2015 Time Small Group Major Medical Rate Filing.pdf
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Transcript of 2015 Time Small Group Major Medical Rate Filing.pdf
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ACTUARIALMEMORANDUMandCERTIFICATIONfor
TIMEINSURANCECOMPANYin
Missourion
FormTGM14.POL.MO
ThepurposeofthisannualratefilingistosettheindexrateandanyotherapplicableadjustmentstotheindexrateforJanuary1st,2015,assetforthintheAffordableCareAct(ACA)requirements,andtodemonstratethereasonablenessofbenefitsinrelationshiptopremiums.Thisratefilingisnotintendedforotherpurposes.AssurantHealthisthemarketingnameofthelegalentitiesTimeInsuranceCompanyandJohnAldenLifeInsuranceCompany.AssurantHealthwilladminister,issue,andinsurethisblock.Theselegalentitiesofferidenticalproductswiththesamerates,administrativesystems,andprocesses.
1. GeneralInformation:
a. InsuranceCompanyName TimeInsuranceCompanyb. State Missouric. HIOSIssuerID 14026d. Market SmallGroupMajorMedicale. EffectiveDates January1,2015December31,2015f. PrimaryContactName RobertAndersong. PrimaryContactPhone# 4142996866h. PrimaryContactEmailAddress [email protected]
i. GeneralPolicyDescription:
ThisratefilingisfornongrandfatheredsmallgroupmajormedicalplanswhichcovertheEssentialHealthBenefits(EHB)asrequiredundertheAffordableCareAct(ACA).TheseplansareguaranteedissueandguaranteedrenewableasdefinedundertheACAandHIPAA.Plansaremarketedthroughgeneralagencies,brokers,wholesalearrangements,anddirecttoconsumer.In2015,AssurantHealthwillonlysellplansoutsideoftheSHOPinthisstate.Coveragebeyondage65willbesecondarytoMedicare.Premiumsareonanattainedagebasisandwillincreasewithage.Premiumsalsovarybyplandesignandgeographicarea.In2015,onlytheoldestthreedependentsunderage21willbechargedapremiumrateforagivenpolicy.Wewilloffercompositeratingonthisformin2015.Wewillensurethatcompositeratesareequaltopermemberratesatissueandonrenewalinordertomaintainstabilityonthegroup'spremiumandemployer'scontributionintheeventofmemberaddonandterminations.Allgroupsizeswillbeeligibletoreceivecompositeratingonthisform.InaccordancetotheFederalrulesandregulationsreleasedonMarch11,2014,ourcompositeratingstructurewillfollowthefederalproposedtwotieredstructure.
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ActuarialMemorandumMissouriFormTGM14.POL.MO Page22. ProposedRateIncrease:
Theproposedaveragerateincreaseforthisstateis6%.Thisincreaseexcludesattainedageincreases.Therateincreasedoesvarybyplan.Theseadjustmentsaredescribedinfurtherdetailinsection14ofthismemorandum.AppendixAshowsthedevelopmentofbaseratesforthisproduct.Theremainingsectionsofthememorandumdetailtheassumptionsweusedtodeveloprates.ReasonsforRateIncrease:Thefollowinglistisabriefdescriptionofthesignificantfactorsdrivingtheproposedratechange.Moredetaileddescriptionsofthesefactorsareincludedlaterinthismemorandum.1.) MedicalTrend:Ourmedicaltrendaccountsfortheeffectsonfutureclaimsduetoinflation,
advancingmedicaltechnologyandtechniques,andincreasedutilizationandcostshifting.
2.) AdditionalFees:Thehealthinsurerfeeassessmentismovingfrom$8billionto$11.3billionin2015whichresultsinalowertargetlossratio.
3.) PaidtoAllowedRatio:Thedifferencebetweenourprojectedpaidtoallowedratioinour
experienceversusthatofthe2014actuarialvaluecalculatorresultsinanincreasetoourprice.
TherateincreasesvarybyproductprimarilyduetobenefitleveragingdifferencesbymetallevelanddifferencesinPPOnetworkfactors.Theseadjustmentsarewarrantedastheyresultinactuariallyappropriateratesthatreflectthetruecostdifferencesbetweentheplans.PleasenotethatourratingmethodologydiffersfromthatoutlinedintheUnifiedRateReviewTemplate.Rather,theUnifiedRateReviewTemplaterepresentsinformationrequiredbyFederalRegulationtofacilitatereview.ThefollowingsectionsnoteanydifferencesbetweentheUnifiedRateReviewTemplateandthepricingmethodologyweusedtodeveloprates.PleaserefertoAppendixAforourratedevelopmentmethodology.
3. ExperiencePeriodPremiumandClaims
WepreparedtheUnifiedRateReviewTemplateusingstateandlegalentityspecificnongrandfatheredexperienceinordertocomplywithDepartmentofHealthandHumanServices(HHS)requirements.Forthepurposeofestimatingtheaverageriskofthe2015market,grandfatheredandnongrandfatheredexperienceofTimeInsuranceCompanyandJohnAldenLifeInsuranceCompanywasreviewedtogether.Thiscombinedexperiencewasusedinordertodevelopanactuariallyappropriatepredictionofthemarketwidepermemberpermonthriskandstandardizedclaimcostin2015.Thesameexperiencebasisisusedforboththepricingmethodologyandthedevelopmentoffactorsthatwilladdresstheimpactofourriskrelativetothemarketandtheimpactthishasonpremiumrates.Thisprocessisdescribedinmoredetailbelow.
ExperiencePeriod:TheexperienceperiodisclaimsincurredandpremiumearnedfromJanuary
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ActuarialMemorandumMissouriFormTGM14.POL.MO Page3
1,2013throughDecember31,2013. PaidThroughDate:Thedatethroughwhichpaymentshavebeenmadeonclaimsincurred
duringtheexperienceperiodisFebruary28,2014. Premiums(NetofMLRRebate)inExperiencePeriod:IntheUnifiedRateReviewTemplate,the
earnedpremiumpriortoMedicalLossRatio(MLR)rebatesfortheCalendarYear2013experienceperiodwas$3,888,321.EarnedpremiumwasnotadjustedforanyreductionsprescribedwhencalculatingtheMLR,suchastaxesandassessments.TheMLRrebatesfortheexperienceperiodareestimatedat$0.
