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Question 1

Categories of approved and/or pending Section 1115 Medicaid waivers

Answer 1

1. Alternative methods to expand Medicaid under the ACA’s Medicaid expansion
2. Eligibility and enrollment requirements
3. Work requirements to be eligible for coverage
4. Benefit restrictions (e.g., copay limits)
5. Behavioral health coverage changes (e.g., enhanced coverage for target populations)
6. Delivery system reform initiatives (e.g., tying provider incentive payments to performance goals)
7. Delivery of Medicaid long-term services and supports through capitated managed care
8. Responding to public health emergencies
9. Providing coverage for other targeted groups

WELDER BET

(Section 1115 Medicaid demonstration waivers)

Question 2

What to watch for in Section 1115 waivers going forward

Answer 2

1. What does research or experience in other states show?
2. What populations are affected and will it change enrollment?
3. What are the administrative costs and challenges?
4. What is the process to receive public input
5. What are the requirements for reporting and evaluating?

ReCIPE

(Section 1115 Medicaid demonstration waivers)

Question 3

Revised CM/S section 1115 waiver approval criteria

Answer 3

1. Improve access to high-quality, person-centered services with positive health outcomes
2. Promote Medicaid’s sustainability over the long term
3. Support strategies that promote upward mobility and greater independence
4. Strengthen incentive structures that promote responsible decision making
5. Enhance alignment between Medicaid policies and commercial health insurance
6. Advance delivery system and payment models to strengthen provider network capacity

MANICS

(Section 1115 Medicaid demonstration waivers)

Question 4

Specific requirements from the revised NAIC Actuarial opinion instructions

Answer 4

1. The appointments by the company’s board of directors of a qualified health actuary. This actuary must report annually to the board or the audit company
2. A process to request exemptions from having to file an actuarial opinion
3. The use of a checkbox section to indicate whether the opinion is unqualified, qualified, adverse, or inconclusive
4. Expansion of the scope of the Actuarial opinion to include specific Actuarial items presented as assets in the annual statement
5. The definition of prescribed language as opposed to suggested language in the prior instructions with any modification or deviations notes within a checkbox section
6. The requirement to reconcile underlying claim lag data to part 2b of the underwriting and investment exhibit
7. A supporting Actuarial memorandum

U CAMELS

(Revised ASO Instructions for the NAIC Health Annual Statement)

Question 5

The classifications of an Actuarial opinion

Answer 5

1. Qualified - results from a situation where all liabilities are good and sufficient except for specifically defined items
2. Adverse - the opinion arises when the actuary determines that the reserves and liabilities are not good and sufficient
3. Inconclusive - this happens when the actuary is unable to form an opinion due to deficiencies in data, analysis, assumptions, or related information
4. Unqualified - this is when all liabilities are deemed good and sufficient by the actuary

(Revised ASO Instructions for the NAIC Health Annual Statement)

Question 6

Sections to include in the body of the Actuarial opinion

Answer 6

1. Table of key indicators - alerts the reader to the opinion, changes in prescribed wording, and deviations from ASOPs
2. Identification section - identifies the actuary
3. Scope section - shows the actuary has checked assumptions and methods used and identifies subjects on which an opinion is to be expressed
4. Reliance section - identifies anyone the actuary relied upon
5. Opinion section - clearly shows the opinion
6. Relevant comments - allows the actuary to further explain any circumstances, concerns, or issues

OR RISK

(Revised ASO Instructions for the NAIC Health Annual Statement)

Question 7

Items to be considered for inclusion in the actuarial memorandum to show how conclusions were reached

Answer 7

In an actuarial statement of opinion the following will help another actuary understand how conclusions were reached

1. Data reconciliation
2. Claim triangles/lags
3. Trend analysis
4. Development of assumptions
5. Other studies performed

TARTS

(Revised ASO Instructions for the NAIC Health Annual Statement)

Question 8

For an actuarial statement of opinion the following items are required to be included in the actuarial memorandum

Answer 8

1. An exhibit that ties to the annual statement
2. Documentation of the reconciliation from data used for analysis to the Underwriting and Investment Exhibit Part 2B, with explanations of the drivers of the differences
3. Any other follow-up studies documenting the prior years’ claim liability and claim reserve run-off as considered necessary by the actuary
4. Documentation of the assumptions used for contract reserves with any changes in assumptions from previous valuations and support of any margin included in the reserves

PEAR

(Revised ASO Instructions for the NAIC Health Annual Statement)

Question 9

The purpose of contract reserves

Answer 9

1. A reserve held because future claims are greater than the future net premiums
2. Needed to prefund the expected increases in claims in later years
3. These types of reserves are needed for long-term insurance policies

