves • Unearned premium reserves • Unpaid claims adjustment expense

print answers

Identify challenges in correctly setting these assumptions. fal 15

see last notecard

For each contract type, identify two A&H or group life products that have: (i) Long-term benefits (ii) Short-term benefits

table

List the ASOPs that you should consider when developing the rate filings and describe the reasons why each is relevant. fall 2017

• ASOP 8: Regulatory Filings for Health Plan Entities o Relevance: ASOP gives guidance for an actuary preparing or reviewing regulatory filings for health plan entities. • ASOP 23: Data quality o Relevance: Gives guidance in selecting data that underlies the actuarial work product, relying on data supplied by others, reviewing, using, and making disclosures on data quality. • ASOP 26: Small employer health plan benefits o Relevance: Applies to actuarial certifications of compliance prescribed by regulatory requirements that a carrier's rating methods and other actuarial practices applicable to small employer health benefit plans comply with statutory and regulatory rating constraints. • ASOP 41: Communications o Relevance: Gives guidance in actuarial communications (including rate filing communications).

List characteristics used to classify members into different rate categories and describe the reasons why each would cause material differences in expected claims costs.

• Age - older recipients are generally higher cost • Gender - females have higher costs due to pregnancy and delivery expenses • Qualifying event - those who are disabled are generally more costly than those who are not disabled • Geographic region - some locations are higher cost than average • Medicaid eligibility - Medicaid Expansion members may have higher costs than people covered by traditional Medicaid categories (low-income people, families and children) due to pent-up demand. • Eligibility for Medicare - this may reduce Medicaid costs due to coordination with Medicare benefits

List the data Your Eyes could use to price the individual dental plan. spr 2017

• Competitor rate filings • Own group experience • Milliman Guidelines (utilization) • ADA survey of dental fees • Reinsurers/TPAs

Explain why it may be difficult for XYZ to accurately project 2017 claims using 2012 experience. spr 17

• Considerable uncertainty around the morbidity level of issuer's insured members. (Change in mix) o Many new members who were previously uninsured. o Shifts in membership across multiple markets (individual, small group, large group, Medicare Advantage, Medicaid) • Changes in plan design o Average benefit level will be higher in 2014 than in the past due to minimum actuarial value and essential health benefit requirements. o Group business could see the opposite effect, with silver plans becoming the de factor benchmark. o Low-income cost-sharing subsidies o Will affect reserving techniques. • Increased provider risk sharing o Issuers will have to determine provider incentive liabilities for amounts owed to providers under gain sharing. o If claims exceed targets, issuers need to decide whether to set up a receivable or cut off claim payments. o Provider solvency becomes an issue. • Intra-year Prior Period Reserve Development o Should be expected to be significant in periods immediately following a large change in the risk pool. o Over time, will diminish to historic levels. o Can be offset by risk corridor and minimum loss ratio. • Implementation of ICD-10 o Transition to ICD-10 could lead to longer lag times and greater volumes of pended claims - due to coding errors and questions. o Will further add to the volatility. • Any other valid arguments.

Describe the most common types of managed care overlays. spr 2017

• General Utilization Management- companies offer a menu of UM activities selected by employers or insurers • Large case management- to assist employers and insurers with very costly cases. Includes screening, collection of information, monitoring, assistance in managing the case, and negotiating provider payments • Specialty Utilization Management- utilization review for specialty services • Disease Management- focus on specific common, chronic diseases rather than utilization more broadly • Rental Networks- networks of contracted providers within markets • Workers' Compensation Utilization Management- standard UM and some unique aspects involved with workers' compensation benefits

List the components of medical trend. spr 2017

• General macro-economic factors that drive medical costs (the force of trend) • Changes in the characteristics of the covered population, including demographics and health status • The structures of the carrier's provider contracts and the changes in that structure • Changes in utilization due to managed care initiatives • Benefit and cost sharing provisions, and changes in those provisions • Random fluctuations

Describe plan consequences of an ACA MLR calculation fall 2017

• If MLR is > Required minimum MLR - Rating Changes; should have charged higher amount of premium for policies, increase rates • If MLR is < Required minimum MLR - Have to pay a rebate back to enrollees

Recommend four dental benefit plan changes that could drive the experience of Your Eyes and Smiles closer to its benchmark. Justify your recommendations. fall 2017

• Increase member coinsurance on class III - higher member cost share to further steer members to preferred providers and control costs • Increasing non-preferred deductible - to steer members to preferred providers • Frequency limitations for preventive as well as major procedures. • Separate annual maximum for preferred and non-preferred services - decrease non-preferred annual max to limit insurer liability

Describe the regulations that apply to insurance companies as they relate to medical loss ratios (MLR) and the justification for each regulation (ind and small) fall 2017

• MLR Formula: ACA MLR: (Health care claims + Quality Imp Expenses) / (Premiums - Tax, Licensing Fees, and Regulatory Fees) o MLR: Small Group Fully Insured 80% o MLR: Individual 80% o MLR: Large Group Fully Insured: 85% o MLR: Self-Funded: None • Purpose: o Limits the portion of premium dollars health insurers may spend on admin, marketing, and profits. o Insurers must publicly report the portion of premium dollars spent on health care and quality imp. o Insurers failing to meet the MLR standards must pay rebates to consumers beginning in 2012.

Describe adjustments required to the base experience from Windy state to make it appropriate for use in Sunny state.

