2015 Time Individual Major Medical Rate Filing.pdf

ACTUARIALMEMORANDUMandCERTIFICATIONfor

TIMEINSURANCECOMPANYin

Missourion

FormsTIM14.POL.ONE.MO,TIM14.POL.IRX.MO,TIM14.POL.OVI.MO,TIM14.POL.RXC.MO,TIM14.POL.OVC.MO,andTIM14.POL.CAT.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 IndividualMajorMedicale. EffectiveDates January1,2015December31,2015

f. PrimaryContactName RobertAndersong. PrimaryContactPhone# 4142996866h. PrimaryContactEmailAddress [email protected]

i. GeneralPolicyDescription:

ThisratefilingisfornongrandfatheredindividualmajormedicalplanswhichcovertheEssentialHealthBenefits(EHB)asrequiredundertheAffordableCareAct(ACA).TheseplansareguaranteedissueandguaranteedrenewableasdefinedundertheACAandHIPAA.Plansaremarketedthroughgeneralagencies,brokers,wholesalearrangements,anddirecttoconsumer.In2015,AssurantHealthwillonlysellplansoutsideofthepublichealthexchangesinthisstate.Coveragebeyondage65willbesecondarytoMedicare.Premiumsareonanattainedagebasisandwillincreasewithage.Premiumsalsovarybyplandesign,tobaccostatusandgeographicarea.In2015,onlytheoldestthreedependentsunderage21willbechargedapremiumrateforagivenpolicy.

2. ProposedRateIncrease:

Theproposedaveragerateincreaseforthisstateis23%.Thisincreaseexcludesattainedageincreases.Therateincreasedoesvarybyplan.Theseadjustmentsaredescribedinfurtherdetail

ActuarialMemorandumMissouriFormsTIM14.POL.ONE.MO, Page2TIM14.POL.ONE.MO,TIM14.POL.IRX.MO,TIM14.POL.OVI.MO,TIM14.POL.RXC.MO,TIM14.POL.OVC.MO,andTIM14.POL.CAT.MO

insection14ofthismemorandum.AppendixAshowsthedevelopmentofbaseratesforthisproduct.Theremainingsectionsofthememorandumdetailtheassumptionsweusedtodeveloprates.ReasonsforRateIncrease:Thefollowinglistisabriefdescriptionofthesignificantfactorsdrivingtheproposedratechange.Moredetaileddescriptionsofthesefactorsareincludedlaterinthismemorandum.1.) MedicalTrend:Ourmedicaltrendaccountsfortheeffectsonfutureclaimsduetoinflation,

advancingmedicaltechnologyandtechniques,andincreasedutilizationandcostshifting.

2.) AdditionalFees:Thehealthinsurerfeeassessmentismovingfrom$8billionto$11.3billionin2015whichresultsinalowertargetlossratio.

3.) AverageMorbidity:Therewillcontinuetobechangesintheprojectedriskpoolduemainly

to,butnotlimitedto,thefollowingfactors:a.) ContinuedgroupandMedicaidmigrationb.) Continueduninsuredmigrationc.) CurrentIMconsumersforgoingcoveraged.) Allowanceoftheextensionofnoncompliantnongrandfatheredplans(grand

motheredplans)e.) Statehighriskpooltermination

4.) PaidtoAllowedRatio:Thedifferencebetweenourprojectedpaidtoallowedratioinour

experienceversusthatofthe2014actuarialvaluecalculatorresultsinanincreasetoourprice.

5.) Reinsurance:TheinitialACAreinsuranceprogramfor2014wastoreimbursecarriers80%ofclaimcostsbetween$60,000and$250,000.In2015,thereimbursementwillchangeto50%ofclaimcostsbetween$70,000and$250,000.However,perrecentguidance,HHShassuggestedthattheparameterisgoingtobeloweredagainin2015from$70,000to$45,000,whichwehavetakenintoaccount.

TherateincreasesvarybyproductprimarilyduetobenefitleveragingdifferencesbymetallevelanddifferencesinPPOnetworkfactors.Theseadjustmentsarewarrantedastheyresultinactuariallyappropriateratesthatreflectthetruecostdifferencesbetweentheplans.PleasenotethatourratingmethodologydiffersfromthatoutlinedintheUnifiedRateReviewTemplate.Rather,theUnifiedRateReviewTemplaterepresentsinformationrequiredbyFederalRegulationtofacilitatereview.ThefollowingsectionsnoteanydifferencesbetweentheUnifiedRateReviewTemplateandthepricingmethodologyweusedtodeveloprates.PleaserefertoAppendixAforourratedevelopmentmethodology.


3. ExperiencePeriodPremiumandClaims

WepreparedtheUnifiedRateReviewTemplateusingstateandlegalentityspecificnongrandfatheredexperienceinordertocomplywithDepartmentofHealthandHumanServices(HHS)requirements.Forthepurposeofestimatingtheaverageriskofthe2015market,grandfatheredandnongrandfatheredexperienceofTimeInsuranceCompanyandJohnAldenLifeInsuranceCompanywasreviewedtogether.Thiscombinedexperiencewasusedinordertodevelopanactuariallyappropriatepredictionofthemarketwidepermemberpermonthriskandstandardizedclaimcostin2015.Thesameexperiencebasisisusedforboththepricingmethodologyandthedevelopmentoffactorsthatwilladdresstheimpactofourriskrelativetothemarketandtheimpactthishasonpremiumrates.Thisprocessisdescribedinmoredetailbelow.

ExperiencePeriod:TheexperienceperiodisclaimsincurredandpremiumearnedfromJanuary

1,2013throughDecember31,2013. PaidThroughDate:Thedatethroughwhichpaymentshavebeenmadeonclaimsincurred

duringtheexperienceperiodisFebruary28,2014. Premiums(NetofMLRRebate)inExperiencePeriod:IntheUnifiedRateReviewTemplate,the

earnedpremiumpriortoMedicalLossRatio(MLR)rebatesfortheCalendarYear2013experienceperiodwas$17,132,091.EarnedpremiumwasnotadjustedforanyreductionsprescribedwhencalculatingtheMLR,suchastaxesandassessments.TheMLRrebatesfortheexperienceperiodareestimatedat$1,661,266.

ThefinancialactuarialteamatAssurantHealthestimatesaccruedpremiumrefundsrequiredunderFederalMinimumLossRatioregulationsfortheIndividualMedicalandGroupMedicalinsurancebusiness.Theteamprojectsincurredclaims,earnedpremiums,andotherelementsandappliesadjustmentsasoutlinedinFederallawsandregulations.Theseprojectionsareperformedonastateandmarketlevelbasisandrecentclaimsexperienceisadjustedforestimatedclaimsreservesonastatelevelbasis.

