Objective 5 - Regulations

Question 1

“Triple Arm” (three goals) Of Health Policy

Answer 1

1. Better Care for Individuals - the institute of Medicine lists six characteristics of quality health care (separate list)
2. Better health for populations - Public Health initiatives should address the upstream causes of poor health (see separate list)
3. Lower per-capita costs - the significance of health care within an economy can be measured by health expenditures as a percentage of GD. This percentage is much higher in the US than in other developed countries

Skwire Ch. 4, Page 40

Question 2

Characteristics of Quality Health Care

Answer 2

1. Safe - must avoid injuries to the patients
2. Effective - must provide services based on scientific knowledge to all who could benefit, and refrain from providing services to those not likely to benefit (avoiding underuse and overuse, respectively)
3. Patient-centered - should be respectful of and responsive to individual patient preferences, needs, and values, and ensure that patient values guide all clinical decisions
4. Timely - should strive to reduce wait times and delays that can be harmful for both those who receive care and those who give care
5. Efficient - should avoid waste, including waste of equipment, supplies, ideas, and energy
6. Equitable - should not vary in quality because of personal characteristics such as gender, ethnicity, geographic location, and socioeconomic status

Skwire Ch. 4, Page 41

Question 3

Causes of poor health and public initiatives to address them

Answer 3

1. Environmental factors that contirbute to population health:
   a) Lack of sanitized water
   b) Pollution (air and water)
   c) Violence (domestic, street, and gun violence)
   d) Unhealthy living environment
   e) Food-borne illness
   f) Lack of access to fresh, healthy foods
2. Community disease prevention - initiatives include childhood immunization requirements and free flu shots and preventive screenings
3. Lifestyle (e.g., obesity epidemic) - initiatives include healthy school lunch programs, safe pedestrian walkways, and taxes on unhealthy foods
4. Smoking and substance abuse - antismoking laws have been effective
5. Socioeconomic factors - income is related to poor health. Social programs such as Medicaid try to address this.
6. Wellness and disease management solutions - include programs around disease preventions, smoking, diet, fitness, or weight loss

Skwire Ch. 4, Page 45

Question 4

Potential Problems in an Unregulated Insurance Market

Answer 4

1. Dishonest company could gain a competitive advantage via:
   a) Misleading marketing materials
   b) Unfair price (only appears as a good value)
   c) Inadequate Reserves
2. Customers do not have the time or expertise to determine which firms are dishonest
3. Companies could become insolvent with no warning, leaving policyholders without coverage

Skwire Ch. 15, 229

Question 5

Goals of Insurance Regulation

Answer 5

1. Eliminate policies not providing the benefits expected
2. Prevent insolvency
3. Eliminate policies that provide poor value
4. Solve minor consumer problems
5. Maintain fair competition
6. Raise tax money
7. promote social goals

Skwire Ch. 15, 230

Question 6

The steps of regulation

Answer 6

1. (L)icensing - the firm agrees to be regulated. Agents may also be required to get a license
2. (I)nformation gathering - The purpose is to monitor financial soundness, confirm compliance, provide consumer information, and design new regulatory requirements
3. (P)rior approval - some jurisdictions require prior approval for certain types of insurance. This may include prior approval of policy language, premium rates, reinsurance arrangements, dividends, mergers, and investments
4. (E)nforcement - includes penalties such as fines, legal action, and/or license removal
5. (R)eceivership - may initially track financial condition, or may take over an insolvent company

LIPER - doesn’t mean anything, but now when I ink regulation steps, the word “LIPER” comes to mind

Skwire Ch. 15, 231

Question 7

Actions commonly taken by state regulators to help prevent insolvency

Answer 7

1. Capital Requirements (such as risk-based capital) - to protect against adverse deviations in experience
2. Guaranty funds - all companies are assessed to create a fund to protect the insureds of insolvent companies
3. Reserve Requirements - for claim reserves and liabilities, contract reserves, provider liabilities, and premium deficiency reserves

Skwire Ch. 15, 233

Question 8

Types of Consumer Protection Regulation

Answer 8

1. Disclosure - must disclose to a potential customer the key features of the insurance policy. This may include a shopper’s guide, outline of coverage, summary of benefits, or illustration
2. Reasonableness - includes mandated benefits and prohibited exclusions. Premiums must be reasonable in relation to benefits (loss ratio requirements)
3. Fairness - includes prohibitions on discrimination even though data may support it. For example, the ACA prohibits different premium rates by gender.

