Bid Pricing Tool (BPT) for Medicare Advantage (MA) Plans and Prescription Drug Plans (PDP): CY 2008

Bid Pricing Tool (BPT) for Medicare Advantage (MA) Plans and Prescription Drug Plans (PDP)

CMS-10142 Attachment E-2, PD BPT instructions

Bid Pricing Tool (BPT) for Medicare Advantage (MA) Plans and Prescription Drug Plans (PDP): CY 2008

OMB: 0938-0944

⚠️ Notice: This form may be outdated. More recent filings and information on OMB 0938-0944 can be found here:

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OMB Approved # 0938-0944

DRAFT INSTRUCTIONS FOR COMPLETING THE
MEDICARE PRESCRIPTION DRUG PLAN BID FORM
FOR CONTRACT YEAR 2008

NOTE: Benefit parameters are not updated for contract year 2008.

January 10, 2007

CMS-10142 (03/2009)

Table of Contents

Introduction ...........................................................................................................3
Special Considerations………………………………………………...……………….8
Worksheet 1 - Rx Base Period Experience.........................................................13
Worksheet 2 - PDP Projection of Allowed/Non-Benefit .......................................21
Worksheet 3 - Contract Period Projection for Defined Standard Coverage ........27
Worksheet 4 - Standard Coverage with Actuarially Equivalent Cost Sharing .....31
Worksheet 5 - Alternative Coverage ...................................................................33
Worksheet 6 - Script Projections for Defined Standard, Actuarially Equivalent, or
Alternative Coverage ..........................................................................................36
Worksheet 7 – Summary of Key Bid Elements ...................................................41
Appendix A – Actuarial Certification....................................................................43
Appendix B – Supporting Documentation ...........................................................47
Appendix C – Employer/Union-only Group
Requirements…………………………………………………………….……47
Appendix D - Bid Pricing Tool Technical Instructions..........................................49
Appendix E – Red-Circle Validation Edits in the
Prescription Drug Plan Bid Form………… ……………………..………….54

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Introduction
Each Prescription Drug Plan (PDP) or Medicare Advantage Prescription Drug (MA-PD) plan
must submit a separate bid for each Rx plan it offers to Medicare beneficiaries. The bid must
be submitted to the Centers for Medicare & Medicaid Services (CMS) using the CMS bid
form in accordance with applicable regulation and guidance
The submitted bids will be subject to review and negotiation by CMS. As part of that
negotiation, CMS may request supporting documentation for the information included on the
bid form. Organizations must be prepared to provide CMS and its representatives with
documentation to support the development of their bid on request. All data submitted as part
of the bid process are subject to audit by CMS or by any person or organization that CMS
designates. CMS requires an actuarial certification to accompany every bid submitted to the
CMS Health Plan Management System (HPMS). A qualified actuary who is a member of the
American Academy of Actuaries (MAAA) must complete the certification.
Organizations must provide a series of data entries on the appropriate form worksheet to
complete the bid form. The number of inputs depends on the type of plan and how long it has
operated. Organizations must submit the information through HPMS in the CMS-approved
electronic format, using the CMS bid form in accord with these instructions to develop a
pricing structure for each prescription drug plan offered. The following sections contain
specific instructions regarding how to complete the bid form. In addition to the line-by-line
instructions, there is also a glossary to assist the user with unfamiliar terms.
Following are the most common steps that an organization must complete:
•

For plans with appropriate and credible base period experience (uncommon for
CY2007),
o

Report the Medicare base period experience.

Illustrate the assumptions used to project the base period costs to the
contract year.

•

For plans with either partially credible or no base period experience, provide a
summary of the manual rates and the techniques used in their development.

•

Project the estimated costs for defined standard prescription drug coverage for the
contract year, including the estimated Federal Reinsurance and Low Income Subsidy
(LIS) amounts.

•

Demonstrate actuarial equivalence for any plans to be offered that do not provide
defined standard coverage.

•

Include an actuarial certification for the bid form executed by a qualified actuary.

If you have any questions about the content of the bid form, please e-mail them to CMS at
[email protected].
If there are any technical questions regarding HPMS or the upload process, please see the
“Bid Submission User’s Manual” (available in HPMS) and Appendix D - Bid Pricing Tool
Technical Instructions, or contact the HPMS Help Desk at 1-800-220-2028 or
[email protected].