AllowedandIncurredClaimsDuringtheExperiencePeriod:IntheUnifiedRateReview

Template,theamountofincurredclaimsprocessedthroughourclaimsystemfortheexperienceperiod2013is$11,221,198.Thebestestimateofexperienceperiodclaimsincurredbutnotreportedis$400,256fortotalincurredclaimsof$11,621,454.Theamountofallowedclaimsprocessedthroughourclaimsystemfortheexperienceperiod2013is$19,104,911.Thebestestimateofexperienceperiodallowedclaimsincurredbutnotpaidasofthepaidthroughdateshownaboveis$997,969fortotalallowedclaimsof$20,102,880.Allowedclaimsaredevelopedbysubtractingineligiblechargesanddiscountsfromthetotalproviderbilledamount.AssurantHealthhasnocapitationagreements.

Thepermemberpermonthexperienceperiodallowedclaimsinourpricingmethodologyis


baseduponallIndividualMedicalexperiencewithinthestateforAssurantHealth.ThemethodologyisdemonstratedinAppendixA.Experienceforlimitedbenefitplanswasnotincluded.Furthermore,anadjustmentwasmadeinordertopoollargeclaimsacrossourblock.Claimsinexcessof$50,000foraspecificmemberandincurredmonthwereremovedfromtheexperience,andthenanationwideaveragepoolingchargewasappliedpermember.Allpricingcomponents,includingthebaseexperienceperioddata,areappliedconsistentlyacrossthesingleriskpoolinthestateandmarketfor2015.

OurfinancialactuarialteamdevelopslagtrianglesfornationwideIndividualMedicalexperience.

ThesetrianglesareseparatelydevelopedforMedicalandPrescriptionDrugCardcoverage.SpecificlargeclaimsthatarepartofourcasemanagementprogramareremovedfromtheMedicaltrianglesandreservedforseparately.Historicalaveragesareusedinordertocalculatemonthlycompletionfactorsfortheremainingclaims.

4. BenefitCategories Inpatientservicesarethosereceivedduringapatientshospitalstayandareincludedinthe

InpatientHospitalCategory.Outpatientservices(e.g.labtests,Xrays,andsomesurgicalservices)arethoserenderedbyafacilitywithinanoutpatientsetting.Professionalservicesincludeprimarycare,specialist,therapyandotherprofessionalchargesthatarenotincludedinfacilityfees.OtherMedicalservicesincludechargesforitemsthatdonotfallintothecategoriesabove,suchasambulanceanddurablemedicalequipment.TheOthercategoryismeasuredbasedupondistinctservicesoritemsprovided.RetailandmailorderpharmacyclaimsareincludedinthePrescriptionDrugcategory.

5. ProjectionFactors

ChangesintheMorbidityoftheInsuredPopulation:Therearetwoadjustmentsthatweareusingtogettoanestimateofthe2015marketrisk.ThefirstisanadjustmenttogetAssurantspecificprereformrisktothemarketaverage.Thesecondistogettheaverageprereformmarketrisktotheexpected2015averagemarketrisk.Bothareexplainedinfurtherdetailbelow.AssurantHealthtoMarketAverage:Toestablishthisestimate,AssurantHealthparticipatedintheWakelyNationalRiskAdjustmentSimulationProject(WNRASP).InthisprojecttheWakelyConsultingGroupquantifiedriskusingtheHCCHHSmodelthatHealthandHumanServices(HHS)developedforimplementationin2014.Wakelyconductedrisksimulationsinindividualandsmallgroupmarketsonlywhen75%+ofthestatewidemembershipwasrepresented.HealthplanscoveringthesemembersusedclaimexperiencetodetermineplanliabilityriskscoresconsistentwiththeHCCHHSmethodology.HealthplanspecificliabilityriskscoresalongwithallowableratingfactorsarecomparedtothescoresofallmarketparticipantsconsistentwiththemethodologysetforthintheRiskAdjustmentProgram.


TheWNRASPresultsprovidedtoAssurantHealthquantifythedifferenceintheriskoftheAssurantHealthbookofbusinessrelativetothestateandmarketaveragerisk.Theestimateofthemarketriskwasadjustedtoapproximateariskscorewhenthemarketincludesbothgrandfatheredandnongrandfatheredexperience.Sinceweusebothgrandfatheredandnongrandfatheredexperiencewefeelitisappropriatethatthemarketisonthissamebasis.In2012theWakelyNationalRiskAdjustmentSimulationProject(WNRASP)usedbothgrandfatheredandnongrandfathereddatawhilein2013onlynongrandfathereddatawasused.Tocalculateanadjustmenttoaccountforincludinggrandfatheredexperienceweusedthe2013marketto2012marketriskscore.Thefinalstateresultisadjustedtotheextentthatbaseperioddatawaslessthan100%credible,inordertobeonaconsistentbasiswiththeindexrateforthestate.Thefinalresultforuseinourpricingmethodologywasa0.89riskscore.ThisindicatesthatAssurantHealthbusinesspractices(e.g.distributionmethodsandunderwriting)andmemberselectionpatternshavecreatedabookofexperiencewith11%lowercosts.Ourpricingwasadjustedbyafactorof1.0/0.89torepresenttheaverageactuarialrisk,asshowninAppendixA.Thismultiplicativeadjustmentisconsistentlyappliedacrossallplanswithinthestate.PrereformMarkettoPostReformMarket:TheACAincentivizesvarioussubpopulationsofMissouritomigrateintooroutoftheACAIMmarket,alteringtheaverageriskoftheinsuredpopulation.Keydriversofthismigrationinclude,butarenotlimitedto:

1.) ThedissolutionoftheMissourihighriskpool,whichwillincentivizethehighriskpoolmemberstoentertheACAIMmarket

2.) TheexpansionofMedicaid,whichwillincentivizelowerrisk,lowincomepersonstoentertheMedicaidmarketratherthantheACAIMmarket

3.) Theavailabilityofsubsidies,whichwillincentivizelowerrisk,formerlyuninsuredpersonstoentertheACAIMmarket

4.) Theguaranteedissueenvironment,whichwillincentivizemembersoftheuninsuredpopulationwithpreexistingconditionstoentertheACAIMmarket

5.) Employeeslosinggroupcoverage,whichingeneralwillresultinanincreaseinmorbidityasthegroupmarketislesshealthythantheprereformIMmarket

6.) Theallowanceoftheextensionofnoncompliant,nongrandfatheredplanspast2014,whichkeepshealthierlowerriskmembersoutofthemarketandincreasestheaveragemorbidity