ThefinancialactuarialteamatAssurantHealthestimatesaccruedpremiumrefundsrequiredunderFederalMinimumLossRatioregulationsfortheIndividualMedicalandGroupMedicalinsurancebusiness.Theteamprojectsincurredclaims,earnedpremiums,andotherelementsandappliesadjustmentsasoutlinedinFederallawsandregulations.Theseprojectionsareperformedonastateandmarketlevelbasisandrecentclaimsexperienceisadjustedforestimatedclaimsreservesonastatelevelbasis.
AllowedandIncurredClaimsDuringtheExperiencePeriod:IntheUnifiedRateReview
Template,theamountofincurredclaimsprocessedthroughourclaimsystemfortheexperienceperiod2013is$3,974,594.Thebestestimateofexperienceperiodclaimsincurredbutnotreportedis$309,661.Theamountofallowedclaimsprocessedthroughourclaimsystemfortheexperienceperiod2013is$5,829,743.Thebestestimateofexperienceperiodallowedclaimsincurredbutnotpaidasofthepaidthroughdateshownaboveis$1,855,149.Allowedclaimsaredevelopedbysubtractingineligiblechargesanddiscountsfromthetotalproviderbilledamount.AssurantHealthhasnocapitationagreements.
Thepermemberpermonthexperienceperiodallowedclaimsinourpricingmethodologyis
baseduponallSmallGroupMedicalexperiencewithinthestateforAssurantHealth.ThemethodologyisdemonstratedinAppendixA.Experienceforlimitedbenefitplanswasnotincluded.Furthermore,anadjustmentwasmadeinordertopoollargeclaimsacrossourblock.Claimsinexcessof$50,000foraspecificmemberandincurredmonthwereremovedfromtheexperience,andthenanationwideaveragepoolingchargewasappliedpermember.Allpricingcomponents,includingthebaseexperienceperioddata,areappliedconsistentlyacrossthesingleriskpoolinthestateandmarketfor2015.
OurfinancialactuarialteamdevelopslagtrianglesfornationwideSmallGroupMedical
experience.ThesetrianglesareseparatelydevelopedforMedicalandPrescriptionDrugCardcoverage.SpecificlargeclaimsthatarepartofourcasemanagementprogramareremovedfromtheMedicaltrianglesandreservedforseparately.Historicalaveragesareusedinordertocalculatemonthlycompletionfactorsfortheremainingclaims.
4. BenefitCategories Inpatientservicesarethosereceivedduringapatientshospitalstayandareincludedinthe
InpatientHospitalCategory.Outpatientservices(e.g.labtests,Xrays,andsomesurgical
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ActuarialMemorandumMissouriFormTGM14.POL.MO Page4
services)arethoserenderedbyafacilitywithinanoutpatientsetting.Professionalservicesincludeprimarycare,specialist,therapyandotherprofessionalchargesthatarenotincludedinfacilityfees.OtherMedicalservicesincludechargesforitemsthatdonotfallintothecategoriesabove,suchasambulanceanddurablemedicalequipment.TheOthercategoryismeasuredbasedupondistinctservicesoritemsprovided.RetailandmailorderpharmacyclaimsareincludedinthePrescriptionDrugcategory.
5. ProjectionFactors
AssurantHealthRiskRelativetotheMarketAverage:Toestablishthisestimate,AssurantHealthparticipatedintheWakelyNationalRiskAdjustmentSimulationProject(WNRASP).InthisprojecttheWakelyConsultingGroupquantifiedriskusingtheHCCHHSmodelthatHealthandHumanServices(HHS)developedforimplementationin2014.Wakelyconductedrisksimulationsinindividualandsmallgroupmarketsonlywhen75%+ofthestatewidemembershipwasrepresented.HealthplanscoveringthesemembersusedclaimexperiencetodetermineplanliabilityriskscoresconsistentwiththeHCCHHSmethodology.HealthplanspecificliabilityriskscoresalongwithallowableratingfactorsarecomparedtothescoresofallmarketparticipantsconsistentwiththemethodologysetforthintheRiskAdjustmentProgram.
TheWNRASPresultsprovidedtoAssurantHealthquantifythedifferenceintheriskoftheAssurantHealthbookofbusinessrelativetothestateandmarketaveragerisk.Theestimateofthemarketriskwasadjustedtoapproximateariskscorewhenthemarketincludesbothgrandfatheredandnongrandfatheredexperience.Sinceweusebothgrandfatheredandnongrandfatheredexperiencewefeelitisappropriatethatthemarketisonthissamebasis.In2012theWakelyNationalRiskAdjustmentSimulationProject(WNRASP)usedbothgrandfatheredandnongrandfathereddatawhilein2013onlynongrandfathereddatawasused.Tocalculateanadjustmenttoaccountforincludinggrandfatheredexperienceweusedthe2013marketto2012marketriskscore.Thefinalstateresultisadjustedtotheextentthatbaseperioddatawaslessthan100%credible,inordertobeonaconsistentbasiswiththeindexrateforthestate.Thefinalresultforuseinourpricingmethodologywasa0.91riskscore.ThisindicatesthatAssurantHealthbusinesspractices(e.g.distributionmethodsandunderwriting)andmemberselectionpatternshavecreatedabookofexperiencewith9%lowercosts.Ourpricingwasadjustedbyafactorof1.0/0.91torepresenttheaverageactuarialrisk,asshowninAppendixA.Thismultiplicativeadjustmentisconsistentlyappliedacrossallplanswithinthestate.Pleasenotethatthisadjustmentisnotaprojectionofa2014riskscore,butratheranadjustmenttogetAssurantHealthspecificmorbidityinlinewiththemarketaverage.Afterfurtherreviewingthisassumption,weapplieda5%adjustmentperactuarialjudgmentandreasonableness.Therefore,inAppendixAtheadjustmentis0.95.