Skwire Ch. 15, 235

Question 9

Responsibilities of the insurance commissioner

Answer 9

1. (O)versee the operation of the insurance department
2. (I)nterpret insurance laws
3. Make (R)egulations implementing insurance laws
4. (L)icense Insurance companies, agents, brokers, and consultants
5. Conduct (E)xaminations of licensed insurers, and assess penalties for violations of laws
6. (R)eview form and rate filings - some states require that the commissioner approve the forms and rates prior to use
7. Regulate (A)dvertising - to protect consumers from unfair, inaccurate, deceptive, and misleading advertisements
8. Regulate (B)usiness Practices - such as underwriting and claim practices
9. Enforce (P)rompt pay laws
10. Regulate insurer (S)olvency - this is the most important duty of the commissioner

PROBE for LIARS

Skwire Ch. 16, Page 238

Question 10

Reasons for an insurance commissioner to assume an insurer’s assets

Answer 10

1. Non-cooperation with examiners
2. Refusing to remove questionable officers
3. Charter violations
4. State law violations
5. Endangered capital or suprlus
6. Technical insolvency

Skwire Ch. 16, Page 241

Question 11

Standard Contract Provisions Required by Most State Insurance Laws

Answer 11

1. (G)race Period - There must be a 31-day grace period for the payment of premium
2. (I)ncontestability - the validity of the policy cannot be contested for two years
3. (A)pplication and statements - the application has to be made part of the policy, and statements made by the insured are considered representations (not warranties)
4. (E)vidence of insurability - the policy must state when evidence of insurability is required
5. (M)isstatement of age provision - a policy must state how premiums or benefits will be adjusted due to misstatement of age
6. (C)ertificates - the insurer must issue certificates to the policyholder for delivery to each insured
7. (B)enefits and Eligibility - the policy must state the benefits and to whom they are payable, and include specific terms of eligibility for coverage

BE MAGIC (provisions might BE MAGIC)

Skwire Ch. 16, Page 242

Question 12

Additional contract provisions for group health plans

Answer 12

(These are in addition to standard provisions)

1. Preexisting conditions - this provision describes the exclusions or limitations that apply to preexisting conditions
2. Notice of proof of claims - establishes a time limit for notifying the insurer of a loss
3. Legal actions - this provision specifies the time period when a legal action may be brought on a claim (e.g. during first 60 days or more than 2 years after clm submission)

Skwire Ch. 16, Page 243

Question 13

Additional Contract provisions for Group Life Plans

Answer 13

(These are in addition to standard provisions)

1. There must be a provision identifying the designated beneficiary
2. Conversion Rights - this provision allows the policy to be converted to an individual policy (in certain situations)
3. Death during the conversion period - if a person dies within the conversion period, the amount available to be converted will be paid as a claim
4. Disability Continuance - active employees that become totally disabled can continue coverage for up to six months by paying the premium

Skwire Ch. 16, Page 243

Question 14

Provider protections related to preferred provider arrangements

Answer 14

1. (A)ny-willing-provider laws - require insurers to accept any provider willing to meet the insurer’s terms for participation
2. Limitations on benefit (D)ifferentials between preferred and non-preferred providers - to limit how much extra coinsurance the member must pay for using a non-preferred provider
3. Coverage of (N)on-preferred providers (required in some states) - effectively precludes exclusive provider arrangements
4. Requirements that (A)llied medical practitioners (chiropractors, dentists, and optometrists) be included in PPOs - these requirements are not common

NADA - (ain’t no way i’d use a non-referred provider without these…. zilch.. nada)

Skwire, Ch. 16, Page 248

Question 15

Consumer Protections Related to Preferred Provider Arrangements

Answer 15

1. Insurers must assure reasonable access to covered services and an adequate number of providers
2. The ACA requires emergency care to be covered at the same benefit level for all providers
3. Some states have tried to regulate quality assurance (measuring quality is difficult)

Skwire, Ch. 16, Page 249

Question 16

Requirements for an HMO to obtain and maintain a certificate of authority

Answer 16

(An HMO must have this certificate in order to operate as an HMO)

1. A description of the HMO’s organization, governance, and management
2. Contracts with providers - including copies of standard forms and contracts between providers, third-party administrators, and other third-party vendors
3. Coverage agreements
4. Financial information - including financial statements and a financial feasibility plan
5. Provider information - including a map or description of the geographic service area, and a list (with addresses) of all providers
6. Grievance procedure
7. Quality assurance program
8. Insolvency protection measures - HMOs must satify minimum net worth requirements, and a deposit of cash or securities is usually required