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Base Experience
Worksheet 1 should be completed when plans have appropriate base period experience for
modeling the Part D benefit. The determination of the appropriateness of a plan’s
experience must include an evaluation of the whether the group included in the experience is
consistent with the group that the plan expects to cover. In addition, the experience must be
representative of the benefits that will be offered in the contract period. For example, a plan
that will be offering defined standard Part D coverage must have experience for a benefit
with a gap in benefits and catastrophic coverage for a population similar to the population
they expect to be covering in order to summarize base period experience in Worksheet 1.
CMS expects that most plans will not have appropriate base period experience to be used in
completing Worksheet 1 for contract year 2007. As explained later in these instructions,
plans without appropriate base period experience must develop manual rates for the pricing
tool, using available data adjusted to reflect the expected population and the benefit design
that will be offered. For example, a plan that has experience in covering Medicaid dual
beneficiaries and wishes to provide a special needs plan covering dual beneficiaries will
likely have appropriate base period experience for contract year 2007, since the covered
population is comparable to the group that will be offered Part D coverage.
A plan that has appropriate base period data must evaluate the credibility of this data.
Although we have not yet established credibility guidelines, we expect prescription drug
experience to have a higher level of credibility than medical coverage for a similarly sized
group. We expect that actuarial judgment will be exercised in determining the credibility
factor for a plan’s base period experience.
In summary:
•

Plans with fully credible experience must complete all sections of Worksheet 1 and
Sections II, III, and V of Worksheet 2.

•

Plans with partially credible experience must complete all sections of Worksheet 1
and Worksheet 2.

•

Plans with no applicable, fully or partially credible experience must complete Section
I of Worksheet 1, and Section IV of Worksheet 2.

Required Sections
Plans must complete different sections depending on the type of coverage that will be
offered. The following are the sections that need to be completed for each type of coverage.
All plans must complete Section 1 of Worksheet 1.
Defined Standard Coverage
Plans submitting a bid for defined standard coverage are required to complete applicable
sections of Worksheet 1 and Worksheet 2 as determined by the available experience;
Worksheet 3; and columns f, g, and h of Section II of Worksheet 6; and Worksheet 7.

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Actuarially Equivalent Standard Coverage
Plans submitting a bid for actuarially equivalent standard coverage are required to complete
applicable sections of Worksheet 1 and Worksheet 2 as determined by the available
experience; Worksheet 3, Worksheet 4; all columns of Section II of Worksheet 6; and
Worksheet 7.
Basic and Enhanced Alternative Coverage
Plans submitting a bid for basic and enhanced alternative are required to complete
applicable sections of Worksheet 1 and Worksheet 2 as determined by the available
experience; Worksheet 3; Worksheet 5; all columns of Section II of Worksheet 6; and
Worksheet 7.
Actuarial Equivalence
Plans submitting a bid for standard coverage with actuarially equivalent cost sharing must
satisfy the two tests to demonstrate actuarial equivalence on Worksheet 4. Plans submitting
a bid for alternative coverage must satisfy the various tests on Worksheet 5 to qualify.
The five tests for alternative coverage plans are specified in the statute and in the final
regulations and apply to both basic and enhanced alternative coverage.
•

The first test ensures that the value of total coverage is at least actuarially equivalent
to standard coverage.

•

The second test ensures that the alternative unsubsidized value of coverage is no
less than the standard unsubsidized value of coverage.

•

The third test ensures that the average alternative benefits for beneficiaries with
allowed drug costs at the initial coverage limit ($2,400) are no less that the average
standard benefits at the initial benefit limit.

•

The fourth test ensures that the deductible is no greater than $265. The fifth test
ensures that the average alternative catastrophic cost sharing percentage is no
greater than under standard coverage. We expect that plans can change the cost
sharing provisions, meet the five tests, and provide a basic alternative plan.

