ASOP 8: Regulatory Filings for Health Entities

Question 1

Section 1 - Purpose, Scope and Effective Date

Answer 1

1. Purpose
   - Guidance to actuaries preparing or reviewing required regulatory filings for health plan entities
2. Scope
   - Filings made to state insurance department, state health departments, the federal government, and other regulatory bodies
   - Primarily rate filings and financial projection filings

Question 2

Definitions

Answer 2

1. Health Filing
   a. Required regulatory filing, requiring projection of future contingent events, for rates or benefits, or financial projection

b. Rate filings include (but are not limited to):
- Filings of manual rates and rating factors
- Filings of rating methodology, such as experience rating formulas or factors
- Statements of actuarial soundness or rate adequacy
- Certification of benefit values

Question 3

Analysis of Issues and Recommended Practices

Answer 3

1. Purpose of filing
   a. Should clearly state applicable law it is intended to comply with
   b. If law is ambiguous, state how actuary interpreted the requirements
2. Assumptions
   a. The following are examples of potentially important assumptions
   - Premium levels and future rate changes
   - Enrollment projections
   - Morbidity, mortality, and lapsation levels and trends
   - Expenses, commissions, and taxes
   - Investment earnings and the time value of money
   - Health cost trends
   - Expected financial results
   - Profit margin, surplus contribution, surplus level
   - Expected impact of contractual arrangements with health care providers and administrators
   - Expected impact of reinsurance other financial arrangements
3. Use of Business Plans to Project Future results
   a. Actuary’s review of business plan should be considered in setting assumptions and methodologies used in the filing
4. Use of Past Experience to Project Future Results
   a. Actuary should adjust for known or expected changes in:
   - Selection of risks
   - Demographic and rate characteristics of insured population - Policy provisions
   - Business operations
   - Premium rates, claim payments, expenses, taxes
   - Trends in mortality, morbidity, and lapse
   - Administrative procedures
   b. When using past experience, consider credibility of data
5. Recognition of plan provisions
   a. Consider plan documents, administrative procedures, plan interpretations not in plan documents, and arrangements with providers
6. New Plans or Benefits
   a. If limited data is available on new plans, model used should be reasonable and consistent with similar benefits or plans of coverage
7. Projection of Future Capital and Surplus
   a. Actuary may be called upon to project results future capital and surplus
8. Regulatory Benchmark
   a. Actuary may be called upon to project results in relation to regulatory benchmark
9. Reasonableness of Assumptions
   a. Should be reviewed by the actuary
   b. Should be reasonable both individually and in aggregate
10. Other considerations
    a. Refer to ASOP 23 (Data Quality) when relying on data supplied by others
    b. When documenting, refer to ASOPs 31 (Documentation in Health Ratemaking) and 41 (Actuarial Communications)

Question 4

Communications and Disclosures

Answer 4

Disclose the following items:
a. Sources of information
b. Material information supplied by others and extent of reliance
c. Unresolved concerns that could affect actuarial work product
d. Conflicts arising from applicable law
e. Assumptions or methods prescribed by applicable law