ChangesinBenefits:Thereisanadjustmentof4.15%withinourpricingandclaimprojectionto
includenewandexpandedbenefitsinaccordancewiththeEHBrequirementsoftheACA.Thetablebelowliststheestimatedadditionalcostassociatedwitheachnewbenefit.ThePediatricDentalexpensewasestimatedusingcommercialgroupexperiencefor2011and2012fromour
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ActuarialMemorandumMissouriFormTGM14.POL.MO Page5
sistersegment,AssurantEmployeeBenefits.Theremainingestimatesarebaseduponpurchaseddataofexperienceofastandardpopulation.
Benefit EstimatedAdditionalCostMaternity 1.00%
MentalHealthandSubstanceAbuse 0.45%PediatricVision 0.40%Chiropractic 0.40%
PrivateDutyNursing 0.30%PediatricDental 1.60%GRANDTOTAL 4.15%
Wealsomadeanadjustmenttoaccountforthecoverageofadditionalpreventativeitemsthat
willbepaidfirstdollarduetoupdatesbytheUSPSTF.Webelievetheimpactofcoveringtheseadditionalfirstdollarbenefitsis1.0%.Thisestimatewasdeterminedbyevaluatingthevolumeoftheseitemsinourhistoricalexperience.Theadditionalfirstdollarpreventativebenefitsare:
1.) AlcoholMisuse2.) BreastCancerRisk3.) HepatitisCScreening4.) HIVScreening5.) TobaccoUsePreventioninChildrenandAdolescents
Inaddition,weexpectthatricherbenefitsin2015willinducedemandforhealthcareservicesthatishigherthantheaverageutilizationwithinourbaseexperience.WeassumethatfutureSilverplanswillhaveutilizationthatis3%higherthanouraveragecurrentexperience,Goldwillbe8%higher,andPlatinumwillbe15%higher.Baseduponourexpected2015splitofplansbymetallevel,wehaveadjustedourexperienceperiodclaimsby0.9%inordertoaccountforthisbenefitleveldrivenincreaseinutilization.Theprojected2015membershipwasusedtodeterminethesplitofplansbymetallevelandtheweightedaverageutilizationimpactThemembershipmethodologyisdescribedinmoredetailbelow.OtherAdjustments:Wemadeanadjustmentof4.1%withinourpricingandclaimprojectioninordertoaccountforexpectedimprovementsinPreferredProviderOrganization(PPO)discountsin2015relativetothe2013experienceperiod.OurexpectedPPOdiscountsaredevelopedbyusingacombinationofexperienceandreporteddatafromthenetworksthatwelease.ThefutureimprovementisdrivenbyalargershareofbusinessexpectedintheAetnaSignatureAdministrators(ASA)networkin2015relativeto2013.ThisnetworkarrangementismorefavorableforAssurantHealththanotherleasednetworks.Furthermore,ourrentalnetworksworktorenegotiateandimprovetheircontractswithprovidersovertime,whichalsocontributestowardstheimprovementindiscounts.TheASAnetworkwasfirstlaunchedinMissouriinApril2012.
TrendFactors(cost/utilization):Theeffectsonfutureclaimsofinflation,advancingmedicaltechnologyandtechniques,andincreasedutilizationandcostshiftingareaccountedforbyan
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ActuarialMemorandumMissouriFormTGM14.POL.MO Page6
annualseculartrendassumptionof9.0%.Thisisanallowedclaimstrendfactor.Thistrendwasdevelopedfromhistoricalexperienceofournationwideblock.Ourhistoricalexperienceshowsslightlyhighertrendbutweareloweringitto9.0%asweanticipatetrendwillbelowerthanourhistoricalexperienceduetoamorestandardriskpopulationgoingforward.PleaseseeAppendixBforfurtherdetail.Experiencewastrendedfor24months,fromthemidpointof2013tothemidpointof2015.
AgeShift:Theexpectedageshiftbetween2013and2015isincludedintheindexratedevelopment.PleaseseeAppendixAfordetails.
GeographicShift:Theexpectedgeographicshiftbetween2013and2015isincludedintheindex
ratedevelopment.PleaseseeSection15b.andAppendixAfordetails.
6. CredibilityManualRateDevelopment
ThemanualratereflectstheAssurantHealthSmallGroupMedical2013nationwideallowedclaimspermemberpermonth(pmpm).Thisallowedpmpmvaluehasbeenadjustedtoaddressthefollowingneeds:1. AdjustthenationwideclaimstoreflecttheAssurantHealthdistributionbyageinMissouri.2. RemovetheimpactofclaimsexperiencefromMissouri(toavoiddoublecountingthis
experienceintheratedevelopment).3. AdjusttoreflectthespecificutilizationandchargelevelpatternsofMissouri.Externaldata,inconjunctionwithclaimsexperiencefrom2012,isusedtodeterminetheMissouritonationwideexpectedcostrelativity.Inordertodeterminethisrelativityfor2012,regressionanalysisisusedholdingageandgenderconstant.If2012experienceinMissouriisnotfullycredible,thestaterelativecostfactorisblendedwithastaterelativecostfactordevelopedusingTruvenAnalyticsMarketScan2011database.Controllingforageandgender,regressionanalysisontheTruvendatabaseproducedthestatetonationwideallowedcostrelativity.The2011andTruvenblendedrelativityfactorisreferredtoasthemanualstatefactor.Aregressionbasedonnationwide2013allowedclaimsexperiencewasusedtosmoothallowedclaimlevelsbyage,gender,andsmokingstatus.Fromthisregression,predictedallowedclaimswerecalculatedateachageandsmokingstatuscombination.TheseallowedpmpmclaimlevelsareappliedtotheMissouridistributionofmembershipbyageandgender,andsummed.Inaddition,anadjustmentisappliedtoremovetheinfluenceMissouriclaimshaveonthenationwideaverageclaims.Themanualstatefactorismultipliedbyadjusted2013nationalclaimlevelsasdescribedinthepreviousparagraphtocalculatethemanualpmpmallowedclaimsinthestate.Themanualrateisblendedwiththebaseperiodrateasdescribedinthecredibilitysectionbelow.Themanualratewasadjustedtothe2015pricingperiodusingtheprojectionfactorslistedinthesectionabove.
