Pricing Medicare Supp Benefits Flashcards
1
Q
Rating approaches for Medicare Supplement (3)
A
- Attained age
- Issue age
- Community rates - all participants pay the same rate
2
Q
Medicare Supp pricing assumptions (10)
A
- Morbidity - past clm cost need to be trended forward to the rating period
- Mortality - not significant assumption and it’s frequently combined with persistency
- Persistency - based on company’s experience
- Investment earnings
- Selection factor/UW - for underwritten policies, selection factors may be used for the first 1-3 years
- Age and sex distribution
- Smoker vs non-smoker
- Area factors - from rating manuals or gov stats
- Expenses and taxes
- Other - modal factors and policy fees
3
Q
NAIC Model Regulation for Medicare Supp (5)
A
- Annual filing and approval of rates and documentation supporting the rates is required
- Loss ratio standards for annual or re-rating filing
- Min loss ratio requirements - group is 75% and individual is 65%
- States differ on level of review for rate increases
- Changes in rating structure or methodology when annual rates are filed
4
Q
NAIC loss ratio standards for filing (3)
A
- Lifetime LR - (AV of past clms and PV future clms)/(AV of past premiuma dn PV of future prem) >=LR standard
- Future LR - (PV of future clms)/(PV of future prem) >= LR standard. This standard limits a carrier from recovering past losses from future premiums.
- 3rd yr LR - Expected 3rd year LR >=LR standard
5
Q
NAIC loss ratio standard (1)
A
LR standard = max(original expected LR (company filing), statutory minimum)
Stat min for grp is 75% and for ind is 65%
6
Q
NAIC filing requirements for changes in rating structure or method (3)
A
- Changes in rate structure must be made within the existing policy form as only one policy is allowed for each plan type
- Actuarial memo must indicate how the revised rates differ
- New rates must be actuarially equivalent to prior rates
7
Q
Methods to project experience for Medicare Supp policy (2)
A
- Project experience from midpoint of exp to midpoint of rating period.
- include other adj (ex. aging, wear-off UW)
- current avg prem and avg clm cost in force can be calced as basis. This avoids adjusting past prem to be on current rates
- alternative proj can be performed to improve estimates (i.e by isse age, duration)
- Project based on asset share model - clm costs modeled based on factors (i.e by age, duration, plan). Model can incorporate changes in distrib over time
8
Q
Profit studies for Medicare Supp Policies (1)
A
- Actual to Expected analysis
- Compare actual claims to expected claims
- compare actual claims to expected LR x actual premium
- adj expected clms or LR based on A/E analysis to arrive at an initial starting value for proj - A/E analysis can include other pricing assumptions (i.e. lapse, expense)
- Compare actual claims to expected claims
9
Q
Reserves for Medicare Supp policies (3)
A
- Clm reserves - est for clms that are incurred byt not paid
- Active life reserve - required for non-cancellable or guaranteed renewable policies with pre-funding of premiums (Medicare supp are required to be guaranteed renewable)
- Premium Deficiency Reserve (PDR) - required if premiums not adequate.
10
Q
Determining premium adequacy for Medicare Supp benefits (4)
A
- Rate increases should be submitted if prem not adequate
- Rate increase based on analysis of incurred LR, Clm to prem ratio, and incurred PMPM claim cost
- RBC calcs include premium, claims, and reserves
- Account for cost of cap req