Appendix F measuring retiree obligations

Question 1

Measuring Retiree Group Benefit Obligations
Part 1 of 2
1. Modeling plan provision
2. Modeling the covered population

Answer 1

1. Modeling plan provisions
   
   1. 1 components of the modeling plan: covered benefits, benefit limitations, exclusions, cost sharing, optional benefits, anticipated changes, participant contributions
   2. 2 historical practices: claims payment practices, cost sharing and contribution levels, pattern of plan changes, governmental programs
   3. 3 consider plan documents, administrative practices, government programs, communications to participants, plan sponsor decisions
2. Modeling the covered population
   
   2. 1 projected size and demographic composition
   3. 2 census data
   4. 3 EEs currently not accruing benefits but may in the future
   5. 4 spouses and survivors of participants
   6. 5 dependents
   7. 6 adjust for retirees covered for group benefits but not receiving pensions benefits (and vice versa)
   8. 7 use of grouping
      
      2. 7.1 based on demographic characteristics
      3. 7.2 group plans with similar expected costs and features
      4. 7.3 disclose combining of plans and grouping of populations

Question 2

Measuring retiree group benefit obligations
Part 2 of 2
1. Modeling initial rates (aka rate making elements)
2. Selecting a cost allocation policy. See also retiree 7and9
3. Use of roll-forward techniques (rather than conduct a new measurement)

Answer 2

1. Modeling initial rates (aka rate making elements)
   
   1. 1 net aggregate claims data
      
      1. 1.1 gross claim, net paid, deductible, copay, cost not covered
   2. 2 exposure data by age, gender, retiree, spouse, or dependent
   3. 3 use of multiple claims experience period
   4. 4 credibility
   5. 5 impact of Medicare and other offsets
   6. 6 age-specific claims rate
   7. 7 adjust for administrative practices and expenses
   8. 8 adjust for large individual claims
   9. 9 adjust for trend
2. Selecting a cost allocation policy. See also retiree 7 and 9
   
   2. 1 criteria for actuarial cost method
      
      2. 1.1 limit on allocation period
      3. 1.2 reasonableness of allocation basis
   3. 2 amortization methods (for amendments, actuarial gains and losses, changes in assumptions, or changes in the actuarial cost method)
   4. 3 cash flow adequacy
   5. 4 actuary may be required to use a prescribed cost allocation (FAS106 = PUC)
      
      2. 4.1 PUC projected unit credit
3. Use of roll-forward techniques (rather than conduct a new measurement)
   
   3. 1 full and partial roll-forward
   4. 2 do not rely on prior measurement of 3+ years old
   5. 3 do not use full roll-forward when key component changed significantly
   6. 4 disclosure

Question 3

Retiree obligations: data and disclosure

Answer 3

1. Identify data, assumptions, and methods in sufficient clarity that an actuary in this area could appraise the actuary’s work
   
   1. 1 plan provisions
   2. 2 covered population
   3. 3 per capita health care rate and assumed trends
   4. 4 modeling techniques
   5. 5 model components prescribed by other
   6. 6 unresolved inconsistencies in data or administration
   7. 7 information significant to interpreting results
2. This ASOP does not require a PSAO (Prescribed Statement of actuarial opinion)
3. Deviation from standard: be prepared to justify the use of procedures that depart from this standard

Question 4

Forms of Medicare integration

Answer 4

1. Note: E = eligible 
             M = paid by Medicare
             % = cost sharing
2. Full COB (aka standard COB)
   2.1 pays difference between eligible charges and Medicare
   2.2 Min (E-M, E%)
   2.3 most expensive
3. Exclusion
   3.1 apply cost sharing to dif between eligible and Medicare
   3.2 (E-M)%
4. Carve out
   4.1 apply cost sharing to eligible then subtract Medicare
   4.2 E% - M
   4.3 least expensive