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ActuarialMemorandumMissouriFormTGM14.POL.MO Page7 7. CredibilityofExperience
Todevelopourfullcredibilitystandard,weconductedastudytoestablishconfidencelevelsatdifferentcohortsizes.Inthisstudy,werandomlysampledcohortsfromourinternalblockofmembers.Weanalyzed100,000randomlysampledcohortsateachsizetoestablishthevarianceassociatedwithacohortofthatsize.Therequiredcohortsizetobeconsideredfullycrediblewassetatthepointwherewewere95%confidentthatclaimswouldfallwithin4%ofourtarget.Thisresultsinafullycrediblestandardof58,000membermonthsforexperiencethathashadclaimsinexcessof$50,000permemberpermonthlevelpooledacrosstheblock,asusedwithinourpricingmethodology.TheUnifiedRateReviewTemplateutilizesunpooledclaims.Therefore,baseduponthesame95%confidence,thestandardforfullcredibilityontheUnifiedRateTemplateis322,000membermonths.Partialcredibilityisassignedtotheexperienceperioddatabasedupontheclassicalcredibilityformulalistedbelow:SquareRoot((ExperienceDataMemberMonths)/(FullCredibilityStandard))Basedupontheabovecredibilitymethodology,ourMissouripooledexperienceasusedwithinpricingis79%credible.TheunpooledbaseexperienceasusedintheUnifiedRateReviewTemplateis0%credible.Thestatespecificexperiencewasremovedfromthedevelopmentofthemanualrateinordertoavoidanydoublecountingofthebaseperiodexperience.GiventhatwedonothavecredibleEHBclaimdatayet,wefeelitisappropriatetoincludegrandfatheredexperiencewithinourpricingdatainordertodevelopthemostpredictiveestimateoftheaveragemorbidityofthe2015market.Inaddition,pleasenotethatourotherpricingassumptionsweredevelopedonaconsistentbasis.Forexample,wedevelopedourchangeinmarketriskassumptionrelativetothetotalIMcurrentmarket,notrelativetothenongrandfatheredcurrentmarket.
SincetheURRTrequiresunpoolednongrandfathereddata,ourpricingapproachwasincompatiblewiththestandarduseoftheURRT.Therefore,weassigned0%credibilitytotheunpoolednongrandfathereddatawhichisrequiredintheURRTinordertogivefullcredibilitytothecredibilitymanualwhichmatchesourpricing.
8. PaidtoAllowedRatio
OurprojectedPaidtoAllowedRatiois65%.Inour2014pricingdevelopment,theActuarialValue(AV)calculatorprovidedbyHHSproducedvaluesthatwereveryclosetoourhistoricalpaidtoallowedratiosonanaggregatebasis.Therefore,wedetermineditwasreasonabletousetheHHSAVcalculatortodevelopestimatesofthepaidtoallowedratioofour2014insuredpopulation.However,our2013paidtoallowed
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ActuarialMemorandumMissouriFormTGM14.POL.MO Page8
ratiowasslightlyhigherthanthevalueproducedAVcalculator,whichisreasonablegiventhatunderlyingdataintheAVcalculatorwasnotupdatedfromtheprioryear.Therefore,weareaccountingforthisdifferencebyincludingabenefitleveragingfactorinthepricingvaluesofourplans.Thisfactorwillvarybymetallevelduetothedifferingleveragingeffectsbycostsharinglevel.Bronzeplanswillhaveahigherleveragingeffectduetohighercostsharingandconversely,Platinumplanswillhavealowerleveragingeffectduetolowercostsharing.Todeterminetheleveragingfactors,weusedaclaimprobabilitydistributionfromthe2012MillimanHealthCostGuidelinestomodeltheleveragingeffectonourmetalplans.Thefinalassumptionsareasfollows:
MetalLevel LeveragingBronze 1.035Silver 1.030Gold 1.015
Platinum 1.010
TodeveloptheprojectedPaidtoAllowedRatio,weusedourmembershipprojectiontodeterminethedistributionofplansbymetallevelin2015.Wethenappliedtheleveragingfactorsbymetalleveltotheactuarialvaluesandaveragedthemtogetatotalprojectedpaidtoallowedratio.Themethodologyofourmembershipprojectionisdescribedinmoredetailbelow.
9. RiskAdjustmentandReinsurance
RiskAdjustment:In2014,theACAestablishedaRiskAdjustmentProgramthatwillallowissuerstosetpremiumsaccordingtotheaverageactuarialriskintheindividualandsmallgroupmarketwithoutrespecttothetypeofriskselectiontheissuerwouldotherwiseexpect.TheACAestablishesastandardquantificationofriskwiththeHCCHHSriskscoringmodel.UntilwegainfurtherknowledgeonthetotalMissourimarketrisk,wearecontinuingtopricetothemarketaverageriskof1.0.Therefore,nomarketwideadjustmentfortheriskadjustmentprogramwasappliedwhendeterminingthemarketadjustedindexrate.
ReinsuranceRecoveries:Thesmallgroupmarketisnoteligibletoreceivereinsurancerecoveries.
ReinsuranceContributions:TheReinsuranceProgramisfundedbyafeeof$3.67permemberpermonth.Wehaveincreasedourexpectedclaimcostswithinourpricingdevelopmentby1.2%inordertocoverthisfee.Inordertomaintaincompliancewiththerequiredrelativityofpricesbyage,wehaveappliedtheadjustmentonamultiplicativebasis.Ouradjustmentfactorwasdevelopedbydividing$3.67bytheexpectedtotalpermemberpermonthclaimcostsinthestate.
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ActuarialMemorandumMissouriFormTGM14.POL.MO Page910. NonBenefitExpensesandProfit&Risk
ThetablebelowliststheexpectedNonBenefitExpensesandTargetProfitforAssurantHealthinMissouri.Thepricingloadtocovertheseexpensesisappliedconsistentlyacrossproductsandplans,asdisplayedintheworkupoftheplanadjustedindexrate.Theseitemsarediscussedindetailinthefollowingparagraphs.