Skwire, Ch. 16, Page 252

Question 17

Advantages of federal qualification for HMOs

Answer 17

1. Equal contribution requirement - ERs that offer a federally-qualified HMO cannot financially discriminate against a person enrolling in that HMO
2. The HMO is allowed to contract as a Medicare or Medicaid carrier
3. The federal HMO Act preempts all stae laws that would prevent the HMO from acting in accordance with the federal HMO Act
4. Federally-qualified HMOs may be automatically deemed to comply with ERISA’s claim appeal requirement

Skwire, Ch. 16, Page 259

Question 18

Disadvantages of federal qualifications for HMOs

Answer 18

1. HMO must establish a separate line of business for any non-qualified HMO business
2. Minimum coverage requirements of federally-qualified HMOs
3. Restrictions on the use of anything more than “nominal” copayments
4. Federal restrictions on rating may be more restrictive than state requirements

Skwire, Ch. 16, Page 260

Question 19

Taxation of Major Group Insurance Beneifts

Answer 19

1. Health (medical, dental, vision, and prescription drugs)
   a) Employer receives a current tax deduction for its expenses. There are no tax advantages for prefunding future benefits, except that for retiree medical plans a deduction is allowed for benefits that are funded over employees’ working lives.
   b) The benefit value for the employee and dependent is free from income and employment taxes (includes employer’s contributions to provide coverage and the insurance proceeds)
   c) No limits on the amount of tax-favored benefits
2. Group Term Life Insurance
   a) Employer receives a current tax deduction for its expenses
   b) The coverage and the insurance proceeds are tax-free for up to a $50,000 death benefit on the employee (not dependents)
   c) Other coverage amounts are taxed as employee compensation
3. Disability Insurance
   a) Employer’s expenses are deductible as they are paid
   b) To the extent the value of coverage is taxed, the proceeds paid to disabled individuals are not taxable. But to the extent the value of coverage is not taxed, the proceeds are taxable.
4. LTC Insurance - proceeds under a qualified plan are deemed to be health insurance and receive the same tax-favored treatment

Skwire, Ch. 16, Page 269

Question 20

ACA Individual and Group Market Reforms

Answer 20

1. Improving Coverage - Requirements Effective in 2010
   a) Expanded Dependent Coverage - all plans must cover dependent children until age 26
   b) Limits on recessions of insurance coverage - these are prohibited except in cases of fraud
   c) Restrictions on lifetime limits. And plans may impose annual limits only for non-essential health benefits
   d) Preventive care coverage - services rated A or B by the US preventive Services Task Force must be covered at 100%
2. Medical Loss Ration (MLR) - plans must provide rebates to consumers if the MLR is below 85% for large groups (101 or more employees)
3. Premium rate review - established a process for reviewing health plan premium increases and requiring plans to justify “unreasonable” increases
4. Early retiree reinsurance program - set aside $5 billion to partially reimburse employers for high-=cost retirees over age 55 who were not yet eligible for Medicare
5. National high-risk pool - provided subsidized coverage until 2014 for previously uninsured individuals with pre-existing conditions

Skwire, Ch. 18, Page 292

Question 21

ACA Rating Requirements Effective in 2014

Answer 21

1. Plans may not impose pre-existing condition exclusions
2. Rating variation is only allowed based on:
   a) Age (limited to a 3 to 1 ratio from highest to lowest age band)
   b) Geographic rating area
   c) Plan design and network relativities
   d) Tobacco use (limited to a 1.5 to 1 ratio)
   e) Family composition
3. Individual and small group plans must be offered on a guaranteed issue and renewal basis
4. Waiting period for coverage must not exceed 90 days

Skwire, Ch. 18, Page 293

Question 22

Categories of Essential Health Benefits (EHBs) under the ACA

Answer 22

1. Ambulatory patient services
2. Emergency Services
3. Hospitalization
4. Maternity and newborn care
5. Mental health and substance use disorder services
6. Prescription drugs
7. Rehabilitative and habilitative services and devices
8. Laboratory services
9. Preventive wellness services and chronic disease management
10. Pediatric services, including dental and vision care