Ourfinalestimateisthatthemorbidityofthe2015insuredpopulationinMissouriwillincreaseby53%overthemorbidityofthepreACAinsuredpopulation.Anumberofsourceswereusedtocalculatethismorbidityfactor.FigurespublishedbytheDepartmentofHealth&HumanServicesinSummaryEnrollmentReportfortheInitialAnnualOpenEnrollmentPeriodwereacceptedasthedefinitivecountofexchangeapplicationsthroughtheendofMarch.Weused


dataprovidedbytheWakelyConsultingGroupinconnectionwiththeirNationalRiskAdjustmentReportingProject(NRAP)todetermineoffexchangeenrollmentthroughtheendofMarch,thevolumeofearlyadoptersbothonandoffexchange,andthenumberofinsuredonnoncompliantplansscheduledtorolltoacompliantplanbytheendof2014.MorbiditydatafurnishedbytheSocietyofActuariesintheirCostoftheFutureNewlyInsuredundertheAffordableCareAct(ACA)wasusedtocomparethemorbidityofthemigratingpopulationtothemorbidityofthepreACAinsuredpopulation.Otherindustrystudieswereusedtovalidatethereasonablenessofourresults.Inadditiontotheexpectedchangeintheaverageriskoftheinsuredpopulation,weanticipatethattherewillbeanincreaseinutilizationrelativetoourexperienceperiodduetothepentupdemandasnewlyinsuredenrolleescontinuetosignupforcoverage.Whenconsumersareuninsuredorunderinsured,theymayopttodelayhealthcareservices.Historically,approximately30%ofoursaleshavebeentocustomerswhodidnotpreviouslyhavehealthinsurance.Thesepreviouslyuninsuredcustomershaveclaimexperiencethatissignificantlyworsethanthosewithpriorcoverage.Thisexperiencediscrepancyismostpronouncedinthefirst6monthsofcoverage,whentheexperiencerelativitybetweenthesetwocohortsisupto20%higherthantheultimaterelativity.Weexpectthatthemandatetopurchaseinsurancemaytemperthepentupdemandofthenewlyinsuredenteringthemarketin2015.Therefore,the2015utilizationonnewlyinsuredindividualswillnothaveaslargeofaspikeasourhistoricalexperience.Ourassumptionisthatanadditional10%ofourblockwillbenewlyinsuredindividuals,with10%higherthantypicalutilizationinthefirst6monthsofcoverage.Thisleadstoanadjustmentof0.5%withinourpricingandclaimprojection.

ChangesinBenefits:Thereisanadjustmentof7.0%withinourpricingandclaimprojectionto

includenewandexpandedbenefitsinaccordancewiththeEHBrequirementsoftheACA.Thetablebelowliststheestimatedadditionalcostassociatedwitheachnewbenefit.ThePediatricDentalexpensewasestimatedusingcommercialgroupexperiencefor2011and2012fromoursistersegment,AssurantEmployeeBenefits.Theremainingestimatesarebaseduponpurchaseddataofexperienceofastandardpopulation.

Benefit Estimated Additional Cost

Maternity 3.1% Mental Health and Substance Abuse 1.2%

Pediatric Vision 0.4% Chiropractic 0.4%

Private Duty Nursing 0.3% Pediatric Dental 1.6%

GRAND TOTAL 7.0% WealsomadeanadjustmenttoaccountforthecoverageofadditionalpreventativeitemsthatwillbepaidfirstdollarduetoupdatesbytheUSPSTF.Webelievetheimpactofcoveringtheseadditionalfirstdollarbenefitsis1.0%.Thisestimatewasdeterminedbyevaluatingthevolume


oftheseitemsinourhistoricalexperience.Theadditionalfirstdollarpreventativebenefitsare:

1.) AlcoholMisuse2.) BreastCancerRisk3.) HepatitisCScreening4.) HIVScreening5.) TobaccoUsePreventioninChildrenandAdolescents

Inaddition,itisexpectedthattheaverageactuarialvalueofourblockwillincreasefromapproximately60%toapproximately69.0%afterthechangetostandardizedBronze,Silver,GoldandPlatinummetallicplans.Furthermore,approximately30%ofbusinesswithinourexperiencedataisonaplanthathasanactuarialvalueof55%orless.Weexpectthatricherbenefitsin2015willinducedemandforhealthcareservicesthatishigherthantheaverageutilizationwithinourbaseexperience.WeassumethatfutureSilverplanswillhaveutilizationthatis3%higherthanouraveragecurrentexperience,Goldwillbe8%higher,andPlatinumwillbe15%higher.Baseduponourexpected2015splitofplansbymetallevel,wehaveadjustedourexperienceperiodclaimsby2.9%inordertoaccountforthisbenefitleveldrivenincreaseinutilization.Theprojected2015membershipwasusedtodetermineboththeaverageactuarialvalueandutilizationimpact.Themembershipmethodologyisdescribedinmoredetailbelow.OtherAdjustments:Wemadeanadjustmentofnegative6.1%withinourpricingandclaimprojectioninordertoaccountforexpectedimprovementsinPreferredProviderOrganization(PPO)discountsin2015relativetothe2013experienceperiod.OurexpectedPPOdiscountsaredevelopedbyusingacombinationofexperienceandreporteddatafromthenetworksthatwelease.ThefutureimprovementisdrivenbyalargershareofbusinessexpectedintheAetnaSignatureAdministrators(ASA)networkin2015relativeto2013.ThisnetworkarrangementismorefavorableforAssurantHealththanotherleasednetworks.Furthermore,ourrentalnetworksworktorenegotiateandimprovetheircontractswithprovidersovertimewhichalsocontributestowardstheimprovementindiscounts.TheASAnetworkwasfirstlaunchedinMissouriinMarch2012.

TrendFactors(cost/utilization):Theeffectsonfutureclaimsofinflation,advancingmedicaltechnologyandtechniques,andincreasedutilizationandcostshiftingareaccountedforbyanannualseculartrendassumptionof9.5%.Thisisanallowedclaimstrendfactor.Thistrendwasdevelopedfromhistoricalexperienceofournationwideblock.Ourhistoricalexperienceshowsslightlyhighertrendbutweareloweringitto9.5%asweanticipatetrendwillbelowerthanourhistoricalexperienceduetoamorestandardriskpopulationgoingforward.PleaseseeAppendixBforfurtherdetail.Experiencewastrendedfor24months,fromthemidpointof2013tothemidpointof2015.AgeShift:Theexpectedageshiftbetween2013and2015isincludedintheindexratedevelopment.PleaseseeAppendixAfordetails.


GeographicShift:Theexpectedgeographicshiftbetween2013and2015isincludedintheindexratedevelopment.PleaseseeSection15bandAppendixAfordetails.

