ASOP 26 Compliance- Certificafions Of Small eR Plans

Question 1

Discuss actuarial soundness

Answer 1

1. Premium rates are actually sound if, projected premiums and investment income provide for all expected costs (including: benefits, settlement expenses, marketing and administrative expenses, and the cost of capital)
2. Based on information available at the time premium rates were established

Question 2

Actuarial certification of small employer plans

Answer 2

1. Testing of rates for violations
2. Analysis of rates for soundness
   
   2. 1 retrospective certification: relates to premium in effect during period and information that was available when the rates were established
   3. 2 prospective certification: relates to the premium for period to which the certification applies
3. Documentation of compliance
4. Qualified or limited opinion
5. Content of certification
   
   5. 1 whether all practices required to be included are in compliance
   6. 2 listing of practices that are covered in the certification
   7. 3 identification of the time period covered
   8. 4 changes in rating methods during the time period
   9. 5 description of any subsequent events
   10. 6 where a qualified certification is given, action being taken
   11. 7 where a limited certification is given, requirements that are not addressed
6. Additional disclosures (see master list in video handouts)

Question 3

Actuarial certification of small employer plans

Documentation of compliance

Answer 3

1. Rating methods and underwriting practices
   
   1. 1 description of the carrier’s rating methods and u/w practices
   2. 2 experience and other data used in the analysis
   3. 3 health plan contracts
   4. 4 sales brochures
   5. 5 the rating manual
   6. 6 formulas for calculating rate from the rating manual
   7. 7 a sufficient sample to test calculation
   8. 8 description of material changes to previously reviewed contracts
   9. 9 policy fees, admin charges, or application charges
   10. 10 other info prescribed by the regulatory requirements
2. Demonstration of compliance with rating constraints
   
   2. 1 explain how classes of business, average rates, rating bands, and rate increases comply with regulation
3. Demonstration of compliance with acturial soundness