Skwire, Ch. 18, Page 294

Question 23

Provisions of the ACA health insurance exchanges

Answer 23

1. Each state will have an American Health Benefit Exchange for individuals and a Small Business Health Options Program (SHOP) Exchange for businesses with up to 100 employees
2. Plans in exchanges must cover EHBs, have an out-of-pocket limit at or below the HSA limit, and fall into one of the ACA metal levels (or the catastrophic plans, separate list)
3. States have various options for establishing exchanges (separate list)
4. Single risk pool - an insurer must combine all of its health plans (other than grandfathered plans) in a given market when setting premiums. All of its individual plans must be pooled together, and all of its small group plans must be pooled. Some states require the use of a combined risk pool for both markets
5. Participating insurers must meet qualification requirements with respect to networks, marketing, reporting, and consumer assistance
6. Quality is to be rewarded through market-based incentives
7. Exchanges may also offer Consumer Operated and Oriented Plans (CO-OPs) and multi-state plans

Skwire, Ch. 18, Page 294

Question 24

Options for States When Establishing Exchanges

Answer 24

1. State-based marketplace - the state performs all marketplace functions. Consumers apply for and enroll in coverage through websites maintained by the states.

(Next Options, Consumers enroll in coverage through healthcare.gov)

2. Federally-supported state-based marketplace - still considered state-based marketplaces, but the states rely on the federally-facilitated marketplace IT platform
3. State-partnership marketplace - the state administers in-person consumer assistance, and HHS performs the remaining functions
4. Federally-facilitated marketplace - HHS performs all marketplace functions

Skwire, Ch. 18, Page 295

Question 25

Cost Sharing Requirement for Non-grandfathered Individual and Small Group Plans

Answer 25

1. These plans, with the exception of catastrophic plans, must have an actuarial value that is within two percentage points of one of the metal levels. Actuarial value is the percentage of total allowed costs covered by the plan.
2. The metal levels and target actuarial values are:
   a) 90% - Platinum
   b) 80% - Gold Plans
   c) 70% - Silver plans
   d) 60% - Bronze plans

3 Insurers may offer a catastrophic plan to enrollees under age 30

Skwire, Ch. 18, Page 295

Question 26

Premium Stabilization Programs in the ACA

Answer 26

1. Risk Adjustment - permanent program that began in 2014
   a) Designed to allow a health insurer to price products without factoring in the health status of the individuals purchasing these products
   b) Insurers whose pools have lower-than-average risk scores will transfer funds to those whose pools have higher-than-average risk scores
   c) Applies to individual and small group products
2. Reinsurance - was in effect from 2014-2016
   a) Applies to individual insurance only
   b) Is funded by assessment paid by commercial insurers and self-funded plans
   c) The 2014 benefit will be 80% of claims between $60,000 and $250,000 for a given individual
3. Risk Corridor - was intended to be in effect from 2014-2016
   a) Designed to provide some protection against variability in claims costs
   b) Applies to individual and small group products

Skwire, Ch. 18, Page 296

Question 27

ACA coverage Mandates

Answer 27

1. Individual Mandate - beginning in 2014, US citizens and legal residents must have qualifying health coverage or pay a tax penalty, unless an exception applies. The penalty is the greater of:
   a) A dollar amount per person (up to 3 per family): $695 in 2016 (indexed after)
   b) A percent of income: 2.5% in 2016 and later
2. Employer mandate - beginning in 2015, employers with 50 or more full-time employees must offer coverage or pay a fee. The fee = $2,000 * (full-time EEs - 30), but is adjusted based on the number of EEs who received a premium tax credit

Skwire, Ch. 18, Page 298

Question 28

ACA provisions related to Medicare

Answer 28

1. Linking payments to quality outcomes - e.g., providing incentives to hospitals that meet certain performance standards
2. Establishing a national strategy to improve health care quality
3. Encouraging development of new patient care models - e.g., the Medicare Shared Savings Program
4. Medicare plan Improvement, such as:
   a) Medicare Advantage plans can receive bonuses or reallocations of rebates based on certain quality measures. These plans are also now subject to MLR requirements
   b) For Medicare Part D, beneficiary coinsurance in the coverage gap will be phased down from 100% to 25% by 2020
5. Ensuring Medicare sustainability - e.g. temporary adjustment to the calculation of Part B premiums
6. Health care quality improvements - e.g., establishing community health teams to support patient-centered medical homes
7. Prevention and wellness provisions - cost sharing for preventive services was eliminated
8. Creating new demonstration programs
9. Improving coordination of Medicare/Medicaid dual eligibles