(Practices for Preparing Health Contract Reserves)

Question 10

GAAP guidance for setting contract reserves

Answer 10

1. Divides insurance into two main categories: short term and long term
2. For long term contracts the insurer will hold a contract or benefit reserve
3. Generally prohibits insurers from establishing a benefit reserve for short term contracts
4. Benefit reserves should include a provision for adverse deviation
5. Assumptions used to initially calculate the reserve are locked-in
6. If a deficiency exists, the original assumptions are “unlocked” and updated

LT ST Dev Locked Unlocked

(Practices for Preparing Health Contract Reserves)

Question 11

SAP guidance for setting contract reserves

Answer 11

1. SAP uses four classes: life, accident and health (A&H), property and casualty (P&C), and deposit-type
2. A&H contracts are defined to include unearned premium reserves and contract reserves
3. Reserve required for contracts when the future claims are greater than the future premiums except:
   - when contracts cannot be continued after one year from issue
   - when a years’ worth of premium is intended to cover that year’s claims without prefunding of future cash flows
4. Uses prescribed methodologies and assumptions for computing minimum allowable reserves
5. GAAP allows for a greater freedom to select methods and assumptions and must include provisions for adverse deviation

CARP G

(Practices for Preparing Health Contract Reserves)

Question 12

Recommendations for determining SAP and GAAP contract reserve assumptions

Answer 12

1. Under SAP:
   - Determine a liability under moderately adverse, but not excessive, conditions
   - Many actuaries believe that the SAP reserve should be greater than the best estimate
   - At least as great as the amount determined using the state prescribed methodology and assumptions
2. Under GAAP:
   - include provision for adverse deveiation
   - Unlike SAP, no prescribed assumptions
   - GAAP reserves should be less than SAP but greater than best estimate

(Practices for Preparing Health Contract Reserves)

Question 13

Methods that are used for contract reserves for SAP vs GAAP

Answer 13

1. Under either method, if the contract reserves are deficient additional reserves may be required as determined by a gross premium valuation
2. For SAP, the minimum reserve standard is a preliminary term method
3. For GAAP, they use the net level premium method

APT

(Practices for Preparing Health Contract Reserves)

Question 14

Tax deductibility of health contract reserves and premium deficiency reserves

Answer 14

1. In general, contract reserves are tax deductible for insurance companies if the contract is noncancelable or guaranteed renewable
2. Several assumptions have specific guidelines that must be followed when calculating a tax reserve
3. The method is defined as the two-year preliminary term except for the LTC contracts which are based on the one-year preliminary term
4. Premium deficiency reserves are not tax deductible
5. The tax reserve may never be greater than the statutory reserve actually held

S2D GG

(Practices for Preparing Health Contract Reserves)

Question 15

Situations for which insurers are allowed to unlock GAAP assumptions

Answer 15

1. When a gross premium valuation reveals a premium deficiency
2. When a future projection by calendar year reveals a pattern of profits followed by losses
3. When internal replacement occurs

GRP

(Practices for Preparing Health Contract Reserves)

Question 16

Important aspects of GAAP loss recognition testing

Answer 16

1. Applies to all business in force
2. Timing is not specified but it should be performed periodically and when experience deviates unfavorably from expected
3. Tests should be performed without provisions for adverse deviation
4. Once testing results in corrective action tests must repeat on future valuation dates

(Practices for Preparing Health Contract Reserves)

Question 17

Important aspects of GAAP DAC recoverability testing

Answer 17

1. Applies to all new business
2. Occurs in the first contract year
3. Testing excludes non deferrable and overhead costs
4. Test first with provisions for adverse deviation (PAD), if fail remove PAD and test again
5. If testing after removing the PAD fails then move to unlock GAAP assumptions

(Practices for Preparing Health Contract Reserves)

Question 18

Important aspects of SAP gross premium valuation

Answer 18

1. Should be done when a company has concern about reserve [a]dequacy
2. The valuations are often performed at aggregate levels of [l]ines of businesss
3. All [e]xpenses should be considered
4. Generally believed to be based on assumptions that would produce an adequate reserve under [m]oderately adverse conditions

MEAL

(Practices for Preparing Health Contract Reserves)

Question 19

Important aspects of the ACA’s risk adjustment program

Answer 19

1. Intended to even out the risk in the insured population in the individual and small group market
2. Risk scores for a company will be compared to the market average
3. Insurers with below-average risk scores will compensate, or transfer to, those with above average risk scores
4. Risk scores will need to be estimated before experience is complete
5. Transfer estimates will need to be accrued in the current plan year and reflected in current financial statements prior to the actual settlement
6. Estimated to be as much as +/- 15% of health plan premiums with smaller insurers possibly seeing +/-40%