6. CredibilityManualRateDevelopment

ThemanualratereflectstheAssurantHealthIndividualMedical2013nationwideallowedclaimspermemberpermonth(pmpm).Thisallowedpmpmvaluehasbeenadjustedtoaddressthefollowingneeds:1. AdjustthenationwideclaimstoreflecttheAssurantHealthdistributionbyageandtobacco

useinMissouri.2. RemovetheimpactofclaimsexperiencefromMissouri(toavoiddoublecountingthis

experienceintheratedevelopment).3. AdjusttoreflectthespecificutilizationandchargelevelpatternsofMissouri.Externaldata,inconjunctionwithclaimsexperiencefrom2012,isusedtodeterminetheMissouritonationwideexpectedcostrelativity.Inordertodeterminethisrelativityfor2012,regressionanalysisisusedholdingage,gender,andsmokingstatusconstant.If2012experienceinMissouriisnotfullycredible,thestaterelativecostfactorisblendedwithastaterelativecostfactordevelopedusingTruvenAnalyticsMarketScan2011database.Controllingforageandgender,regressionanalysisontheTruvendatabaseproducedthestatetonationwideallowedcostrelativity.The2011andTruvenblendedrelativityfactorisreferredtoasthemanualstatefactor.Aregressionbasedonnationwide2013allowedclaimsexperiencewasusedtosmoothallowedclaimlevelsbyage,gender,andsmokingstatus.Fromthisregression,predictedallowedclaimswerecalculatedateachageandsmokingstatuscombination.TheseallowedpmpmclaimlevelsareappliedtotheMissouridistributionofmembershipbyage,gender,andsmokingstatusandsummed.Inaddition,anadjustmentisappliedtoremovetheinfluenceMissouriclaimshaveonthenationwideaverageclaims.Themanualstatefactorismultipliedbyadjusted2013nationalclaimlevelsasdescribedinthepreviousparagraphtocalculatethemanualpmpmallowedclaimsinthestate.Themanualrateisblendedwiththebaseperiodrateasdescribedinthecredibilitysectionbelow.Themanualratewasadjustedtothe2015pricingperiodusingtheprojectionfactorslistedinthesectionabove.

7. CredibilityofExperience

Todevelopourfullcredibilitystandard,weconductedastudytoestablishconfidencelevelsatdifferentcohortsizes.Inthisstudy,werandomlysampledcohortsfromourinternalblockofmembers.Weanalyzed100,000randomlysampledcohortsateachsizetoestablishthevariance


associatedwithacohortofthatsize.Therequiredcohortsizetobeconsideredfullycrediblewassetatthepointwherewewere95%confidentthatclaimswouldfallwithin4%ofourtarget.Thisresultsinafullycrediblestandardof82,000membermonthsforexperiencethathashadclaimsinexcessof$50,000permemberpermonthlevelpooledacrosstheblock,asusedwithinourpricingmethodology.TheUnifiedRateReviewTemplateutilizesunpooledclaims.Therefore,baseduponthesame95%confidence,thestandardforfullcredibilityontheUnifiedRateTemplateis562,000membermonths.Partialcredibilityisassignedtotheexperienceperioddatabasedupontheclassicalcredibilityformulalistedbelow:SquareRoot((ExperienceDataMemberMonths)/(FullCredibilityStandard))Basedupontheabovecredibilitymethodology,ourMissouripooledexperienceasusedwithinpricingis100%credible.Thestatespecificexperiencewasremovedfromthedevelopmentofthemanualrateinordertoavoidanydoublecountingofthebaseperiodexperience.GiventhatwedonothavecredibleEHBclaimdatayet,wefeelitisappropriatetoincludegrandfatheredexperiencewithinourpricingdatainordertodevelopthemostpredictiveestimateoftheaveragemorbidityofthe2015market.Inaddition,pleasenotethatourotherpricingassumptionsweredevelopedonaconsistentbasis.Forexample,wedevelopedourchangeinmarketriskassumptionrelativetothetotalIMcurrentmarket,notrelativetothenongrandfatheredcurrentmarket.SincetheURRTrequiresunpoolednongrandfathereddata,ourpricingapproachwasincompatiblewiththestandarduseoftheURRT.Therefore,weassigned0%credibilitytotheunpoolednongrandfathereddatawhichisrequiredintheURRTinordertogivefullcredibilitytothecredibilitymanualwhichmatchesourpricing.

8. PaidtoAllowedRatio

OurprojectedPaidtoAllowedRatiois69.0%.Inour2014pricingdevelopment,theActuarialValue(AV)calculatorprovidedbyHHSproducedvaluesthatwereveryclosetoourhistoricalpaidtoallowedratiosonanaggregatebasis.Therefore,wedetermineditwasreasonabletousetheHHSAVcalculatortodevelopestimatesofthepaidtoallowedratioofour2014insuredpopulation.However,our2013paidtoallowedratiowasslightlyhigherthanthevalueproducedAVcalculator,whichisreasonablegiventhatunderlyingdataintheAVcalculatorwasnotupdatedfromtheprioryear.Therefore,weareaccountingforthisdifferencebyincludingabenefitleveragingfactorinthepricingvaluesofourplans.Thisfactorwillvarybymetallevelduetothedifferingleveragingeffectsbycostsharinglevel.Bronzeplanswillhaveahigherleveragingeffectduetohighercostsharingand


conversely,Platinumplanswillhavealowerleveragingeffectduetolowercostsharing.Todeterminetheleveragingfactors,weusedaclaimprobabilitydistributionfromthe2012MillimanHealthCostGuidelinestomodeltheleveragingeffectonourmetalplans.Thefinalassumptionsareasfollows:

MetalLevel LeveragingCatastrophic 1.035

Bronze 1.035Silver 1.030Gold 1.015

Platinum 1.010Theapproximateaverageleveragingusingthefactorsaboveis3%,whichislowerthanourhistoricalbenefitleveragingof4%.WebelievethisdecreaseisappropriategiventhelargeproportionofourhistoricalbookthathadAVslessthan55%.TodeveloptheprojectedPaidtoAllowedRatio,weusedourmembershipprojectiontodeterminethedistributionofplansbymetallevelin2015.Wethenappliedtheleveragingfactorsbymetalleveltotheactuarialvaluesandaveragedthemtogetatotalprojectedpaidtoallowedratio.Themethodologyofourmembershipprojectionisdescribedinmoredetailbelow.

