Miscellaneous 3 Flashcards
straight line amortization
recognizes the PSC (private service costs) sooner
= PSC/ (service years/ participants)
amortization - equal amount assigned to each future year of service
amortization for year X =
PSC * years of service in year X / total years of service
pension plan assumptions that are also relevant for retiree group benefits
economic assumptions
- inflation
- discount rate
- asset returns
- salary increases
- Social Security increases
demographic
- turnover of employment
- mortality
- disability
- retirement incidence
differences of retirees compared to active employees
- Harder to communicate because they do not come to work
- Many have family physicians they have been seeing for a long time and don’t want to change providers
- Some have moved from where they worked so it is difficult to physically meet for company-sponsored event.
ASOP #50 provides guidance for determining the standards for the following: (3)
- Categorizing individual and SG plans into metal tiers
- Testing whether employer-sponsored health insurance plans meet the federal minimum value
- Making any required certification related to the above tasks
purpose of ASOP #50
Guidance to actuaries who are determining the actuarial value of a health insurance plan and testing whether the minimum value requirement is met in accordance with the ACA
actuarial soundness definition
Premium rates are actuarially sound if projected premiums in the aggregate are adequate to provide for all expected costs
purposes of ASOP #26
Guides the preparer of the actuarial certification by identifying the issues to be addressed and the required documentation
regulatory benchmarks for rate filings
- rate adequacy
- rates not excessive
- rates not unfairly discriminatory
- projected loss ratio
health filing definition
A required regulatory filing for health benefits which requires projection of future contingent events for rate or benefits, or financial projections
purpose of ASOP #8
provide guidance to actuaries regarding the preparation & review of regulatory filings for health plan entities
ACA premium subsidies are heavily distributed toward
older people
For ACA plans, the 80% loss ration is applied at what level?
aggregate level for all metal tiers, all ages combined
expected claim cost PMPM formula using AV
allowed cost * AV
benefit adjustments for CSRs & the % of FPL in which they apply
AV - FPL
73%: 200-250%
87%: 150-200%
94%: 100-150%
The affordability measure for ACA premium subsidies is measured using which plan?
2nd lowest shift silver plan
eligibility requirements for a premium subsidy under the ACA
- income level from 100-400%
- purchase a plan in an individual exchange
- generally not eligible for other coverage
credibility brackets for ACA MLR calculations
< 1,000 life years: Non-credible
1,000 < life years < 75,000: partially credible
75,000 < life years: fully credible
ACA MLR requirements don’t apply to:
self-funded plans, even when they are administered by an insurer
risk adjustment transfer formula in terms of revenue
required revenue - allowed revenue
difference between total MMs & billable MMs
billable MMs don’t include dependents over 3 eldest children
The 2nd half of the RATP formula..
uses what?
measures what?
Measures premium revenue if premium was solely based on age, actuarial value, induced demand, and geographic cost differences
1st half of risk transfer formula measures:
the plan’s premium with risk selection
ACA - components of the risk adjustment transfer formula
- PLRS (plan liability risk score)
- AV (actuarial value)
- ARF (allowable rating factor)
- IDF (induced demand factor)
- GCF (geographic cost factor)
True or False
All risk adjustment is budget neutral
False
ACA budget neutral, MA & PD are not always
HHS risk adjust methodology
- Model
a. HHS Hierarchical Condition Categories (HHS-HCC)
b. assigns risk score based on demographics & diagnoses - Risk Transfer Formula
a. balances transfer funds to account for health risk differences while preserving permissible premium differences
Risk adjustment shifts the competitive focus from risk selection to:
- quality
- efficiency
- value
ERISA
Employee Retirement Income Security Act of 1974
Federal tax & labor law that establishes minimum standards for pension plans in private industry
group term life is subject to social security & Medicare taxes after what amount?
$50K
MLRs introduced by the ACA
Ind: 80%
SG: 80%
LG: 85%
index rate under the ACA
expected average allowed claims for EHBs for the carriers single risk pool
NAIC model - fair marketing standards
- any plan offered for sale by a carrier to a small employer within a class must be available to all small employers within the same class
- make reasonable disclosures
- commissions & other sales compensation cannot vary by health status, claim experience, industry, occupation, or geographic location
- No carrier or producer may encourage an employer to exclude an employee from coverage
Rate increase limitations form the NAIC model
- the % change in the new business rate
- 15% annually for the group’s experience
- any adjustment due to change in coverage or case characteristics
ACA permitted rating variables
- benefit plan
- geographic area
- age (3:1 ratio)
- family size - no premium for more than 3 children dependents
- tobacco usage (1.5:1 ratio)
Financial incentives to purchase through the exchange
SG: tax credit (50% of premium) for 1st 2 years for employers with fewer than 25 FTEs with an average annual salary below $50K
who purchases insurance through an exchange
- people who qualify for subsidies
- if employer plan is non-qualified or unaffordable
- high risk individuals
- small employers for tax subsidies
- those not served:
a. those on large employer plans
b. Medicaid
c. Medicare
what is an exchange?
a market for health insurance products offered by multiple insurers. For consumers it is potentially a one-stop shopping place for health insurance.