Worksheet 6 illustrates the assumptions used in demonstrating actuarial equivalence and
develops values to support the tests in Worksheets 4 and 5.
All plans are required to develop projected utilization for the defined standard benefit in
columns f, g, and h in Section II of Worksheet 6. In addition, plans submitting a bid for an
actuarially equivalent or alternative benefit are required to report projected utilization in
columns i, j, and k. If the bid is defined standard, then columns I, j, and k should be left
blank.
Data in Section II of Worksheet 6 are collected to support an actuarial comparison of the
proposed benefit to the defined standard benefit; and are not expected to model all of the
aspects of plan design. Lines 1 through 20 summarize all of the expected claims of the
proposed benefits, with lines 1 through 10 capturing the claims for individuals with less than
$2,400 in annual drug claims, and lines 11 through 20 capturing the claims for individuals
with $2,400 or more in annual drug claims. Lines 21through 30 capture the claims for

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individuals expected to reach catastrophic coverage, which is $5,451.25 or more in annual
drug claims for contract year 2006. Note that the amounts summarized in lines 21 through
30 will be a subset of those summarized in lines 11 through 20.
Plans should follow the instructions carefully in developing cost sharing values for column h
in Section II of Worksheet 6 because this column is not expected to specifically model all of
the cost sharing elements for the proposed defined standard benefit. For lines 1 through 20,
column h captures the cost sharing applicable between the deductible and the initial
coverage limit for all claims summarized in columns f and g. This means that column h
develops cost sharing without the impact of the deductible, the gap in coverage, and
catastrophic coverage. For this purpose, plans should ignore the impact of the low-income
cost sharing subsidy. Since column h summarizes the defined standard benefit, the claims
reflect cost sharing of 25%. Similarly, items in column h for lines 21 through 30 are
developed assuming cost sharing applicable beyond the catastrophic threshold. For defined
standard coverage, this amount would be the greater of 5% or $2.15 for generic drugs /
$5.35 for brand name drugs.
Plans submitting a bid to provide an actuarially equivalent or alternative benefit are required
to report the projected utilization on the proposed benefit in Section II, columns i, j, and k.
The distributions must be based on the categories determined in the defined standard
coverage. For example, rows 1 through 10 must reflect the utilization for the actuarial
equivalent or alternative plan for individuals expected to have less than $2,400 in annual
coverage based on the defined standard coverage. In other words, the utilization
summarized in columns i, j and k is based on the same population summarized in columns f,
g, and h.
Plans should follow the instructions carefully in developing the cost sharing values in column
k, lines 1 through 20, Section II of Worksheet 6. Values in column k are calculated using the
copay and coinsurance structure that the proposed actuarially equivalent or alternative
benefit applies to allowed utilization between the applicable deductible and the initial
coverage limit. As does column h, column k develops cost sharing without the deductible,
any gap in coverage, and catastrophic coverage. Lines 21 through 30 are developed
assuming the cost sharing applicable beyond the catastrophic threshold for the actuarial
equivalent or alternative coverage.
Values for A, B, C, and D in Worksheet 4
Plans proposing a benefit that has standard coverage with actuarially equivalent cost sharing
must satisfy the two tests to demonstrate actuarial equivalence on lines 16 and 17, Section
III of Worksheet 4:
Line 16 - Plans that meet the following criteria will be considered equal and pass the test for
Actuarial Equivalence of “A=B.”
•

The value for “A” is 25%.

•

The ratio of A/B is between .98 and 1.02.

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Line 17 - Plans that meet the following criteria will be considered equal and pass the test for
Actuarial Equivalence of “C=D.”
•

The values for both C and D are greater than or equal to 5.0%.

•

The ratio of C/D is between .98 and 1.02.

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Special Considerations
Part D Payment Demonstration
The Part D Payment Demonstration allows for varied payment rules for plans offering
supplemental benefits. The details for this demonstration are provided in our “Instructions for
Part D Payment Demonstration.” The May 10, 2005 instructions describe the following three
demonstration options:
•