Skwire, Ch. 18, Page 299

Question 29

Other ACA health insurance market reforms

Answer 29

1. Essential Health Benefits (EHBs) - all qualified individual and small group health plans must off an EHB package (see separate list for categories of EHB)
2. Grandfathering of existing plans - plans in existence when the ACA was enacted are exempt from many ACA requirements. But most of the benefit and coverage requirements do still apply.
3. Premium credits and cost-sharing subsidies for those with low incomes (separate list in “implications of ind subsidies in the ACA)
4. Small business tax credits
5. Medicaid - expanded to all non-Medicare eligible individuals with incomes up tot 138% of FPL. Due to SCOTUS ruling, federal govt can’t withhold original Medicaid funding from states who do not expand
6. Revenue Provisions - Health Insurer Tax, Excise Tax, and other tax-related changes

Skwire, Ch. 18, Page 294, 297, 302

Question 30

Material Changes to the risk adjustment program since 2014

Answer 30

1. Allowing certain high cost pharmaceuticals to influence risk scores for certain conditions
2. Risk adjustment is no longer systematically overstated by transferring approximated non-claim related costs
3. Adjustments were made for short duration members (these members have a disproportionate share in costs)
4. A reinsurance model was embedded within the risk adjustment program. It shares 60% of all persons’ claims that exceed a $1 million threshold
5. In 2018, risk scores have been updated with new weights based on condition-cost and prior risks core data
6. CMS granted states the right to cut the transferred percentage to as low as 50% of what it would have been

GHFV-823-20, Page 3

Question 31

Guardrails that must be met for a section 1332 waiver to gain federal approval

Answer 31

1. Comprehensiveness - must provide coverage that is at least as comprehensive without the waiver
2. Affordability - must not reduce the affordability of coverage
3. Coverage - Must provide coverage to at least a comparable number of residents as would be without waiver
4. Federal deficit - must not increase the federal deficit.

GHFV-823-20, Page 5

Question 32

Concerns for allowing insurance companies to sell across state lines

Answer 32

1. Provider network inadequacy
2. Level playing field for insurer’s operational requirements
3. Race to the bottom in terms of benefits and/or state
4. Ensuring premiums are reasonable in relation to benefits
5. Does not address underlying issues of high health costs

(look this one up, some seem worded strangely)

GHFV-823-20, Page 6

Question 33

Changes in the ACA that affect rate setting

Answer 33

1. The child (A)ge gender factor was initially set exceptionally low and it is transitioning to a higher factor
2. CMS changed the (M)LR requirements ot allow for further quality improvement expenses
3. CMS allows state regulators to (P)etition for a reduction in the federal MLR threshold for their state
4. Starting in 2019, CMS moved the premium increase that triggers a (R)ate review from 10% to 15%
5. If an enrollee attempts to rejoin the individual market with the same carrier, the carrier may (C)ollect any past due premium owed from the past 12 months if it is in the contract language

AMP R C (AMP the Rate Changes)

GHFV-823-20, Page 7

Question 34

Plan design, covered services, and operational rule changes / proposals to the ACA

Answer 34

1. In plan year 2018, metal level plans have wider ranges of acceptable actuarial values
2. Starting in 2020, states have more flexibility in selection EHB benchmarks
3. Starting in 2018, carriers must count out-of-network cost sharing towards the in-network out-of-pocket maximum if the consumer had accessed those services at an in-network setting
4. Starting in 2018, CMS requires that carriers must sell silver AND GOLD plans in order to be allowed to sell via the exchange
5. The Trump administration expanded the types of employers that can opt out of providing contraception benefits
6. Allowing carriers to reject premium payments from third party payers that may be offering self-interested advice to the enrollee

GHFV-823-20, Page 8

Question 35

Functions provided by the federal small group exchange (SHOP) for 2018 and beyond

Answer 35

The federal government will no longer operate SHOP as it had in the past. This is a list of what functions remain, with all other current functions being terminated:

1. Showcasing plans and prices
2. Performing plan certifications
3. Providing a call center
4. Processing employer appeals
5. Assisting with small business tax credits