ExpenseCategory %ofPremium
GeneralandAdministrative 12.0%CommissionsandSalesBonus 5.5%ManagedCareandCostContainment 2.0%QualityImprovement 0.9%NetInvestmentIncome 2.0%Taxes,FeesandStateAssessments 2.4%ACAHealthInsurerFee 1.7%FederalIncomeTaxes 1.9%ProfitandRiskMargin(AfterTax) 1.1% Total 25.5%
Ourpricedforlossratiois74.5%inMissouri,whichisapproximatelyan80%MedicalLossRatioasdefinedbytheACA.ThecalculationoftheMedicalLossRatioisshownintheProjectedLossRatiosection.ThefinalpricedforTotalNonBenefitExpensesandProfitis25.5%.Inaddition,pleasenotethatexpensesforeachfunctionalareawithinthecompanyarerecordedatanationwidelevel.Expenseassumptionsforastateandproductareallocatedandrepresentedonapercentofpremiumbasis.Thispercentofpremiumrepresentationofexpensesisconsistentwithouractualtoexpectedlossratiopricingmethodology.AdministrativeExpenseLoads:GeneralandAdministrativeExpenses:Thiscategoryaccountsfortheexpensesofadministeringthebusiness,suchasclaimpaymentexpenses.Theassumptionwasderivedfromactualexpensesin2013relativetoactualrevenue.Indevelopingthisexpenseassumption,underwritingexpenseswereadjustedduetothereductionofstaffwithintheunderwritingfunctionalareathatoccurredinresponsetothe2014marketrules.CommissionsandSalesBonus:Thisisavariableexpensethatrepresentsthecostofacquiringbusiness.Ourcommissionschedulesandbonuscampaignswillbesetto5.5%ofpremium.ManagedCareandCostContainmentExpenses:Thisisavariableexpensethataccountsforexpensesincurredinordertoreduceclaimscosts,suchasaccessfeespaidtothePreferredProviderOrganizationNetworksthatareleasedonbehalfofourcustomers.Thisexpenseassumptionwasderivedfromactualexpensesin2013relativetoactualrevenue.QualityImprovementExpenses:Thiscategoryaccountsforexpensesincurredinordertoimprovethequalityofhealthcare.QualityImprovementExpensesareaddedtoclaimpaymentsintheMedicalLossRatioCalculation.Thisexpenseassumptionwasderivedfromactual
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expensesin2013relativetoactualrevenueandadjustedtoaccountforadditionalQIexpensesexpectedin2015.NetInvestmentIncome:Thiscategoryaccountsforinvestmentincomeearnedonreservesandsurplus.Thisassumptionwasderivedfromouractualcurrentnetinvestmentincomeratio.Profit&RiskMargin:Ourtargetedaftertaxmarginforriskandprofitis3%ofpremium.Thepricingloadforthis3%aftertaxmarginisappliedconsistentlyacrossproducts.In2015,weareexpectinga1.1%aftertaxmargin.
TaxesandFees:HealthInsurerFee:$8billionwillbecollectednationallyforthisfeein2014and$11.3billionin2015.Thefeeisbasedonourshareofthetotalmarketpremium.Itisestimatedthatthisfeewillbe1.7%ofpremium.Furthermore,thisfeeisnotdeductiblefromfederalincometaxes.StatePremiumTaxesandAssessments:Thisisestimatedatapproximately2.4%ofpremiumbasedupon2013experience.AnadjustmentwasmadetohistoricalexperienceinordertoreduceanyComprehensiveHealthAssociationassessments.Inaddition,anadjustmentofapproximately0.05%hasalsobeenmadetoaccountforthe$2permemberperyearPCORIfee.Theminimalimpactofthe$0.08permemberpermonthRiskAdjustmentProgramadministrationfeehasbeenremovedfromthissectionandisincludedintheprojectedriskadjustmentperthePartIIIActuarialMemoandCertificationInstructions.IncomeTaxes:FederalIncomeTaxesareexpectedtobe1.9%ofpremium,calculatedas((3%+1.7%)X40%),where3%isthepretaxprofitmargin,1.7%isthenondeductibleACAhealthinsurerfeecostand40%isanapproximationofthefederalincometaxrateforAssurantHealth.Pleasenotethatoureffectivefederalincometaxrateisexpectedtobegreaterthanthestandard35%duetothenondeductibilityofcertaininternalandexternalsmallgroupcompensation.Thisnondeductiblecompensationisprimarilyincurredwithinnonhealthinsurancelinesofbusinessfromourparentcompany,Assurant,Inc.ExchangeUserFees:Assurantwillonlyissuebusinessofftheexchangeinthisstatein2015.Therefore,noexchangeuserfeehasbeenappliedtotherates.
11. ProjectedLossRatio
Theprojectedfuturelossratiofortheperiodof1/1/2015through12/31/2015is74.5%.Ourpremiumratewasdevelopedbydividingprojectedincurredclaimsbythepricedforlossratio.Ourpricedforlossratiois74.5%inMissouri.However,attherequestofHHS,weremovedour0.6%loadtocoverthecostofnotchargingpremiumforchilddependentsbeyondthree.Withthisadjustment,ourprojectedlossratiois74.9%,whichisapproximatelyan80%MedicalLossRatioasdefinedbytheAffordableCareAct.AcalculationoftheprojectedMedicalLossRatio(MLR)isshownbelow:MLR =(Claims+QualityImprovementExpense)/(PremiumTaxesandFees)
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ActuarialMemorandumMissouriFormTGM14.POL.MO Page11
=(A+B)/(DEFG)=(74.9%+0.9%)/(100%2.4%1.7%1.1%)=80%
Where: AisIncurredClaims,netofReinsuranceandRiskAdjustmentTransfers BisExpensesforImprovementintheQualityofHealthcare Dispremium
Eisstatepremiumtaxesandotherassessmentsandfees FistheHealthInsurerFee GisFederalIncomeTaxes(excludingtaxesonprofitduetoInvestmentIncome)
12. SingleRiskPoolandIndexRate
Thesingleriskpoolreflectsallcoveredlivesforeverynongrandfatheredproduct/plancombinationforthisstateandmarket.TheIndexRateistheestimatedtotalallowedclaimspermemberpermonthforallnongrandfatheredplansforallessentialhealthbenefitswithinthestate.ThisfiguredoesnotincludeadjustmentsforReinsurance,RiskAdjustmenttransfers,orexchangeuserfees.TherearenomaterialcoveredbenefitsinexcessoftheEssentialHealthBenefits.PleaseseeAppendixAfordetailontheprojected2015IndexRatecalculation.Also,pleaseseetheMarketAdjustedIndexRateandPlanAdjustedIndexRateExplanationSectionsbelowfordetailsonhowratesarecalculatedrelativetotheIndexRate.Theexperienceusedtodeveloptheprojectedindexrateincludestheexperienceoftransitionalplans.