(ACA’s impact on financial statements)

Question 20

Important aspects of the ACA’s reinsurance program

Answer 20

1. Reimburses health plans for high-cost individuals in the individual commercial market
2. Payment in 2014 was expected to be 80% of claims from a single claimant for annual amounts between $45K and $250K. The parameters changed in ‘15 and ‘16
3. Estimating this reimbursement timing brought added complexity. Large claims have longer runout periods
4. This was a subsidy since the fee was paid by all markets, but only the individual market received recoveries
5. Since the payment happened in the middle of the subsequent year, there were cash flow challenges for some insurers
6. As with many types of receivables, there was different reporting guidance from various standards (i.e., GAAP and STAT)
7. The fee funding the program ended in 2016 with the program
8. The fee was collected based on member counts, and there were various methods for plan sponsors to “count” these members

(ACA’s impact on financial statements)

Question 21

Important aspects of the ACA’s risk corridor program

Answer 21

1. Ended in 2016
2. Shared in claims costs deviation from a targeted amount
3. It was for issuers of qualified health plans (QHPs) in the individual and small group markets
4. Risk corridors kicked in when claims varied by 3% or more from the target claims amount, where excess claims were initially shared 50% with the federal government
5. Beyond an 8% variation from target, excess claims were shared 80% with the federal government
6. This program was considered highly complex in terms of estimation and even unexpected nuances
7. Impact estimates were as much as +/- 25% of premiums

(ACA’s impact on financial statements)

Question 22

Important aspects of the ACA’s premium subsidies program

Answer 22

1. Available to individuals and families whose incomes are between 100% and 400% of the FPL
2. Premium subsidy payment should be received monthly before the month of coverage
3. Annual retroactive adjustments will be made to the government for members who terminate coverage prematurely
4. Subsidies receive by the insurer prior to the start of coverage should be recorded as an unearned premium, becoming “earned” when the coverage becomes effective

(ACA’s impact on financial statements)

Question 23

Important aspects of the ACA’s cost-sharing reduction (CSR) subsidies program

Answer 23

1. Members with incomes between 100% and 250% of the FPL are eligible for this permanent program
2. Members mush choose a silver plan to qualify
3. The cost-sharing subsidy may be in addition to the premium subsidy
4. Insurers will enroll qualified members in cost-share-reduced plan designs
5. The federal government will reimburse the insurer the difference between what the member paid in the enhanced plan design and what would have been paid in the standard silver plan
6. The federal government will provide insurers of these members with prospective payments throughout the year on a monthly basis
7. Reconciliation occurs in the following year
8. As insurers are asked to generate effective cost-sharing parameters by adjudicating reduced claims through the standard silver plan design, they may run into credibility issues. There are alternative approaches in those cases

(ACA’s impact on financial statements)

Question 24

Description of the health insurance provider fee

Answer 24

1. The permanent excise tax on insurers is nondeductible tax on income
2. It is based on the prior year’s collected premiums
3. The liability should be recognized on Jan 1 of the year it is paid
4. The corresponding asset seems to be recognized differently between GAAP and STAT
5. The fee is monthly, with annual retroactive reconciliations
6. The fee was approximately 2% of premiums in 2014, and increases in subsequent years

(ACA’s impact on financial statements)

Question 25

Types of statements of actuarial opinion

Answer 25

1. Unqualified opinion - for NAIC Health Annual Statement, the reserve amount makes good and sufficient provision for all unpaid claims and other actuarial liabilities and that obligations are covered even under moderately adverse conditions - In other circumstances, says the liability and asset amounts are reasonable for the intended purpose 2. Adverse opinion - For NAIC Health Annual Statement, says the aggregate amount established is not sufficient for the actuary to provide an unqualified opinion - In other circumstances, says the liabilities fall outside a reasonable range for the specified purpose 3. Qualified opinion - issued when there are certain liabilities or assets that the actuary believes cannot be reasonably estimated or for which the actuary is unable to render an opinion 4. Inconclusive opinion - issued when the actuary cannot reach a conclusion due to deficiencies or limitations in the data, analyses, assumptions, or related information (ASOP #28)

Question 26

Information to include in a statement of actuarial opinion

Answer 26

1. The [w]ords "statement of actuarial opinion" in the title 2. The intended [u]sers 3. The intended [p]urpose 4. The [l]iabilities being opined upon 5. The stated [b]asis of the amounts presented 6. The [s]cope of the analysis underlying the opinion and the review date if different from the date the opinion is signed 7. The [t]ype of opinion PLUS BTW (ASOP #28)

