Medicare

Question 1

Med Supp
Three Loss Ratios that must be met as part of Annual Filing

Answer 1

1. Lifetime Loss Ratio = (AV of past claims + PV of future claims) / (AV of past premiums + PV of future premiums)
2. Future Loss Ratio = PV of future claims / PV of future premiums
3. Expected Third Year Loss Ratio

Lifetime, Future, Third
Min Loss Ratios for Individual = 65%
Min Loss Ratios for Group = 75%

Question 2

Med Supp
Items to be included in Filing per Compliance Manual

Answer 2

1. Description of policy benefits
2. Description of marketing, underwriting, issue age limits
3. Historical Experience
4. Projected Future Experience
5. Actuarial Certification
   * Assumptions are reasonable and rates have been calculated using generally accepted actuarial principles

Question 3

Med Supp
Pricing Assumptions

Answer 3

1. Morbidity (Primary source from CMS, Trend the claim costs forward is important)
2. Mortality (usually included in persistency)
3. Persistency
4. Investment earnings
5. Selection factors/Underwriting
6. Age and sex distributions
7. Smoker/Non-Smoker
8. Area Factors
9. Expenses and Taxes
10. Other Considerations (Premium mode, Actuarial Certification)