• Missing data: adjustments for missing encounters • Incomplete data: for example, IBNR or claims in progress of settlement • Population adjustment: for differences between the base and rating period • Retroactive eligibility: for coverages retroactively effective prior to application • Covered services: must reflect differences in requirements at the state level • Data smoothing: to address anomalies and outliers in the data • Claim cost trends: include adjustments for unit cost and utilization trends • Non-Medical expenses: admin, taxes, underwriting gain, etc.

Recommend which technique is most suitable to present to a credit rating agency. Justify your response. spr 17

• Recommendation o Recommend a pro forma statement o It is the most formal method o It presents information in a form suitable for additional financial analysis. o It is a great platform for effective financial planning where management carefully analyzes their forecast to decide if it is acceptable or whether it must be changed to avoid identified problems.

Compare and contrast the three financial forecasting techniques. spr 17

• Similarities o If the assumptions are the same, each method produces the same result o None of the methods are biased by inflation. • Differences o Pro Forma Principal means by which operating managers can predict the financial implications of their decisions. Prediction of what the company's financial statements will look like at the end of the forecast period. Often based on percent-of-sales forecasts Generate forecasts that are strictly applicable only on the forecast date and thus require care when dealing with seasonal business. o Cash Flow Forecast Projects external funding required as the difference between anticipated sources and uses of cash over the forecast period. Less informative than pro forma statements o Cash budgets Projects the change in cash balance over the forecast period as the difference between anticipated cash receipts and disbursements. Relies on cash rather than accrual accounting. Commonly used for short-term forecasts Less informative than pro forma, but easier to understand

Identify other sources of data that the MCO could use and describe the advantages and disadvantages of each besides experience

• State actuary summaries of claim or encounter data for the state managed care program o Advantage: reflects general experience under the Sunny State program o Disadvantage: may not reflect the particular MCO's mix within the Sunny State • State actuary summaries of claims experience under the state fee for service program o Advantage: may include more years of experience, if transition to managed care was recent o Disadvantage: May be difficult to anticipate appropriate level of managed care savings achievable • Sub-capitation rates from vendors Windy State will contract with o Advantage: best source of actual cost data for MCO o Disadvantage: will not cover all categories of service (needs to be combined with non-sub-capitated cost estimates • State Fee Schedules for Sunny and Windy States o Advantage: can use in conjunction with Windy State data to reflect differences in provider reimbursement between Windy and Sunny State o Disadvantage: can be cumbersome to re-price claims

List the requirements for actuarially sound Medicaid rates. fall 2017

• The rates have been developed using generally accepted actuarial principles and practices • The rates are appropriate for the population to be covered and the services provided • The rates have been certified by an actuary who meets the qualification standards established by the AAA • Medicaid capitation rates are "actuarially sound" if, for business and period covered by the certification, projected capitation rates and other revenue sources provide for all reasonable, appropriate, and attainable costs

Describe the primary approach insurers use to address these limitations. fall 2017

• The traditional solution for analysts is to divide each of the expense items by the membership to which the expenses apply, rather than revenues. Corresponding with how health plans bill for insurance, the cost attributes are standardized in PMPM units.

List the limitations in using same-size-income statements. fall 2017

• There are issues with reporting on a percent of revenue. • Competitive pressures on health plan pricing can affect same size income statements. • Using same-size income statements presents challenges managing actual business operations.

Describe employer considerations in determining the appropriate level of financial commitment to their benefit plans. fall 2017

• Total Compensation Philosophy- reflects the employer's overall compensation levels, how it's divided between salary and benefits and what types of benefits are offered. • Benefits Budget- employers need their benefits program to fit within their budgetary constraints, including payroll contributions • Benefit Competitiveness- Consider the total benefit structure compared to other employers with whom they compete for talent. • Collective Bargaining- employers with populations who might consider entering into a collectively bargained agreement may be inclined to provide more generous coverage at a lower cost to avoid unionization • Legislative and Regulatory Issues - Can influence payroll contribution levels, as has been experienced in the United States as a result of the Affordable Care Act (ACA)

Explain how ACA risk-adjustment will increase the uncertainty surrounding XYZ's financial statements. spr 17

• Uncertainty as to the issuer's own risk score. o Risk-adjustment is concurrent, thus the insurer will not have all relevant data at year-end. o Projecting IBNP claims would require new methodologies to be developed - substantial uncertainty exists around the validity of the arising estimates. • Uncertainty as to other issuer's risk scores o Perhaps the largest uncertainty o Ultimate payment is based on the relative relationship between its aggregate risk score and the risk scores for those of all issuers participating in that risk-adjustment cell. o Issuer will need to take a position as to what it thinks the aggregate risk score across the entire risk-adjustment cell. o Changes by one issuer in information reported or how information is classified can impact significantly the risk-adjustment estimates for all issuers. o This uncertainty will be greater in 2014 than in subsequent periods. • Uncertainty as to member exposure o Issuers are required to extend the premium grace period from 30 days to 90 days for any member receiving a premium subsidy on the exchanges. o Thus it is less clear at year-end which of the issuer's members have remained through the entire year. • Granularity of the calculation o Commercial risk-adjustment is not a single national calculation but rather a series of separate calculations for each risk-adjustment cell. o Complicates the modeling required to perform effective estimates of commercial risk-adjustment balances. • Implications of data reviews o The regulations call for a data validation review that could lead to payment adjustments.