13. MarketAdjustedIndexRate
TheMarketAdjustedIndexRateiscalculatedastheIndexRateadjustedforallallowable marketwidemodifiersdefinedinthemarketratingrules,45CFRPart156,156.80(d)(1). Theseadjustmentsinclude:
Federalreinsuranceprogram Riskadjustment Exchangeuserfee
Pleaseseesection9ofthismemoforadescriptionofthereinsuranceandriskadjustment.Pleaseseesection10ofthismemoforadescriptionoftheexchangeuserfeeadjustment.ThecalculationoftheMarketAdjustedIndexRatecanbefoundinAppendixA.
14. PlanAdjustedIndexRate
ThePlanAdjustedIndexRateiscalculatedastheMarketAdjustedIndexRateadjustedforallallowableplanlevelmodifiersdefinedinthemarketratingrules,45CFRPart156,156.80(d)(2).Theseadjustmentsaredescribedbelow.ThecalculationofthePlanAdjustedIndexRatecanbefoundintheattachedrateexhibits.
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ActuarialValueandCostSharing:
o ActuarialValuePleaseseesection17ofthismemoforadescriptiononhowtheactuarialvalueswerecalculated.
o PaidtoAllowedLeveragingFactorPleaseseesection8ofthismemoforadescriptiononhowthepaidtoallowedleveragingfactorwascalculated.
o UtilizationWeexpectthatricherbenefitsin2015willinduceutilizationforhealthcareservicesthatishigherthantheaverageutilizationwithinourbaseexperience.WeassumethatfutureSilverplanswillhaveutilizationthatis3%higherthanouraveragecurrentexperience,Goldwillbe8%higher,andPlatinumwillbe15%higher.ThesefactorsaretheprescribedHHSinducedutilizationfactorsusedintheHHSriskadjustmentcalculations.
ProviderNetworkPPOfactorsweredevelopedusinginternalcompanydiscount
experienceinconjunctionwithreporteddiscountsfromthenetwork.Thefactorsreflectthedifferencefromtheaveragediscountinthestate.
AdministrativeCostsTheadministrativecostfactoristhereciprocalofourprojectedlossratio.Pleaseseesection11foradescriptiononhowourprojectedlossratiowascalculated.Theadministrativecostsfactorisconstantacrossallplans.
15. Calibration
a. AgeCurveCalibrationTheagecurvecalibrationisusedtoadjustPlanAdjustedIndexRatetoa21yearold.Theagecurvecalibrationiscalculatedas:
1/AverageAgeRatingFactorWeightedbyAgeMembershipSplit
Theaverageageratingfactoristhestandardagecurveweightedbyourmembershipdistributioninthestate.TheagecurvecalibrationisapplieduniformlytoallplansandisdemonstratedinAppendixA.Duringthefilingreviewprocess,theexpectedageshiftbetween2013and2015wasincorporatedintheindexratedevelopment.
b. GeographicFactorCalibrationTheratingareafactorsusedinour2014pricingwereusedinthedevelopmentoffactorsfor2015,withtheexceptionofa10%decreaseinRatingArea3.Tocalibrate,wefirstused2013membershipandbalancedtheoverallstateareafactortoa1.0togettheareafactorsonthebasisofour2013pricingexperienceperiod.Secondly,weusedtheprojected2015membershipbyratingareaandreweightedtheareafactorsagaintodeterminetheprojectedstateaverage.Theresultingstateaveragefactorinthisstatewas0.990.Thismarketwidecalibrationfactoristhenappliedafterthedeterminationof
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theplanadjustedindexratesandthesmallgroupareafactorsaredividedbyittocalibratethemarketaveragebacktoa1.0.Thetablebelowshowstheresultingweightedaveragegeographicfactorof1.000forthestatealongwithrelativityfactorsforeachratingareawithinthestateandtheircorrespondingprojectedmemberdistributions.
RatingArea
2015SGMember
Distribution
2015WeightedSGAreaFactors
1 9.0% 1.032 19.1% 1.043 15.4% 1.014 5.8% 0.945 13.5% 0.996 6.9% 1.097 4.5% 0.928 13.6% 0.979 5.8% 0.9510 6.3% 0.97
Total 100% 1.000Duringthefilingreviewprocess,thisgeographicshiftbetween2013and2015wasincorporatedintheindexratedevelopment.Thegeographiccalibrationisnow1.0.
16. ConsumerAdjustedPremiumRateTheConsumerAdjustedPremiumRateisthefinalpremiumrateforaplanthatischargedtoanindividualorfamily.TheConsumerAdjustedPremiumRateisdevelopedbycalibratingthePlanAdjustedIndexRatetotheagecurveandgeographythenapplyingtheratingfactorsspecifiedby45CFRPart147,147.102.Theseratingfactorsaredescribedbelow.Theratingfactorscanbefoundintheattachedrateexhibitfile.
AreaFactorsAreafactorsweredevelopedusinginternalcompanyprediscountedallowedclaimexperience.Inareasthatwerelessthan100%credible,internalexperiencewassupplementedwithconsultantdata.TheAreafactorisconstantacrossallplansandisbalancedtoequal1.0intotalforthestate,asdescribedabove.
AgeFactorsTheagecurveusedtosettheagefactorsisthestandardagecurvesetbyHHS.Theagefactorsaresetrelativitytotheprojectedaverageageusedintheagecurvecalibrationabove.
TrendFactorsThetrendfactorsincreasequarterlyatarateof9%annually.PleaseseeAppendixBforfurtherdetail.