The ACA expanded Medicaid to all non-Medicare eligible individuals with incomes up to ___% of FPL
133%
state’s choice to expand, Supreme Court ruling in 2012
transitional risk corridor
effective 2014-2016
compares a plan’s actual costs to target costs and the plan will either pay a portion of a gain or collect a portion of a loss, according to a defined schedule
plans must be within __% of target AV to be compliant
2%
employer financial implications of the ACA
- employer mandate
- small business tax credit
- excise tax for high-cost health plans
- transitional reinsurance
- retiree drug subsidy
- Patient-Centered Outcomes Research Institute
Due to HIPAA, a group health plan, group insurer, or HMO may not establish eligibility rules or premium levels based on:
health status
plans exempt from ERISA
- government plans
- church plans maintained by a tax exempt church
- plans required by state law (worker’s comp, unemployment, disability)
- plans maintained outside the U.S. & cover nonresident aliens
- plans covering self-employed persons
True or False
it is voluntary for HMOs to become federally qualified
true
state regulatory focus (for HMOs)
- protecting the consumers
- establishing & maintaining ground rules for competition
- assuring financial solvency
common components of LTC laws & regulations for group plans
- benefit triggers
- continuation or conversion options
- protection against unintentional lapse in coverage
- offer of automatic increase in benefits (to offset inflation)
- limits on pre-existing conditions
- type used in printed material
- form & rate filing requirements
The ACA standardized & expanded SG reforms with the following requirements:
- pooling risk @ state-wide level through risk-adjustment
- limiting rating factors- only allow area, age (standard), benefit, network, & tobacco
- expanding definition of SG to 100 employees
- 10/2015 law - state decides - extending guarantee issue through a 1 month open window where participation & contribution standards cannot constrain eligibility
Medicare doesn’t pay providers for these events (and the patient can’t be billed)
- wrong-site surgeries
- transfusion with wrong blood type
- pressure ulcers (bedsores)
- falls or trauma
- hospital acquired infections associated with surgeries or catheters.
3 elements of healthcare
- high quality
- wide access
- low cost
possible to achieve 2; rare to achieve all 3
This ASOP provides guidance to actuaries when providing services to respond to or assist auditors or examiners in connection with a financial audit, review, or examination
ASOP #21
income statement equation
Net Income = Revenues (premium & income) - benefits paid - expenses - taxes
balance sheet formula
assets = liabilities + equity
equity = surplus + capital
comprehensive examples of liabilities & revenues for universal life, deferred annuities, & non-traditional policies
liabilities - premiums
revenue:
- investment income
- fees
- charges
comprehensive income
includes all charges in equity other than owner-related transactions
- includes the effects of unrealized gains & losses
If an outflow has a future utility, it is considered an ____
asset instead of an expense
GAAP rules for financial statement reporting
- single currency is used
- currency is not adjusted for inflation
- non-monetary items must be converted into a monetary value
Advance payments to health insurers due to the ACA.
May require subsequent true-ups
- premium subsidies
- portion of premium paid by government for an enrollee - Cost sharing reduction payments
- silver plans with reduced cost sharing
- Trump ended in 2017
issues for financial statements due to HIP fee & reinsurance contributors
- expense estimation risk
- earning emergence implications of revenue/ expense mismatch
- comparability across insurers subject to different tax code provisions
- customer rebate implications of revenue/ expense mismatch
- cash flow timing
- administration of self-funded business
3 key differences between the reinsurance contribution & the HIPF
- more direct relationship between the reinsurance contribution & an enrollee than the HIP fee & an enrollee
- far greater transparency with respect to the magnitude on the reinsurance contribution
- reinsurance contribution is tax-deductible
achieving maximum value (for a Health Plan) involves the maximization of:
growth
evaluated with Gordon Constant Growth Model
Other financial analyses
3 applications
- year-over-year analysis
- comparisons with other, similar enterprise
- financial planning & analysis
- company’s results over successive years
- company’s results compared to similar business models, products, philosophies, geographical focus, & capital costs
- establishing goals & measuring performance relative to those goals.