GHFV-823-20, Page 10

Question 36

Lower Gross premiums Lead to Higher Premiums Net of ACA Subsidies

Answer 36

1. Affordable coverage in the ACA markets is determined based on a sliding scale % of income
2. Enrollees can purchase the benchmark plan with an enrollee contribution equal to the calculated “affordable” % of their income
3. Premiums subsidy (or APTC) = benchmark plan gross premium minus enrollee maximum monthly contribution
4. Enrollees can use this subsidy on other plans, either within the same value tier or not
5. Net monthly premium = Gross monthly premium - Premium Subsidy
6. Lower benchmark premiums result in lower subsidies and higher net premiums

GHFV-830-21

Question 37

How Competition Increases Prices for Subsidized ACA Customers

Answer 37

1. An Incraese in insurer participation creates bias towards compressed premium subsidies
   - More data points depressed the second lowest result
   - As more insurers enter market, benchmark is naturally based on lower cost plan
2. If benchmarks decline and gross premiums stay the same, consumers pay higher net premiums
3. More competition results in less attractive market and lower enrollment

GHFV-830-21

Question 38

Why ACA Insurer’s don’t enroll healthy people

Answer 38

1. ACA does not allow raiting to vary based on health status
2. Risk adjustment transfers funds from insurer’s who enroll low-risk individuals to insurers who enroll high-risk individuals
3. Risk-adjustment methodology is imbalanced and penalized insurers that attract health enrollees that the ACA needs to survive
4. Risk-adjustment model understates risk scores for health individuals and overstates them for those with significant health conditions
5. ACA needs young and healthy adults to enroll in the market to preserve the risk pool

GHFV-830-21

Question 39

Impact of Cost Share Reduction (CSR) defunding on the ACA market

Answer 39

1. CSR funding was discontinued and this had unexpected effects
2. Insurers increased silver premiums (“silver loading” thereby increasing premium subsidies and reducing net premiums
3. Higher subsidies increased enrollment and made the market more attractive to consumers and insurers

GHFV-830-21

Question 40

How the ACA Risk Adjustment Program Plays a Critical Role in the Market

Answer 40

1. Reducing the potential for adverse selection
2. Promoting a level playing field
3. Promoting stability and affordability for consumers

The ACA Risk Adjustment Program, Page 1

Question 41

Important Findings From Various Reports on the Premium Stabilization Programs

Answer 41

1. Transitional Reinsurance and Permanent Risk Adjustment Programs are Functioning Smoothly
2. Paid claims were strongly correlated with risk scores, risk adjustment, and risk transfers
3. Smaller and larger insurers received similar risk adjustment transfers on average as a percentage of premium
4. The risk adjustment program compressed loss ratio differences among insurers
5. The program redistributed funds from plans with lower-risk members to plans with higher-risk members
6. Virtually all insurers successfully submitted the data necessary to calculate the risk adjustment payment transfers

The ACA Risk Adjustment Program, Page 2

Question 42

Potential changes to the risk adjustment model

Answer 42

1. Incorporating prescription drug data
2. Better reflecting the cost of partial year enrollees
3. Recalibrating the model risk weights to better reflect the experience in the exchange
4. Making adjustments to the payment transfer formula

The ACA Risk Adjustment Program, Page 3

Question 43

Requirements to Obtain and Maintain ACA grandfathered Status

Answer 43

1. The plan must have existed on March 23, 2010
2. The plan must have notified policyholders that is is considered grandfathered
3. The insurer must have taken appropriate legal action to assert grandfathered status for the plan
4. The insurer cannot make material changes to the plan

Skwire, Chapter 28, Page 486

Question 44

Major small group rating requirements from the NAIC model law

Answer 44

1. Certain case characteristics are recognized as allowable rating factors (see separate list of allowable case characteristics). This means they are not subject to the following premium range limitation tests.
2. Index Rate
   a) The average of the lowest and highest premium rate that could be charged within a given class of business
   b) Calc’d only after all rates have been adjusted for all allowable case characteristics and benefit design variations
3. Rating restrictions between classes - the differential between the different classes’ index rates is limited to 20%
4. Rating restrictions within a class - all groups must be charged a rate within 25% of the class’ index rate
5. Rate increase limit for a given group - the increase is limited to the sum of the following:
   a) The percentage change in the new business rate
   b) 15% annually for the group’s experience
   c) Adjustment due to the change in coverage or case characteristics

Skwire, Chapter 28, Page 487

Question 45

Allowable case characteristics from the NAIC model law

Answer 45

These factors apply to grandfathered plans. ACA-compliant plans can only use rating factors allowed under the ACA (separate skwire ch. 18 list)

1. Age
2. Gender
3. Geographic Area
4. Family Comp
5. Group size (max allowable is 20% spread)
6. Some states allow industry and tobacco use