Flexible capitation option

•

Fixed capitation option

•

MA rebate option

Generally, the capitation options replace the typical reinsurance subsidy of 80% of allowed
costs that apply after the beneficiary has reached the out-of-pocket threshold of $3,850 of
true out-of-pocket payments (TrOOP) with a capitation amount reflecting the actuarial value
of that subsidy if it is offered under the defined standard benefit structure. The distinction
between the flexible and the fixed options is that catastrophic coverage is required to begin
at $5,451.25 of total drug expenditures (consistent with the point at which the beneficiary
would have catastrophic coverage under the defined standard benefit) for a beneficiary in the
“fixed” option. The flexible option permits catastrophic coverage to begin at any point after
the beneficiary has $3,850 of TrOOP spending.
The MA rebate option permits supplemental benefits that fill in the coverage gap to count
toward the accumulation of the beneficiary’s TrOOP. In this option, as is the case for nondemonstration Part D plans, reinsurance will be paid based on 80% of allowed reinsurance
costs after beneficiaries have satisfied their TrOOP requirement. No change to the bidding
requirements or bid pricing tool (BPT) is necessary to support plans choosing this option.
It should be noted that a non-demonstration Part D plan that provides supplemental
coverage will generally delay the point at which a beneficiary reaches catastrophic coverage.
Accordingly, a non-demonstration Part D plan will likely see a shift in allowed costs - from
amounts that would be provided under catastrophic coverage for defined standard coverage,
to amounts in the coverage gap for alternative coverage. Since the fixed capitation option
and the flexible MA rebate option do not delay the point at which a beneficiary reaches
catastrophic coverage, there should not be a shift from catastrophic costs to gap coverage
costs for these options. For the flexible capitation option, a shift in costs between
catastrophic and coverage gap is to be expected.
The impact described above is illustrated in the following table of the benefit options
available for Part D plans. In this table, the only benefit design change represented in the
non-standard options is the variation of the point at which the coverage gap begins. In
addition, the values reflect the benefit parameters in effect for 2006.

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Benefit Design

Defined
Standard

Enhanced
Alternative

Flexible
Capitation

Fixed
Capitation

Flexible MA
Rebate

Deductible

$250

Coinsurance

25%

Coverage Gap Begins

$2,250

$3,250

Catastrophic Threshold

$5,100

$5,850

$5,100

The alternative coverage worksheet in the BPT requires costs to be allocated to below the
initial coverage limit, in the coverage gap and above the catastrophic threshold. The initial
coverage limit is statutorily defined to be $2,250 for 2006. For the enhanced alternative
option outlined above, the actuarial value of costs for the alternative coverage between the
initial coverage limit ($2,250) and the catastrophic threshold ($5,850) must be presented in
the coverage gap column. The coinsurance percentage for this period must reflect that the
portion of the coverage between $2,250 and $3,250 would have 25% coinsurance and that
the portion of coverage between $3,250 and $5,850 would have 100% coinsurance. The
same would be true for the flexible capitation option summarized in the table; both the fixed
capitation option and the flexible MA rebate option would have the same pattern except that
the catastrophic threshold would begin at $5,100 instead of $5,850.
The following is an explanation of each option:
•

Capitation Options.
The reinsurance capitation amounts reflected on the
alternative coverage worksheet are based on the development of the estimated
reinsurance amounts included in the defined standard worksheet.

•

Flexible MA Rebate Option. The only supplemental cost-sharing permitted in the
flexible MA Rebate option is the filling in of the coverage gap. As such, no reduction
in the deductible, in the cost sharing amounts up to the initial coverage limit of
$2,250, or in the amounts in the catastrophic period are allowed. For catastrophic
coverage plan bids must reflect a $250 deductible and have cost-sharing
percentages within 2% of the 25% amount (i.e., between 24.5% and 25.5%) up to the
initial coverage limit and within 2% of the cost-sharing percentage estimated for the
defined standard benefit structure..

Modeling Considerations
We require that plans consider the effects of the benefit design they choose on the
underlying population they expect to enroll, and that they complete the BPT accordingly.
Specifically, providing supplemental coverage in exchange for a premium, or at the expense
of offering other benefits, is likely to result in a change in the plan’s expected risk/cost profile
as compared to a plan that is offering basic benefits only. If the net value of these
supplemental benefits, defined to be the difference between the actuarial value of the
supplemental benefits and the amount of the premium, were to be positive for a class of
beneficiaries, a plan should expect a greater proportion of these beneficiaries in their plan as
compared to the class of beneficiaries with a negative value. For purposes of evaluating the
effect on the anticipated enrolled population, the plan must consider the impact of the value
of supplemental benefits at all points of the drug expense distribution.