9. RiskAdjustmentandReinsurance

RiskAdjustment:In2014,theACAestablishedaRiskAdjustmentProgramthatwillallowissuerstosetpremiumsaccordingtotheaverageactuarialriskintheindividualandsmallgroupmarketwithoutrespecttothetypeofriskselectiontheissuerwouldotherwiseexpect.TheACAestablishesastandardquantificationofriskwiththeHCCHHSriskscoringmodel.UntilwegainfurtherknowledgeonthetotalMissourimarketrisk,wearecontinuingtopricetothemarketaverageriskof1.0.Therefore,nomarketwideadjustmentfortheriskadjustmentprogramwasappliedwhendeterminingthemarketadjustedindexrate.

ReinsuranceRecoveries:In2015,theACAhasaReinsuranceProgramthatwillreimbursecarriers50%ofclaimcostsbetween$70,000and$250,000permember.However,perrecentguidance,HHShassuggestedthattheparameterisgoingtobeloweredagainin2015from$70,000to$45,000.Wearetakingthischangeintoaccountwhichresultsinanegative11.0%adjustmenttoourexpectedclaimcostswithinourpricinginordertoaccountforexpectedreinsurancerecoveries.ThisprojectedreinsuranceadjustmentisappliedtotheindexratetodevelopthemarketadjustedindexrateinaccordancewithPartIIIinstructions.OurreinsurancerecoveryassumptionwasdevelopedusingTruvenHealthMarketScanResearchDatabases,whichisrepresentativeofastandardpopulationandwithcoveragesimilartotheACAEHBpackage.Theexposureandclaimdatawaslimitedtomembersthathadcompletedataand


wereonanoncapitatedbasis.Inaddition,theclaimdataforeachmemberwastrendedto2015andautilizationadjustmentwasmadetoscaleclaimstotheappropriatecostsharinglevel.Thereinsuranceformulawasappliedbymember,andtheresultwasdividedbytotalpaidclaimsonthesameadjustedbasis.Thisprocesswasdonetoestimateareinsurancerecoveryfactorforeachplanmetallevel.ThefinalcompositefactorabovewasdevelopedbaseduponourexpectedmixofBronze,Silver,GoldandPlatinumbusiness.Thereinsurancerecoveryestimatedin2014wasnegative14%forMissouri.Therefore,thisresultsinanestimatedrateimpactof3.5%overtheprioryear.ReinsuranceContributions:TheReinsuranceProgramisfundedbyafeeof$3.67permemberpermonth.Wehaveincreasedourexpectedclaimcostswithinourpricingdevelopmentby1.1%inordertocoverthisfee.Inordertomaintaincompliancewiththerequiredrelativityofpricesbyage,wehaveappliedtheadjustmentonamultiplicativebasis.Ouradjustmentfactorwasdevelopedbydividing$3.67bytheexpectedtotalpermemberpermonthclaimcostsinthestate.

10. NonBenefitExpensesandProfit&Risk

ThetablebelowliststheexpectedNonBenefitExpensesandTargetProfitforAssurantHealthinMissouri.Thepricingloadtocovertheseexpensesisappliedconsistentlyacrossproductsandplans,asdisplayedintheworkupoftheplanadjustedindexrate.Theseitemsarediscussedindetailinthefollowingparagraphs.

ExpenseCategory %ofPremium

GeneralandAdministrative 12.0%CommissionsandSalesBonus 5.0%ManagedCareandCostContainment 2.5%QualityImprovement 0.9%NetInvestmentIncome 2.5%Taxes,FeesandStateAssessments 2.4%ACAHealthInsurerFee 1.7%FederalIncomeTaxes 2.1%ProfitandRiskMargin(AfterTax) 1.5% Total 25.5%

Ourpricedforlossratiois74.5%inMissouri,whichisapproximatelyan80%MedicalLossRatioasdefinedbytheACA.ThecalculationoftheMedicalLossRatioisshownintheProjectedLossRatiosection.ThefinalpricedforTotalNonBenefitExpensesandProfitis25.5%.However,asdemonstratedinthetableabove,ourprojected2015totalnonbenefitexpensesandprofitare28.0%.Thiswillresultinanactualmarginforriskandprofitthatislowerthanthetargetshownabove.


Inaddition,pleasenotethatexpensesforeachfunctionalareawithinthecompanyarerecordedatanationwidelevel.Expenseassumptionsforastateandproductareallocatedandrepresentedonapercentofpremiumbasis.Thispercentofpremiumrepresentationofexpensesisconsistentwithouractualtoexpectedlossratiopricingmethodology.AdministrativeExpenseLoads:GeneralandAdministrativeExpenses:Thiscategoryaccountsfortheexpensesofadministeringthebusiness,suchasclaimpaymentexpenses.Theassumptionwasderivedfromactualexpensesin2013relativetoactualrevenue.Indevelopingthisexpenseassumption,underwritingexpenseswereadjustedduetothereductionofstaffwithintheunderwritingfunctionalareathatoccurredinresponsetothe2014marketrules.CommissionsandSalesBonus:Thisisavariableexpensethatrepresentsthecostofacquiringbusiness.Ourcommissionschedulesandbonuscampaignswillbesetto5.0%ofpremium.ManagedCareandCostContainmentExpenses:Thisisavariableexpensethataccountsforexpensesincurredinordertoreduceclaimscosts,suchasaccessfeespaidtothePreferredProviderOrganizationNetworksthatareleasedonbehalfofourcustomers.Thisexpenseassumptionwasderivedfromactualexpensesin2013relativetoactualrevenue.QualityImprovementExpenses:Thiscategoryaccountsforexpensesincurredinordertoimprovethequalityofhealthcare.QualityImprovementExpensesareaddedtoclaimpaymentsintheMedicalLossRatioCalculation.Thisexpenseassumptionwasderivedfromactualexpensesin2013relativetoactualrevenueandadjustedtoaccountforadditionalQIexpensesexpectedin2015.NetInvestmentIncome:Thiscategoryaccountsforinvestmentincomeearnedonreservesandsurplus.Thisassumptionwasderivedfromouractualcurrentnetinvestmentincomeratio.Profit&RiskMargin:Ourtargetedaftertaxmarginforriskandprofitis3%ofpremium.Thepricingloadforthis3%aftertaxmarginisappliedconsistentlyacrossproducts.

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:FederalIncomeTaxesareexpectedtobe2.1%ofpremium,calculatedas((3.6%+1.7%)X40%),where3.6%isthepretaxprofitmargin,1.7%isthenondeductibleACAhealthinsurerfeecostand40%isanapproximationofthefederalincometaxrateforAssurantHealth.Pleasenotethatoureffectivefederalincometaxrateisexpectedtobegreaterthanthestandard35%duetothenondeductibilityofcertaininternalandexternalindividualcompensation.Thisnondeductiblecompensationisprimarilyincurredwithinnonhealthinsurancelinesofbusinessfromourparentcompany,Assurant,Inc.ExchangeUserFees:Assurantwillonlyissuebusinessofftheexchangeinthisstatein2015.Therefore,noexchangeuserfeehasbeenappliedtotherates.