Skwire, Chapter 28, Page 487

Question 46

Core components of the small group rate filing for non-grandfathered plans

Answer 46

1. Part I - Unified Rate Review Template
   a) An excel spreadsheet showing summary values pertaining to the rate increase request
   b) Worksheet 1 provides aggregate data for all benefit plans, including historical experience, credibility information, trend, and other pricing inputs
   c) Worksheet 2 provides this same information by benefit plan, as well as each plans’ metal value, membership projections, and requested rate change
2. Part II - Written explanation of rate increase - for products with an average increase of 10% or more, the carrier must provide a plain narrative explaining the major reasons for the increase
3. Part III - Actuarial Memorandum - provides descriptions of the rate review template components and support for assumptions made (see separate list for req. elements)
4. Unique plan design supporting documentation and justification - if the plan design contains unique features that cannot be handled by the Actuarial Value Calculator, then this component is needed to explain any special actuarial adjustments that were made

Skwire, Chapter 28, Page 491

Question 47

Required elements for the Actuarial Memorandum for a small group rate filing

Answer 47

1. Health status and non-allowed case characteristic changes - description of the financial effect of health status changes and explanations for changes in morbidity
2. Plan design and coverages - justification for any adjustments made to account for differences in benefit designs
3. Trend - justification for annual trend, typically broken down between unit cost trend and utilization trend
4. Documentation and assumptions for administrative costs, taxes, and fees
5. Profit and risk margins - carriers are typically allowed to include the profit and risk margin they deem warranted, though regulators may object if the value is too high

Skwire, Chapter 28, Page 497

Question 48

Types of Health Care Accounts (HBoEB)

Answer 48

1. HSA
   a) Must accompany a high-deductible health plan with a minimum deductible ($1,200 ind, $2,400 fam) and maximum out-of-pocket limit ($5,950 Ind, $11900 family) - 2011 indexed amounts
   b) Can be used to pay for qualified medical expenses, health insurance premiums in limited circumstances, LTC premiums, and LTC services
   c) Owned by the EE, who gets to keep the unused balance upon terminating employment
2. FSA
   a) can be used to pay for qualified medical expenses
   b) Contributions must be specified at the beginning of the period, and EE can use the full amount at any time in the coverage period
   c) Funds not used by the end of the period are forfeited

GHFV-827-19, Page 699

Question 49

Comparison of key features of health care accounts

Answer 49

1. Who can set up account?
   HSA: Ind and EE covered by HDHP (no other health ins)
   FSA: Only ERs
2. Who can contribute:
   HSA: ERs and EEs
   FSA: ERs and EEs
3. Contribution Limits (indexed, 2011)
   HSA: $3,050 for ind, $6,150 for fam
   FSA: No limit (through 2012); $2,500 (2013)
4. Carryover of unused balances
   HSA: Yes
   FSA: No
5. Portability
   HSA: Yes
   FSA: No

GHFV-827-19, Page 699

Question 50

Types of coverage and nondiscrimination tests for cafeteria plans

Answer 50

1. Eligibility Test - Tests whether the plan discriminates in favor of highly compensated individuals. Includes a length of service test (no EE be required to complete more than 3 years of employment to be eligible for the plan) and a facts and circumstances demonstration
   a) Highly-compensated individuals are officers, 5% owners, highly-compensated employees, and their spouses and dependents
2. Contributions and benefits test - the plan must provide nondiscriminatory contributions and benefits with respect to both benefit availability and actual benefit utilization. For example:
   a) benefits elected by highly-compensated participants as a percentage of their compensation must not exceed the benefits elected by non-highly-compensated participants as a % of their compensation
   b) The same comparison is done for the employer contributions elected by the two groups of participants
3. Key employee concentration test - nontaxable benefits provided to key employees cannot exceed 25% of the aggregate benefits provided to all employees
   a) Key employees are officers with annual pay greater than $160K, 5% owners, and 1% owners with annual pay greater than $150K

GHFV-827-19, Page 709

Question 51

Prescribed benefit classifications for MHPAEA

Answer 51

When parity testing MH/SUD benefits the minimum prescribed benefits classification levels that must be used:

1. Inpatient, in-network
2. Inpatient, Out-of-network
3. Outpatient, in-network
4. Outpatient, out-of-network
5. Emergency Care
6. Pharmacy