Question 27

Prescribed benefit classifications for MHPAEA

Answer 27

When parity testing MH/SUD benefits the minimum prescribed benefits classification levels that must be used: 1. IP, IN 2. IP, OON 3. OP, IN 4. OP, OON 5. ER 6. Pharmacy (Employer Guide for Compliance with the Mental Health Parity and Addiction Equity Act)

Question 28

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

Answer 28

1. Determine if the QTL applies to "substantially all" (at least 2/3s) of 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/SUD benefits (Employer Guide for Compliance with the Mental Health Parity and Addiction Equity Act)

Question 29

Requirements for applying a Nonquantitative Treatment Limitation (NQTL) to MH/SUD benefits

Answer 29

1. The NQTL is comparable to an NQTL imposed on medical/surgical benefits and 2. The NQTL is applied no more stringently to the MH/SUD benefits than to the medical/surgical benefits (Employer Guide for Compliance with the Mental Health Parity and Addiction Equity Act)

Question 30

Common NQTLs that are found in health plans

Answer 30

1. Utilization management practices 2. Medical necessity criteria 3. Experimental treatment exclusions 4. Primary care physician or other gatekeeping 5. Approval of formulary drugs 6. Placement of drugs on formulary tiers 7. Generic substitution/therapeutic interchange or substitution 8. Pharmacy benefit management protocols 9. Network tier design 10. Standards for provider admission to participate in a network 11. Plan methods for determining UCR charges 12. Fail-first policies (step-therapy protocols) 13. Employee assistance plans (EAPs) (Employer Guide for Compliance with the Mental Health Parity and Addiction Equity Act)

Question 31

Health plans required to meet the MHPAEA requirements

Answer 31

1. Fully insured employer plans 2. Self-funded employer plans 3. Non-grandfathered plans in the individual and small-group markets (Employer Guide for Compliance with the Mental Health Parity and Addiction Equity Act)

Question 32

Health plans that are specifically excluded from MHPAEA

Answer 32

1. Small private employers that are not required by the ACA to provide EHBs 2. Plans that met increased cost exemption requirements 3. Self-funded state or local governmental plans that request exemption 4. Medicare plans 5. Veteran Affairs and TriCare plans VEEP M (Employer Guide for Compliance with the Mental Health Parity and Addiction Equity Act)

Question 33

Required components of a regulatory compliance program for MHPAEA

Answer 33

To adhere to provisions specific to MHPAEA, Core 4 of URAC's standards requires that the health plan implement a regulatory compliance program that: 1. Tracks applicable laws and regulations 2. Ensures the organization's compliance 3. Responds to detected problems and takes corrective action (Employer Guide for Compliance with the Mental Health Parity and Addiction Equity Act)

Question 34

Controls a health plan must implement to monitor adherence to MHPAEA

Answer 34

These Compliance Program Internal Controls are needed in order to effectively monitor adherence to the laws and regulations of MHPAEA 1. Designating a compliance officer 2. Periodic review and update of the compliance program in the organization's training 3. Periodic internal monitoring and auditing 4. Periodic review and analysis to determine any changes in - Benefits - Policies - Procedures - Utilization management protocols that impact compliance - Communication to delegated contractors regarding changes impacting compliance 5. Performance of a thorough review of state and federal laws and regulations related to privacy and security CAPPO (Employer Guide for Compliance with the Mental Health Parity and Addiction Equity Act)

Question 35

Purpose of the ACA's 1332 waivers

Answer 35

1. Purpose is to allow states to undertake different approaches to achieving the ACA's core goals 2. Relative to status quo the waivers must: - Be at least as successful at providing access to affordable good quality health insurance coverage - do so at the same or lower cost to the federal government - pass the guardrail tests that show the above requirements were met AM ACT (Understanding the ACA's state innovation (1332) waivers)

Question 36

Guardrails used to demonstrate 1332 waiver standards

Answer 36

1. Provide benefits as comprehensive as the EHBs 2. Provide cost share protections and coverage at least as affordable as those in the marketplace 3. Ensure a comparable number of people have health coverage 4. Not increase the federal deficit (Understanding the ACA's state innovation (1332) waivers)

