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Post by dpon on Jan 10, 2016 19:28:34 GMT -8
Hi William, I was wondering if, as part of the Executive Summary, if we could add a glossary section, as a compliment to the 2-pages.
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Post by williamma on Jan 10, 2016 19:36:20 GMT -8
Hi dpon,
Go ahead. Please keep it within 1 page.
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Post by lorenzglaza on Jan 11, 2016 5:32:42 GMT -8
Greetings students. This is Lorenz and I am posting some guidance to some questions that were sent to me. First, thank you for participating in the case study. I hope you are finding it interesting as it is relevant to today's Actuarial work. I will do my best to check these boards regularly over the next few days, but do continue to also email William with questions so he can relay them to me.
Before I answer, I would like to share the following general guidance. There are two sides of the case study here. One is the expense or cost side and the other is the premium side. As Actuaries, we are usually focused on what the expense or cost side of the insurance financing mechanism is and do own work based on that. But the member pays a premium, which is different, but, in theory, should cover the medical costs, administrative costs and provide some provision for profit. But this may not always be true, depending on market conditions and other business decisions that arise.
With that said, let me see if I can put more context and guidance around the questions the students have been answering. See below in bold for my answers.
2) I am specifically referring to the 619,200 members that were renewed on December 2015, can we assume that their renewal premiums will be different from the 2016 premiums of the other large group employers? Can we also assume that in 2015, all large group employers paid the same PMPM premium of $364.08 rather than the (more fairly priced) premiums of $260.39 and $390.00 based on their size?
Yes to both questions.
2) For the small-large group employers who got offered an offer that's "too good to refuse", are they still considered as large groups, but their PMPM premiums will be different from that of the remaining large groups who will renew as normal? We are asking this because one of the assumptions says the small group and individual rates should be the same regardless of where the new members come from, so we are wondering if this amssuption also holds for the large groups
Yes, they are considered large groups. Ans yes, their premiums will be different as they hav3 a different rating trend for the offer that was "too good to refuse". As for the question about the small group and individual rates being the same, this should be understand that once a member or group joins the exchange, they have the same rate as everyone else at their age bracket. In large group you have flexibility to charge different rates to different groups based on the characteristics of that group. So, in this study, we have split out the rates for large groups into small-large groups and regular large groups.
1) We are a little bit confused at the data on the small group costs spreadsheet. It seems as if much of the data is completely contradictory; the tables on the right spit out completely different costs than the tables on the left. we were wondering if it is possible that there is an error in the given data, and if so how to account for that. Thanks!
The tables in cells A3 to F12 (this is for 2016 rate development, but this also applies to the 2017 rate development) develop expected average small group costs for the entire pool as a whole, i.e., not by age bracket, from assumptions from the consultant. Cells H4 to M9 develop the rates by age bracket since small groups are rated by age bracket, not just by average cost as in large group. There is a 3:1 ratio limit on what the highest rate can be versus the lowest rate. This is your company's attempt to distribute the average costs developed in cells A3 to F12 to the different age buckets while staying within the 3:1 constraint as mandated by the ACA legislation. Cells A25 to C30 show your company's rates versus what the market rates are expected to be by age bracket.
2) We have question on how to read the "Relative cost of a member lapsing from a particular line of business into another line of business" table. Is is lapsing from individual to small group 105% or small group to individual 105%? Thanks.
This table is not as clearly labeled as it could be. Let me describe it in further detail. It is read with the population a member is coming from going down the rows and the population the member is going to going across the columns. So, for example, a small group member who leaves the small group pool and enters the individual pool is expected to have costs that are 95% of a regular small group member already in the pool. If that small group member enters the large group pool, that member is expected to cost 90% of a regular large group member.
Individual Small Group Large Group Individual N/A 105% 100% Small Group 95% N/A 90% Large Group 85% 105% N/A
3) Are there any assumptions for new members of large groups?
All large group assumptions that you can use are described on the following tabs in the workbook: "UC Existing Large Group", "Misc Assumptions".
4) Does Overhead mean Admin Costs?
Yes, they are used interchangeably throughout the case study.
5) Is there an assumption for large groups in-force lapse?
See the table on the "Misc Assumptions" tab.
6) What are the rating, expense and OH trends for small groups in 2016 and 2017?
You can find this information on the "New Small Group Costs" tab. The consultant has provided you with information on rate build-ups.
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