MC Chapt 22 Underwriting And Rating

Question 1

Community Rating vs experience rating

Answer 1

1. Community rating: experience of a group of indiv is not taken into account, only the collective experience of the risk pool
2. Experience rating: manual rate is blended with group-specific experience
   
   2. 1 allowed under ACA for groups with > 100 EEs

Question 2

Base rate development

Part 1 of 2

Answer 2

1. Historical experience info reflected in base rate
   
   1. 1 population (e.g. Commercial, Medicare, Medicaid, other)
   2. 2 covered services; cost sharing
   3. 3 provider payment arrangements; demographics
   4. 4 Average members per contract; geographical area
   5. 5 occupation; health status
   6. 6 degree of health care management; coverage effective date
   7. 7 Level of out of network usage, if applicable
   8. 8 presence of workers’ compensation insurance
   9. 9 Underwriting practices; claim admin practices; distribution methods

Question 3

Base rate development

Part 2 of 2

Answer 3

1. Adjust for changes in health plan operations between base period and projection period
2. Projection base rate: trending forward to projection period
3. Claims data converted to an incurred basis including IBNR
4. Inc claims matched with exposure to develop PMPM
5. Actuarial cost model: PMPM by service category and produce codes
6. PMPM medical cost = (the annual utilization per 1000) * (avg charge per service) /12000 - PMPM cost sharing
7. Retention: converts medical cost to PMPM premium
8. Conversion of rates from member to EE level

Question 4

Managing the business
Examples of typical ongoing actuarial reports
Financial Gain/Loss Summaries AND Large Group-Specific Reports

Answer 4

1. Financial Gain/Loss
   
   1. 1 Total block of business
   2. 2 Line of business (commercial vs Medicare)
   3. 3 Product line (HMO vs PPO, traditional vs CDHP)
   4. 4 Group size (large vs small group)
   5. 5 Type of business (new bs renewal)
   6. 6 type of medical service (hospital inpatient, outpatient, etc)
   7. 7 Calendar year or quarter
   8. 8 Each group individually (usually large group)
2. Large group-specific reports
   
   2. 1 Earned premium
   3. 2 Paid claims
   4. 3 Medical loss ratio
   5. 4 Large claim information
   6. 5 Benefit plan changes
   7. 6 subscriber and membership counts by contract type

Question 5

Managing the business
Examples of typical ongoing actuarial reports
Incurred claim costs

Answer 5

1. Total block of business
2. Line of business
3. Product line
4. Group size
5. Type of business
6. Funding arrangement
7. Geographical area
8. Policy duration of individual/small group (not usually applicable to large groups)

Question 6

Managing the business
Example of typical ongoing actuarial reports
IBNR

Answer 6

1. IBNR development
   
   1. 1 paid claim triangles
   2. 2 a lag development of incurred claims
   3. 3 a projection development of incurred claims
   4. 4 paid claim lags to monitor the speed of claim processing
   5. 5 analysis of seasonality/working days
   6. 6 medical cost trends, along with monthly, quarterly, and annually incurred claim estimates
2. IBNR Reports
   
   2. 1 Line of business (commercial vs Medicare)
   3. 2 product line (HMO vs PPO, traditional vs CDHP)
   4. 3 Type of medical service (hospital inpatient, outpatient, etc)

Question 7

Type of underwriting depends on

Answer 7

1. Type of UW depends on:
   
   1. 1 the time (e.g at issue, during the plan year, or renewal)
   2. 2 group size
   3. 3 risk arrangement (fully insured and self-insured)
2. UW at issue
   
   2. 1 health status and preexisting condition limitation not allowed under ACA
   3. 2 Ensuring a valid ER-EE relationship, min participation, Ability to pay, other coverage, persistency
3. Underwriting during the plan year and at renewal
   
   3. 1 ACA does not prohibit experience rates for large groups

Question 8

Managing the business
Examples of typical ongoing actuarial reports
Membership

Answer 8

1. Line of business
2. Product line
3. Group size
4. Type of business
5. Contract tier
6. Geographical area
7. Age and gender