GHFV-821-18, Page 6

Question 52

Steps to show Quantitative Treatment Limitations (QTLs) satisfy parity requirements for MH/SUD benefits

Answer 52

1. Determine if the QTL applies to “substantially all” (at least 2/3) of the medical/surgical benefits
2. Apply the “Predominant” test
3. If a single level of QTL applies to over half the benefits subject to the QTL in that classification, it is considered the “predominant” benefit level and the MH/SUD benefit must be richer than that level
4. If there is no single level that applies to more than half of the medical/surgical benefits subject to the QTL in a benefits classification, the health plan can combine levels to get over half of the benefits
5. After combining benefits, the QTL that is the least restrictive will be the “predominant” benefit level used to test the MH/SUB benefits

GHFV-821-18, Page 14

Question 53

Recommended practices for Actuaries Preparing Health Filings (ASOP #8)

Answer 53

1. State the purpose of the filing - including the regulatory requirements that filing intends to comply with
2. Understand any applicable
3. Decided what assumptions are needed and select appropriate assumptions (separate list)
4. Review the formulas used to calculate premium rates and determine whether they are appropriate
5. Understand the business plan, and consider its assumptions when setting rate filing assumptions
6. For projecting future results, use past experience that is properly adjusted (see separate list)
7. Be familiar with rating factors and regulatory requirements for those factors
8. Consider available data relevant to new plans or benefits
9. Projections of future capital and surplus should account for any future actions that are likely to have a material effect on capital or surplus
10. Projections done to compare future results with a regulatory benchmark should be based on appropriate available information
11. Assumptions must be reasonable in the aggregate, and for each assumptions individually
12. When relying on data to other information supplied by others, refer to ASOP #23
13. Prepare and maintain documentation in compliance with ASOP #41

ASOP #8, Page 4

Question 54

Assumptions that may be needed for a rate filing (ASOP #8)

Answer 54

1. Premium levels and expectations for future rate changes
2. Projections of covered lives
3. Levels and trends in morbidity, mortality, and lapsation
4. NBE, including admin, commissions, broker fees, and taxes
5. Investment earnings and time value of money
6. Health cost trends - when projecting medical expense trends, consider detail by service category or service setting, separated by cost and utilization. Also consider leveraging and changes in benefit provisions and provider contracting
7. Expected financial results - consider appropriate methods and assumptions for calculating profit margin
8. Expected impact of known contractual arrangements with health care providers and administrators
9. Expected impact of reinsurance and other financial arrangements
10. Provisions for adverse deviation - consider whether the provisions are sufficient to cover anticipated costs under moderately adverse experience

ASOP #8, Page 4

Question 55

When using past experience to project future results, adjust for material change in: (ASOP #8)

Answer 55

1. Selection of Risks
2. Demographic and risk Characteristics of insured pop
3. Policy provisions
4. Business operations
5. Provider contracts
6. Premium rates, claim payments, expenses, and taxes
7. Seasonality in incurred claims
8. Trends in mortality, morbidity, and lapse
9. Catastrophic claim variability
10. Administrative procedures
11. Federal / State Regulations
12. Medical practice
13. Cost containment procedures or quality improvement initiatives
14. Economic conditions

ASOP #8, Page 6

Question 56

Documentation needed to support the actuarial certification of compliance with small group rating methods (ASOP #26)

Answer 56

1. Materials that have been reviewed to certify compliance with requirements for rating methods and underwriting practices, including:
   a) A description of the carrier’s rating methods and underwriting practices
   b) The rating manual and formulas for calculating rates from the manual
   c) Some test calculations to verify that the rates charged are in accordance with the rating manual
2. A written demonstration that the rates are in compliance with applicable regulatory requirements. Should explain how classes of business, average rates, rating bands, and rate increases comply with rating constraints.
3. A written demonstration supporting the determination of compliance with actuarial soundness

ASOP #26, Page 3

Question 57

Items to include in an actuarial certification of compliance with small group rating methods

Answer 57

1. Certification that all practices required to be in the certification are in compliance with applicable regulatory requirements
2. A listing of practices that are covered in the certification]
3. Identification of the time period covered
4. Changes in rating methods and other practices that have occurred during the time period covered that affect compliance
5. A description of any subsequent events that could materially affect current or future certifications
6. When a qualified certification is given, any actions that are being taken to bring the carrier into compliance
7. Where a limited certification is given, any sections of the regulatory requirements that are not addressed

ASOP #26, Page 5