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The following table illustrates the pattern of supplemental benefit value for the designs
summarized in the table above. Note that a supplemental premium is presented for
illustrative purposes only; actual premium amounts for such coverage could differ
significantly. Again, this example reflects the benefit parameters in effect for 2006.

Benefit Design

Defined
Standard

Enhanced
Alternative

Flexible
Capitation

Fixed
Capitation

Flexible
MA
Rebate

Supplemental Premium
Beneficiary Cost Share
at Drug Expense of:

$240

$220

$315

$1,250
$2,250

$500
$750

$3,250
$5,100

$1,750
$3,600

$1,000
$2,850

$5,600
$6,100

$3,625
$3,650

$3,350
$3,613

$2,875
$2,900

$10,000
Value of Supplemental
Benefit:

$3,845

$3,808

$3,095

$1,250
$2,250

NA
NA

$0
$0

$3,250
$5,100

NA
NA

$750
$750

$5,600
$6,100

NA
NA

$275
$38

$750
$750

$10,000

$38

$750

When modeling supplemental benefits, plans must factor behavioral impacts into the
anticipated selection. Beneficiaries spending less than the $2,250 initial coverage limit will
not receive any additional benefits from purchasing the supplemental coverage. Plans
modeling these types of benefits should consider the possibility that a lower percentage of
enrollees with spending under the initial coverage limit may participate than if they were
modeling a standard benefit.
Similarly, the value of the supplemental benefits decreases as the spending level exceeds
the catastrophic threshold for the standard benefit in the enhanced alternative and flexible
capitation options. The illustrative net value, after subtracting out the premium for the
supplemental benefits, is negative for beneficiaries in the above table spending in excess of
$6,100 of spending. Again during their development, plans must consider the possibility that
fewer such beneficiaries will enroll. We recognize that the average risk profiles of members
enrolled in existing MA organizations are not likely to change significantly from 2006 to 2007.
This tendency towards stability may mitigate some of the behavioral effects outlined above.
Plans must consider the implications of the plan designs being offered in estimating their
projected population.

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Also of interest in the table is the difference between the supplemental premiums for the
enhanced alternative and the flexible capitation options. Although a benefit pattern for two
designs may be identical, the supplemental premium will be slightly lower for the flexible
capitation option. This difference exists because the supplemental premium development for
the enhanced alternative plan includes a cost component for the estimated reduction in
reinsurance payments between the enhanced alternative plan and the defined standard plan
(the typical TrOOP impact). Since the reinsurance capitation in the flexible capitation option
is based on the defined standard estimate, there is no reduction in reinsurance value, and
thus no additional supplemental premium needs to be incorporated.
Profit Guidance
CMS will review the reasonableness of various components of plan bids, including the profit
component, and will use a statistical approach to assess whether a given plan’s profit margin
is fairly representative of the range of values expected by most plans. Medicare Advantage
Organizations and Part D Plans that submit plan bids with profit margins outside of this range
will be asked to further justify their values, and the results will be considered accordingly.
CMS will allow varied gain/loss margins for separate bids offered by an organization, under
certain circumstances. The margin variability must be based on bid-specific factors such as
risk margins, surplus requirements, taxes, and other key factors used in the development of
the organization’s aggregate gain/loss requirement.
CMS will allow negative profit margins in certain circumstances, such as for new market
entrants. However, we would not normally allow a plan to have negative profit margins over
an extended period of time or without a business strategy that projects positive margins in
future years.
First Dollar Generic Coverage
Plans that are implementing a deductible that is not applied consistently between categories
of drugs (for example, $0 deductible for generic drugs, and $265 deductible for brand drugs)
must make several modifications to pricing of this benefit in the BPT. Specifically, Worksheet
5 the BPT requests the proposed deductible. Plans with a non-uniform deductible must enter
$0 for the proposed deductible in D6 and F8 in Section IV of Worksheet 5. Plans with a
uniform deductible must enter in Worksheet 6 the cost-sharing items for the population with
spending under $2,400, and for the population with spending over $2,400 applying the
effective cost-sharing by drug class for the interval between the deductible and the initial
coverage limit. Plans with a non-uniform deductible must reflect the impact of the brand
deductible in the brand cost-sharing categories in addition to the cost-sharing required after
the deductible has been satisfied.
Decreased Initial Coverage Limit (ICL)
Plans that are lowering the initial coverage limit (ICL) must still report in lines 3 through 8 of
Worksheet 6 all costs and cost-sharing for drug spending up to the defined initial coverage
limit in 2007. For plans that are reducing the ICL to $2,000, the amounts in column k must
reflect the cost-sharing appropriate up to the $2,000 level plus 100% of costs for drug
spending between $2,000 and $2,400. The entries on Worksheet 6 (Scripts Projection) must
fit in the specified intervals. For example, for members with allowed drug costs (under
defined standard coverage) above $2,400, their entire allowed amounts and scripts are to be
entered in the section for persons with expenses above $2,400, regardless of the alternative
plan's benefit limit. Note that the section for persons with expenses above $2,400 also