Question 37

CMS guidance for passing the guardrails for the 1332 waiver

Answer 37

1. The waiver must not result in fewer individuals covered with benefits at least as comprehensive as the benchmark for all ten EHB categories 2. The waiver cannot result in more uninsured relative to the current law 3. CMS evaluates affordability on a high level average and also at more detailed levels of individuals 4. Members must have coverage with an actuarial value of at least 60% and an out-of-pocket maximum that complies with ACA requirements 5. The waiver review focuses on vulnerable populations: low income individuals, seniors, and the very sick 6. Applications must show how all requirements were met and how they differ from the current 7. The initial duration of a waiver is five years, but the state must demonstrate that it will be deficit neutral to the federal government over ten years 8. Applications must describe models used to demonstrate deficit neutrality, showing the following: - Data sources - Data quality - Key assumptions - Key parameters - Other supporting documentation of the actuarial and economic analysis VAN CURVS D2K2O (Understanding the ACA's state innovation (1332) waivers)

Question 38

Material changes to the risk adjustment program since 2014

Answer 38

1. Allowing certain high-cost pharmaceuticals to influence risk scores for certain conditions 2. Risk adjustment is no longer systematically overstated by approximating non-claim related costs 3. Adjustments were made for short-duration members (these members have a disproportionate share in costs) 4. A large claim reinsurance model was embedded within the risk adjustment program 5. For 2018, risk scores have been updated with new weights based on updated data 6. CMS has granted states the right to cut the transferred percentage to as low as 50% of what it would have been (Recent policy changes under the ACA)

Question 39

Reasons that most CO-OPs were not successful

Answer 39

1. Political dismantling of the risk corridor program 2. Too much growth in relation to their capital 3. Access to federal loans were halted due to the political climate LPG (Recent policy changes under the ACA)

Question 40

Concerns for allowing insurance companies to sell across state lines

Answer 40

1. Provider network inadequacy 2. Level playing field for insurers' operational requirements 3. A race to the bottom in terms of benefits and/or state regulations 4. Ensuring premiums are reasonable in relation to benefits (Recent policy changes under the ACA)

Question 41

Changes in the ACA that affect rate setting

Answer 41

1. The child age gender factor was initially set exceptionally low at .635, but in 2018 it has increased (tiered across brackets) 2. CMS proposed reducing MLR standards substantially by adding carrier favorable adjustments 3. CMS has also proposed allowing state regulators to petition for a reduction in the federal MLR threshold applicable in their state 4. For plan years 2019 and beyond, CMS is proposing to move the premium increase that triggers a rate review from 10 to 15% 5. IF an enrollee attempts to rejoin the individual market with the same carrier, the carrier ay collect any past due premium owed from the past 12 months if it is in the contract language (Recent policy changes under the ACA)

Question 42

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

Answer 42

1. In plan year 2018, metal levels plans have wider ranges of acceptable actuarial values 2. Proposed 2019 changes would provide states more flexibility in selecting EHB benchmarks 3. Starting in plan year 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 with plan year 2018, CMS requires that carriers must sell silver and gold plas in order to be allowed to sell via the exchange 5. In the fall of 2017, the current administration is expanding 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 COMET G (Recent policy changes under the ACA)

Question 43

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

Answer 43

The federal government will no longer operate the SHOP as it had in the past and 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 (Recent policy changes under the ACA)

Question 44

New tax-favorable opportunity for small employers to provide health insurance due to the 21st Century CURES Act

Answer 44

1. Employers can create and fund an account allowing employees to use the funds to purchase coverage on the individual market 2. This is good for lower-compensated employees who might also receive subsidies in the individual market (Recent policy changes under the ACA)

Question 45

How the ACA risk adjustment program plays a critical role in the market

Answer 45

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)

Question 46

Important findings from various reports on the premium stabilization programs

Answer 46

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 permium 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 DR CFP (The ACA risk adjustment program)

Question 47

Potential changes to the risk adjustment model

Answer 47

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 FREE (The ACA risk adjustment program)

Question 48

Covered ASOPs

Answer 48

1. ASOP #6 - Measuring Retiree Group Benefit Obligations and Determining Retiree Group Benefits Program Periodic Costs or Actuarially Determined Contributions 2. ASOP #8 - Regulatory Filings for Health Plan Entities 3. ASOP #21 - Responding to or Assisting Auditors or Examiners in Connection with Financial Statements for All Practice Areas 4. ASOP #23 - Data Quality 5. ASOP #25 - Credibility Procedures 6. ASOP #26 - Compliance with Statutory and Regulatory Requirements for the Actuarial Certification of Small Employer Health Benefit Plans 7. ASOP #28 - Statements of Actuarial Opinion Regarding Health Insurance Liabilities and Assets 8. ASOP #41 - Actuarial Communications 9. ASOP #49 - Medicaid Managed Care Capitation Rate Development and Certification 10. ASOP #50 - Determining Minimum Value and Actuarial Value Under the ACA