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ActuarialMemorandumMissouriFormTGM14.POL.MO Page1417. AVMetalValues
TheHHSActuarialValueCalculator(AVC)wasusedtogeneratetheAVvaluesandmetalvaluesforsomeoftheplansinourportfolio.TogenerateAVsfortheplansthatcontainedbenefitsbeyondthoseinthecalculator,anacceptablealternativemethodologywasused.ThemethodologyusedtodeveloptheseplansAVsisdetailedbelow.1.MailOrderCopayApplicableplans:Silver5,Silver8,Gold5,Gold6,Platinum2,Platinum4,Platinum5MailordercopaysforAssurantHealthplanswillbe3timestheretailRxcopay.TheHHSactuarialvaluecalculatordoesnotallowfortheusertoinputdifferentdrugcopayvaluesformailorderdrugs.TheprojectedpercentageoftotalscriptsthatAssurantexpectstobemailorderin2014is12%.Therefore,wearecertifyingthattherewillbenoimpactof3xmailorderdrugcopaysontheactuarialvalue.2.$500FirstDollarD/X/LBenefitApplicablePlans:Silver1,Silver2,Silver3,Silver4,Silver5,Silver6,Silver8,Gold1,Gold2,Gold3,Gold4,Gold5,Gold6,Gold7,Platinum1,Platinum2,Platinum3,Platinum4,Platinum5AssurantHealthwillhavemanyplansthathavea$500firstdollarLabandXRaybenefit.Inordertoevaluatetheactuarialvalueofthisbenefit,anewcontinuancetablehadtobecreatedsincetheHHSAVCcannotcalculatetheimpactoffirstdollarbenefits.TheclaimcostbasiswasselectedastheactuarialcontinuancetablesoftheHHSAVC.ThecontinuancetablesoftheHHSactuarialtablesarecomprisedofclaimcostssegregatedbyservicecategory,plusanallowanceforadditionalclaimcostsexpectedfromhighriskpools.Continuancetableswerebuilttoremovetheadditionalcostofthehighrisktables.Thevalueaddedtothetableswasasetdollaramount,withoutallocationtotheseparateservicecategoryclaimcosts.Twoaggregatetableswerebuilt,onereflectingallservicecategoriesandthesecondreflectingallservicecategorieswithoutLabandXRay,bothofthesetablesexcludingthehighriskpooladditionalcosts.Expectedclaimcostsweredevelopedforeachmetallevelatadeductiblelevelthatgeneratestheprescribedmetalactuarialvalue,withanintegratedmedicalanddrugdeductible.AcontinuancetableofLabandXRaybenefitswasbuiltfromdatafromMilliman.ThetablewasadjustedsothattotalclaimcostsofLabandXraybenefitswereequaltotheamountofclaimsforLabandXRaysundereachmetalbenefitlevel.Thecontinuancetablewassplitintoprofessionalandtechnicalbytheuseofalevelproportionacrossallaverageclaimlevels.Thecontinuancetablewasutilizedtoderiveabenefitofa$500firstdollarcoveragebenefit.Remainingclaimswerethenappliedtothebaseplandeductible.Eachmetalplancontinuancetablewasreliedontoderivethisvalue.
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Belowarethecalculationsofthe$500firstdollarlabandXraybenefitresultingfromtheprocessdescribedabove:
Silver1 Silver2 Silver3 Silver4 Silver5 Silver6 Silver8
ClaimCostofPlanatMetalLevel(a) $3,108 $3,136 $3,174 $3,209 $2,905 $3,285 $2,995
includesallmedicalandpharmacybenefits
ClaimCostofPlanatMetalLevel(b) $2,820 $2,854 $2,897 $2,918 $2,632 $2,988 $2,715
nobenefitsforLabandXRay
ValueofLabandXRay(c) $164 $164 $164 $164 $164 $164 $164
firstdollarbenefits,upto$500
AdditionalValueofLabandXRay,appliedagainst
deductible(d) $163 $166 $163 $167 $154 $170 $158
includesanestimateofimpactofdeductible
NewEstimateofMedicalClaimCoste=(b+c+d) $3,148 $3,183 $3,224 $3,249 $2,950 $3,323 $3,037
AdditionalAV(e/a1): 1.30% 1.50% 1.56% 1.23% 1.56% 1.14% 1.41%
Gold1 Gold2 Gold3 Gold4 Gold5 Gold6 Gold7
ClaimCostofPlanatMetalLevel(a) $3,865 $3,859 $3,852 $3,916 $3,962 $3,859 $4,081
includesallmedicalandpharmacybenefits
ClaimCostofPlanatMetalLevel(b) $3,520 $3,521 $3,491 $3,546 $3,606 $3,521 $3,724
nobenefitsforLabandXRay
ValueofLabandXRay(c) $171 $171 $171 $171 $171 $171 $171
firstdollarbenefits,upto$500
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AdditionalValueofLabandXRay,appliedagainst
deductible(d) $205 $201 $213 $218 $211 $201 $213
includesanestimateofimpactofdeductible
NewEstimateofMedicalClaimCoste=(b+c+d) $3,895 $3,892 $3,874 $3,934 $3,988 $3,892 $4,107
AdditionalAV(e/a1): 0.78% 0.88% 0.55% 0.47% 0.66% 0.88% 0.65%
Platinum
1Platinum
2Platinum
3Platinum
4Platinum
5
ClaimCostofPlanatMetalLevel(a) $4,735 $4,751 $4,763 $4,831 $5,015
includesallmedicalandpharmacybenefits
ClaimCostofPlanatMetalLevel(b) $4,320 $4,324 $4,334 $4,410 $4,598
nobenefitsforLabandXRay
ValueofLabandXRay(c) $175 $175 $175 $175 $175
firstdollarbenefits,upto$500
AdditionalValueofLabandXRay,appliedagainst
deductible(d) $252 $259 $260 $255 $253
includesanestimateofimpactofdeductible
NewEstimateofMedicalClaimCoste=(b+c+d) $4,747 $4,758 $4,769 $4,840 $5,026
AdditionalAV(e/a1): 0.25% 0.15% 0.14% 0.20% 0.22%
3.OneDeductiblePlansAffectedplans:1DedBronze2,1DedSilver4,1DedGold4TheOneDeductibleproductdesignconsistsofasinglefamilydeductibleforallmembersofthefamily.ThescopeofthisproductdesignisoutsidethoseallowedbytheHHSAVC.AcontinuancetablewasselectedthatreplicatedresultsoftheBronzelevelActuarialValues
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fromtheHHSAVC,usinganintegrateddeductible.ActuarialValuescalculatedwiththisselectedtablecomparedfavorablywiththeAVscalculatedintheHHSAVC.ThisBronzelikecontinuancetablewasconjugatedwithitselftorepresenttheexpectedclaimsof2,3,4,5,6,or7membersunderaunifiedfamilydeductible.ExpectedmemberlevelAVsarethendevelopedfromaninputtedplandesign,foreachofsevendifferentcontinuancetables.AnaggregateplanlevelActuarialValueisdevelopedfromabusinessweightingbyfamilysize.Thefollowingtableshowsthecalculationoftheaggregate.
