Underwriting and Rating

Question 1

Underwriting and Rating

Type of UW Depends on:

Answer 1

• Time (At Issue, During Plan Year, At Renewal)
• Group Size
• Risk Arrangement

Question 2

Underwriting and Rating

At Issue Underwriting

Answer 2

• Health status (ACA doesn’t allow in small group market)
• Ensure valid EE/ER relationship
• Minimum participation
• Ability to pay
• Other coverage
• Persistency

Question 3

Underwriting and Rating

Base Rate Development

Answer 3

1. Historical Experience
2. Trend to projection period
3. Claims data converted to incurred basis (+ IBNR)
4. Incurred claims matched with plan exposure to develop PMPM
5. Adjust for changes in health plan operations between base and projection period
6. Summarize in actuarial cost model

Question 4

Underwriting and Rating

Rate Determination

Answer 4

1. Incurred medical costs PMPM (base rate)
2. Add/Subtract: Reinsurance costs, services not in base rate
3. Multiply by rating factors
4. Retention Load (Profit, Admin)
5. Convert member rate to contract rate

Question 5

Underwriting and Rating

Rate Determination

Answer 5

1. Incurred medical costs PMPM (base rate)
2. Add/Subtract: Reinsurance costs, services not in base rate
3. Multiply by rating factors
4. Retention Load (Profit, Admin)
5. Convert member rate to contract rate