11. ProjectedLossRatio

Theprojectedfuturelossratiofortheperiodof1/1/2015through12/31/2015is74.8%.Ourpremiumratewasdevelopedbydividingprojectedincurredclaimsbythepricedforlossratio.Ourpricedforlossratiois74.5%inMissouri.However,attherequestofHHS,weremovedour0.4%loadtocoverthecostofnotchargingpremiumforchilddependentsbeyondthree.Withthisadjustment,ourprojectedlossratiois74.8%,whichisapproximatelyan80%MedicalLossRatioasdefinedbytheAffordableCareAct.AcalculationoftheprojectedMedicalLossRatio(MLR)isshownbelow:MLR =(Claims+QualityImprovementExpense)/(PremiumTaxesandFees)

=(A+B)/(CDEF)=(74.8%+0.9%)/(100%2.4%1.7%1.1%)=80%

Where: AisIncurredClaims,netofReinsuranceandRiskAdjustmentTransfers BisExpensesforImprovementintheQualityofHealthcare Cispremium

Disstatepremiumtaxesandotherassessmentsandfees EistheHealthInsurerFee FisFederalIncomeTaxes(excludingtaxesonprofitduetoInvestmentIncome)

12. SingleRiskPoolandIndexRate

Thesingleriskpoolreflectsallcoveredlivesforeverynongrandfatheredproduct/plancombinationforthisstateandmarket.TheIndexRateistheestimatedtotalallowedclaimspermemberpermonthforallnon


grandfatheredplansforallessentialhealthbenefitswithinthestate.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.

ActuarialValueandCostSharing:o ActuarialValuePleaseseesection17ofthismemoforadescriptiononhow

theactuarialvalueswerecalculated.o PaidtoAllowedLeveragingFactorPleaseseesection8ofthismemofora

descriptiononhowthepaidtoallowedleveragingfactorwascalculated.o UtilizationWeexpectthatricherbenefitsin2015willinduceutilizationfor

healthcareservicesthatishigherthantheaverageutilizationwithinourbaseexperience.WeassumethatfutureSilverplanswillhaveutilizationthatis3%higherthanouraveragecurrentexperience,Goldwillbe8%higher,andPlatinumwillbe15%higher.ThesefactorsaretheprescribedHHSinducedutilizationfactorsusedintheHHSriskadjustmentcalculations.

o DependentFactorThedependentfactorwasdevelopedtospreadthecostofcovering4ormoredependentsunder21.Thisfactorisconstantacrossallplans.


o NontobaccoUserAdjustmentThenontobaccouserfactorisusedtoputthemarketadjustedindexrateonanontobaccobasis.Thisfactorisconsistentacrossallplans.Thetobaccocalibrationfactoristhereciprocalofthefollowingcalculation:

(NontobaccoMemberMonths+TobaccoMemberMonths*TobaccoLoad)

TotalMemberMonths

ProviderNetworkPPOfactorsweredevelopedusinginternalcompanydiscountexperienceinconjunctionwithreporteddiscountsfromthenetwork.Thefactorsreflectthedifferencefromtheaveragediscountinthestate.

CatastrophicPlanAdjustmentForthecatastrophicplan,wecontinuetoassumethepopulationwillalmostentirelyconsistofconsumersunderage30,thus,theyoungerconsumersonthisplanwillnotneedtosubsidizeolderconsumers.Therefore,todevelopourCatastrophicPlanadjustmentfactor,wehaveestimatedandremovedtheimpacttothe1830yearoldpricethatwasspecificallyduetothechangefromourcurrentageslopetothenewstatespecified3:1ageslope.Webelievethatthehardshipexemptionwillhavelittletonoeffectonthecatastrophicpopulationsowehavenotmadeanadjustmentforit.

AdministrativeCostsTheadministrativecostfactoristhereciprocalofourprojectedlossratio.Pleaseseesection11foradescriptiononhowourprojectedlossratiowascalculated.Theadministrativecostfactorisconstantacrossallplans.

15. Calibration

a. AgeCurveCalibrationTheagecurvecalibrationisusedtoadjustPlanAdjustedIndexRatetoa21yearold.Theagecurvecalibrationiscalculatedas:

1/AverageAgeRatingFactorWeightedbyAgeMembershipSplit

Theaverageageratingfactoristhestandardagecurveweightedbyourmembershipdistributioninthestate.TheagecurvecalibrationisapplieduniformlytoallplansandisdemonstratedinAppendixA.Duringthefilingreviewprocess,theexpectedageshiftbetween2013and2015wasincorporatedintheindexratedevelopment.

b. GeographicFactorCalibration

Theratingareafactorsusedinour2014pricingwereusedinthedevelopmentoffactorsfor2015,withtheexceptionofadjustmentsinRatingAreas2,3,and10.Tocalibrate,we


firstused2013membershipandbalancedtheoverallstateareafactortoa1.0togettheareafactorsonthebasisofour2013pricingexperienceperiod.Secondly,weusedtheprojected2015membershipbyratingareaandreweightedtheareafactorsagaintodeterminetheprojectedstateaverage.Theresultingstateaveragefactorinthisstatewas0.983.Thismarketwidecalibrationfactoristhenappliedafterthedeterminationoftheplanadjustedindexratesandtheindividualareafactorsaredividedbyittocalibratethemarketaveragebacktoa1.0.Thetablebelowshowstheresultingweightedaveragegeographicfactorof1.000forthestatealongwithrelativityfactorsforeachratingareawithinthestateandtheircorrespondingprojectedmemberdistributions.

RatingArea

2015IMMember

Distribution

2015WeightedIMAreaFactors

1 8.1% 0.932 10.0% 1.063 18.5% 1.004 4.3% 1.085 17.0% 1.006 6.1% 1.107 3.7% 0.948 17.0% 0.949 8.2% 0.9210 7.2% 1.11Total 100% 1.000

Duringthefilingreviewprocess,thisgeographicshiftbetween2013and2015wasincorporatedintheindexratedevelopment.Thegeographiccalibrationisnow1.0.

16. ConsumerAdjustedPremiumRate

TheConsumerAdjustedPremiumRateisthefinalpremiumrateforaplanthatischargedtoanindividualorfamily.TheConsumerAdjustedPremiumRateisdevelopedbycalibratingthePlanAdjustedIndexRatetotheagecurveandgeographythenapplyingtheratingfactorsspecifiedby45CFRPart147,147.102.Theseratingfactorsaredescribedbelow.Theratingfactorscanbefoundintheattachedrateexhibitfile.