NumberofMembers MixofBusiness 1DedBronze2 1DedSilver4 1DedGold4
1 73% 59.9% 68.3% 78.6%2 10% 50.1% 62.4% 73.7%3 6% 54.1% 66.9% 79.1%4 6% 57.9% 70.4% 83.1%5 2% 61.4% 73.2% 86.1%6 2% 64.6% 75.4% 88.3%7 1% 67.4% 77.1% 89.9%
AggregateActuarialValue: 58.6% 68.1% 78.9%
TheplanportfolioforAssurantHealthisincludedinAppendixC.ScreenshotsoftheAVcalculationscanbefoundinAppendixD.18. AVPricingValues TheAVpricingvaluesincludetheAVs,calculatedasdescribedabove,inadditiontoan
adjustmentforutilizationdifferencesweexpectduetoplancostsharingdesign.Whileweunderstandthedifficultyindifferentiatingincreasedutilizationfromanincreasedriskprofile,wedofeelitisappropriatetoadjustlowermembercostsharingplansforincreasedutilization.IntheActuarialValueCalculatorMethodologydocumentreleasedbyHHS,HHSstatesthatspendingisaffectedbyplandesignthroughinduceddemand,andtheyinturnhaveexplicitlydifferentiatedandestimatedtheimpactofinducedutilizationbymetallevel.AninternalstudyhasconfirmedthatinducedutilizationisrelevantandsuggeststhattheHHSdefinedinducedutilizationfactorsmaybeconservative.
Sincewedonthaveenoughcredibilitytodetermineseparateinducedutilizationfactorsfor
eachmetallevel,weareapplyingtheprescribedHHSinducedutilizationfactorsusedintheHHSriskscoretoourplans.
Theothervaluesusedindeterminingtheplanadjustedindexrateareexplainedintheapplicablesectionabove.Pleaseseetheattachedrateexhibitsfortheportionofthevaluethatisduetotheallowedplanmodifiers.
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ActuarialMemorandumMissouriFormTGM14.POL.MO Page1819. MembershipProjections
PleaseseeAppendixEforprojectedexperiencein2015.Ourprojectionof2015membermonthswasdevelopedbycombiningthefollowingpiecesofinformation:
2014openenrollmentsalesandexpected2015openenrollmentsales PoliciesthathaverolledtoanACAcompliantplanthrough4/1/2014 PoliciesthatweexpecttorolltoanACAcompliantplanthroughtheendof2015,
includingthosethatmaykeeptheircurrentNonACAcomplaintplanin2014androlltoanACAcompliantplanin2015
Wemodeledthemembershiponamonthlybasisthroughtheendof2015usingourmonthlylapseratesbymetallevelandexpectedrolldateforeverypolicywithinthestatethatisnotyetonanACAcompliantplan.Theexpectedmembercountduring2015foreachmonthisthenaddeduptoarriveatthetotalmembermonthsexpectedin2015.Anydifferencesbetweenthecurrentdistributionofprojectedmembermonthsandcurrentmetallicmembershipdistributionwouldbeattributedtoanymetallicrollsduringtheyear.
20. TerminatedProducts
NonGrandfatheredpoliciesunderformsTGM.TRT.MOandJGM.TRT.MOwillbediscontinued.Theseproductsareincludedintheexperienceperioddata.Inthisstate,policyholdershavetheoptiontocontinuetheirplanunderthePresident'stransitionalmemorandum.Theseproductsareincludedintheexperienceperioddata.
21. PlanType
All2015SmallGroupMedicalPlanswillbePPOplans.22. WarningAlerts
Adescriptionofthewarningalertsfromtheunifiedratereviewtemplateisbelow:1. Awarningappearsbecausehistoricalrateincreaseswerenotenteredforourterminated
products.Theinstructionsfortheunifiedratereviewtemplatespecificallystatethatthesearenotrequired.
19. EffectiveRateReviewInformation
None.
21. Reliance
IndevelopingthisratefilingIrelieduponinformationprovidedbyotherswithinmydepartment,aswellasoninformationprovidedbyotherdepartmentswithintheorganization.Ihave
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reviewedthisinformationforreasonableness,andIconsiderittobereliable.22. ActuarialCertification
IamamemberoftheAmericanAcademyofActuaries.Tothebestofmyknowledgeandjudgment,1. Thisratefilingisincompliancewiththeapplicablelawsandregulationsconcerning
premiumratedevelopmentinthisstateandthebenefitsarereasonableinrelationshiptopremiums.
2. Theprojectedindexrateis:a. IncompliancewithallapplicableStateandFederalStatutesandRegulations.b. DevelopedincompliancewiththeActuarialStandardsofPractice.c. Reasonableinrelationtothebenefitsprovidedandthepopulationanticipatedtobe
covered.d. Neitherexcessivenordeficient.
3. Theindexrateandonlytheallowablemodifiersasdescribedin45CFR156.80(d)(1)and45CFR156.80(d)(2)wereusedtogenerateplanlevelrates.
4. ThepercentoftotalpremiumthatrepresentsessentialhealthbenefitsincludedinWorksheet2,SectionsIIIandIVwerecalculatedinaccordancewithactuarialstandardsofpractice.Tothebestofmyknowledge,thepercentoftotalpremiumthatrepresentsEHBsis100%.
5. TheHHSAVCalculatorwasusedtodeterminetheAVMetalValuesforallplansshowninWorksheet2ofthePartIUnifiedRateReviewTemplateexceptforthosedocumentedinthismemorandum.TheAVvaluesforthosedocumentedinthememorandumweredevelopedbasedononeoftheacceptablealternativemethodsandareinaccordancewithgenerallyacceptedactuarialprinciplesandmethodologies.
______________BrentWiskirchen,FSA,MAAAAssociateActuaryReformPricing9/2014