AreaFactorsSeeaboveforanexplanationofthedevelopmentoftheareafactors.TheAreafactorisconstantacrossallplansandisbalancedtoequal1.0intotalforthestate,as


describedabove. AgeFactorsTheagecurveusedtosettheagefactorsisthestandardagecurvesetbyHHS.

Theagefactorsaresetrelativetotheprojectedaverageageusedintheagecurvecalibrationabove.

TobaccoStatusAregressionbasedonnationwide2012and2013experiencewasusedtocalculateacompositesmokerfactorof1.20.Thenontobaccouserfactoris1.0.

17. AVMetalValues

TheHHSActuarialValueCalculator(AVC)wasusedtogeneratetheAVvaluesandmetalvaluesforthemajorityoftheplansinourportfolio.ThereareaselectnumberofAssurantHealthplansthatuseanacceptablealternativemethodologytogenerateAVs.ThemethodologyusedtodeveloptheseplansAVsisdetailedbelow.Pleasenotethatthesearethesameadjustmentsthatwereusedinourpriorfiling,whichwefeelisappropriategiventhattheAVChasnotbeenupdated.1.SpecialtyHighCostDrugsApplicablePlans:Bronze4,Bronze5SpecialtyDrugsforAssurantHealthplanswithaseparateRxdeductible/coinsurancewillgotowardsthemedicaldeductible/coinsurance.TheHHSAVCdoesnotallowfortheusertospecifythatspecialtydrugsshouldgotothemedicaldeductibleandcoinsurancewheninputtingaplandesignwithaseparatedrugdeductible.ThefollowingisatabledetailingtheaveragecostandscriptsfromtheBronzeRxcontinuancetableintheHHSAVC:

RxCategory

AvgCostperEE

AvgScripts

%ofTotalScripts

Generics $178.03 5.94 59.2%PreferredBrand $534.99 3.55 35.4%NonPreferredBrand $117.58 0.51 5.1%SpecialtyHighCost $102.41 0.04 0.3%Total $933.01 10.04 100%

Sincethefrequencyofspecialtyhighcostdrugsisverylowcomparedtotheotherdrugcategories,Iamcertifyingthattheimpactofthespecialtyhighcostdrugsbeingsubjecttomedicaldeductible/coinsuranceinsteadofdrugdeductible/coinsurancewillbeinsignificanttotheAV.2.RxBrandDeductibleAccumulationApplicablePlans:Bronze4,Bronze5BasedonthedocumentationintheHHSAVC,servicesthathavebothdeductiblesandcopayswillbevaluedasthoughthecopayispaidfirst,withtheremaindergoingtowardsthedeductible.However,forourplanswithaseparatedrugdeductible,thecopayswillonlyapply


afterthedeductibleisreached.Toaccountforthis,wehavedeterminedtheequivalentcoinsurancerateforthebranddrugsandusedthatinplaceofthebrandcopays.

Plan BrandCopay(pref/nonpref) AVw/noRxDed EquivalentCoinsBronze4 $50/$75 62.1% 61%/61%Bronze5 $50/$75 62.8% 61%/61%

3.OfficeVisitLimitsApplicablePlans:Bronze2,Silver2,Silver4OfficevisitcopaylimitsforAssurantHealthplanswillapplytoprimarycareandspecialtycareofficevisitsintotal.TheHHScalculatoronlyallowsfortheusertoapplycopaylimitstoprimarycarevisits.Theaveragefrequenciesforofficevisitsfromthebronzeandsilvercopaylimitsaredetailedbelow:

AvgFrequency

PCPAvgFrequency

SP Total PCP%ofTotalBronzeCombinedTable 1.36 0.90 2.26 60%SilverCombinedTable 1.57 0.94 2.51 63%

AssumedPCP%ofTotal 60%

Usingtheassumptionthat60%ofofficevisitsareprimarycare,thetablebelowdetailsthenumberofvisitsthatwouldbeprimarycarevs.specialtyfora4totalvisitlimitanda10totalvisitlimit.

VisitLimit PCP% PCPVisits SPVisits4 60% 2 210 60% 6 4

Therefore,foraplanwitha4copaylimit,a2copaylimitwasinputtedforprimarycare,andlikewisefora10visitlimit,a6copaylimitwasinputted.ThevaluecalculatedbelowfortheBronze2planwassubtractedfromtheHHSAVtoaccountforthevisitlimitsonspecialtycare.Forthesilverplans,movingfromanunlimitedPCPcopaytoa4copaylimithasanegligibleeffectontheAV.Therefore,IamcertifyingthattheAVimpactofaspecialistcopaylimitontheSilver2andSilver4planswillbeinsignificant.

Bronze2AVNoCopay(a) 59.0%AVUnlimited$35PCPCopay(b) 61.3%AV2Visit$35Copay(c) 60.2%ImpactofNocopaytounlimited(d=ba) 2.3%


ImpactofNocopaytoXvisitlimit(e=ca) 1.2%NetImpact(f=(de)/d) 48% AVUnlimited$35SPCopay(g) 60.5%Est.AVImpactof2VisitSPLimit(h=(ga)*f) 0.7%

Plan AVImpact

Bronze2 0.7%Silver2 0.0%Silver4 0.0%

4.$500FirstDollarD/X/LBenefitApplicablePlans:Silver3,Silver4AssurantHealthwillhavetwosilverplansthathavea$500firstdollarLabandXRaybenefit.Inordertoevaluatetheactuarialvalueofthisbenefit,anewcontinuancetablehadtobecreatedsincetheHHSAVCcannotcalculatetheimpactoffirstdollarbenefits.TheclaimcostbasiswasselectedastheactuarialcontinuancetablesoftheHHSAVC.ThecontinuancetablesoftheHHSactuarialtablesarecomprisedofclaimcostssegregatedbyservicecategory,plusanallowanceforadditionalclaimcostsexpectedfromhighriskpools.Continuancetableswerebuilttoremovetheadditionalcostofthehighrisktables.Thevalueaddedtothetableswasasetdollaramount,withoutallocationtotheseparateservicecategoryclaimcosts.Twoaggregatetableswerebuilt,onereflectingallservicecategoriesandthesecondreflectingallservicecategorieswithoutLabandXRay,bothofthesetablesexcludingthehighriskpooladditionalcosts.Expectedclaimcostsweredevelopedforeachmetallevelatadeductiblelevelthatgeneratestheprescribedmetalactuarialvalue,withanintegratedmedicalanddrugdeductible.AcontinuancetableofLabandXRaybenefitswasbuiltfromdatafromMilliman.ThetablewasadjustedsothattotalclaimcostsofLabandXraybenefitswereequaltotheamountofclaimsforLabandXRaysundereachmetalbenefitlevel.Thecontinuancetablewassplitintoprofessionalandtechnicalbytheuseofalevelproportionacrossallaverageclaimlevels.Thecontinuancetablewasutilizedtoderivea$500firstdollarcoveragebenefit.Remainingclaimswerethenappliedtothebaseplandeductible.Eachmetalplancontinuancetablewasreliedontoderivethisvalue.Belowarethecalculationsofthe$500firstdollarlabandXraybenefitresultingfromtheprocessdescribedabove:


Silver3 Silver4ClaimCostofPlanatMetalLevel(a) $3,136 $2,889

includesallmedicalandpharmacybenefits ClaimCostofPlanatMetalLevel(b) $2,854 $2,617

nobenefitsforLabandXRay ValueofLabandXRay(c) $164 $164

firstdollarbenefits,upto$500 AdditionalValueofLabandXRay,appliedagainstdeductible(d) $166 $154

includesanestimateofimpactofdeductible NewEstimateofMedicalClaimCoste=(b+c+d) $3,183 $2,935 RiderAddonCost(e/a1): 1.5% 1.6%

5.OneDeductiblePlansAffectedplans:1DedBronze1,1DedBronze2TheOneDeductibleproductdesignconsistsofasinglefamilydeductibleforplanswithmorethan1member.ThescopeofthisproductdesignisoutsidethoseallowedbytheHHSAVC.AHHScontinuancetablewasadjustedthatreplicatedresultsoftheBronzelevelAVsfromtheHHSAVC,usinganintegrateddeductible.ThisBronzelikecontinuancetablewasconjugatedwithitselftorepresenttheexpectedclaimsof2,3,4,5,6,or7membersunderaunifiedfamilydeductible.ExpectedmemberlevelAVsarethendevelopedfromaninputtedplandesign,foreachofsevendifferentcontinuancetables.AnaggregateplanlevelActuarialValueisdevelopedfromabusinessweightingbyfamilysize.Thefollowingtableshowsthecalculationoftheaggregate.

NumberofMembers MixofBusiness 1DedBronze1AVs 1DedBronze2AVs

1 43% 61.0% 61.4%2 19% 51.3% 51.9%3 13% 55.4% 56.0%4 15% 59.4% 59.7%5 7% 63.1% 63.2%

Plan AVImpactSilver3 1.5%Silver4 1.6%


6 2% 66.5% 66.3%7+ 1% 69.6% 69.1%

AggregateActuarialValue: 58.5% 58.9%TheplanportfolioforAssurantHealthisincludedinAppendixC.ScreenshotsoftheAVcalculationscanbefoundinAppendixD.

18. AVPricingValues TheAVpricingvaluesincludetheAVs,calculatedasdescribedabove,inadditiontoan

adjustmentforutilizationdifferencesweexpectduetoplancostsharingdesign.Whileweunderstandthedifficultyindifferentiatingincreasedutilizationfromanincreasedriskprofile,wedofeelitisappropriatetoadjustlowermembercostsharingplansforincreasedutilization.IntheActuarialValueCalculatorMethodologydocumentreleasedbyHHS,HHSstatesthatspendingisaffectedbyplandesignthroughinduceddemand,andtheyinturnhaveexplicitlydifferentiatedandestimatedtheimpactofinducedutilizationbymetallevel.AninternalstudyhasconfirmedthatinducedutilizationisrelevantandsuggeststhattheHHSdefinedinducedutilizationfactorsmaybeconservative.Resultsfromtheinternalstudyareasfollows.

BronzePlanLiabilityRiskScore AllowedPerMemberPerYear

LOB=$5,000Ded(b)

Increase(c=a/b1)

=$5,000Ded(e)

Increase(f=d/e)

InducedUtilization(g=(1+f)/(1+c)1)

IM 0.50 0.42 17% $2,897 $2,059 41% 20% Sincewedonthaveenoughcredibilitytodetermineseparateinducedutilizationfactorsfor

eachmetallevel,weareapplyingtheprescribedHHSinducedutilizationfactorsusedintheHHSriskscoretoourplans.

Theothervaluesusedindeterminingtheplanadjustedindexrateareexplainedintheapplicablesectionabove.Pleaseseetheattachedrateexhibitsfortheportionofthevaluethatisduetotheallowedplanmodifiers.

19. MembershipProjections

PleaseseeAppendixEforprojectedexperiencein2015.Ourprojectionof2015membermonthswasdevelopedbycombiningthefollowingpiecesofinformation:

2014openenrollmentsalesandexpected2015openenrollmentsales PoliciesthathaverolledtoanACAcompliantplanthrough4/1/2014


PoliciesthatweexpecttorolltoanACAcompliantplanthroughtheendof2014,includingthosethatmaykeeptheircurrentNonACAcomplaintplanin2014androlltoanACAcompliantplanin2015

QualifiedLifeEventsalesoutsideofopenenrollmentexpectedeachyear

Wemodeledthemembershiponamonthlybasisthroughtheendof2015usingourmonthlylapseratesbymetallevelandexpectedrolldateforeverypolicywithinthestatethatisnotyetonanACAcompliantplan.Theexpectedmembercountduring2015foreachmonthisthenaddeduptoarriveatthetotalmembermonthsexpectedin2015.Anydifferencesbetweenthecurrentdistributionofprojectedmembermonthsandcurrentmetallicmembershipdistributionwouldbeattributedtoanymetallicrollsduringtheyearandadditionalexchangesales,ifapplicable.

20. TerminatedProducts

NongrandfatheredproductsonformsTIM.CER.MO,227,244,and553willbediscontinuedbeginning1/1/2014.Theseproductsareincludedintheexperienceperioddata.Inthisstate,policyholdershavetheoptiontocontinuetheirplanunderthePresident'stransitionalmemorandum,exceptthoseonForm554.Theseproductsareincludedintheexperienceperioddata.

21. PlanType

All2015IndividualMedicalPlanswillbePPOplans.22. WarningAlerts

Adescriptionofthewarningalertsfromtheunifiedratereviewtemplateisbelow:

1. Awarningappearsbecausehistoricalrateincreaseswerenotenteredforourterminatedproducts.Theinstructionsfortheunifiedratereviewtemplatespecificallystatethatthesearenotrequired.

23. EffectiveRateReviewInformation

None.

24. Reliance

IndevelopingthisratefilingIrelieduponinformationprovidedbyotherswithinmydepartment,aswellasoninformationprovidedbyotherdepartmentswithintheorganization.Ihavereviewedthisinformationforreasonableness,andIconsiderittobereliable.


25. ActuarialCertificationIamamemberoftheAmericanAcademyofActuaries.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,MAAAAssociateActuaryReformPricing10/2014

Documents

2015 Time Individual Major Medical Rate Filing.pdf