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includes amounts for members with expenses exceeding $5,451.25. A member's expenses
and scripts are entered in the expense section as projected under defined standard
coverage. No matter what expense category a member is assigned under the defined
standard benefit, the member must remain in the same expense category under the
alternative coverage even if the expense level changes due to the incentive of alternative
coverage.
Coverage in Payment Gap
Enhanced alternative coverage can reduce cost-sharing and / or provide coverage for drugs
that are specifically excluded from the definition of Part D drugs. While enhanced alternative
coverage can fill in some or all of the coverage gaps in the Defined Standard coverage, it
cannot affect the true out-of-pocket threshold of $3850 in 2007 (see Payment Demonstration
discussion for exceptions). Therefore, reductions in cost-sharing would impact the point at
which the member reaches the true out-of-pocket threshold for catastrophic coverage.

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Worksheet 1 - Rx Base Period Experience

Overview
Section 1 of Worksheet 1 collects general information that carries over to all sheets; entries
are required for each item. The remaining sections of Worksheet 1 summarize the base
period Rx experience and should be left blank if no applicable, credible Part D coverage was
in effect during the base period. Section II includes base period background information.
Section III summarizes the base period Rx claims data, Section IV summarizes the nonbenefit expenses, and Section V summarizes the various components of revenue that relate
to the Part D coverage. Section VI is an income statement summary.
Section I – General Information
The following paragraphs provide line-by-line instructions for Section I. This information is
required for all plans, and carries forward to all other worksheets.
Line 1 – Contract Number
Enter the contract number for the plan on Line 1. The designation begins with a capital
alphabetic letter H, R, or S and includes four Arabic numerals (for example, H9999, R9999,
or S9999). Please include all leading zeros. Obtain this number from your contract.
Line 2 – Plan ID
The plan ID and corresponding contract number form a unique identifier for the plan being
priced in the bid form. Plan IDs contain three Arabic numerals. Please enter all leading
zeros. For example, enter “001” for plan number one. If the bid is for an employer-group-only
plan, the plan ID must be 800 or higher.
Line 3 – Segment ID
If the bid is for a service area segment of a local plan, enter the segment ID.
Line 4 – Contract Year
This cell is automatically completed with the calendar year for which the contract applies.
Line 5 – Organization Name
Enter the organization’s legal entity name on Line 5.
Line 6 – SNP
Enter the Special Needs Plan (SNP) Indicator as “Y” or “N”.
Line 7 – Plan Name
Enter the name of the MA-PD or PDP plan that you are offering to Medicare enrollees. This
entry must match what is in the PBP.

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Line 8 – Plan Type
Enter the type of plan. The valid options are listed below:

Type of Plan
Local Coordinated Care Plans:

Plan Type Code:

Health Maintenance Organization

HMO

Health Maintenance Organization with a
Point-of-Service (POS) Option
Provider-Sponsored Organization w/ State
License
Provider-Sponsored Organization w/ Federal
Waiver of State License
Preferred Provider Organization

HMOPOS
PSO State License
PSO Federal Waiver
LPPO

Regional Coordinated Care Plans:
Regional Preferred Provider Organization

RPPO

Private Fee-for-Service Plans:
Private Fee-for-Service Plan

PFFS

Continuing Care Retirement Community
Continuing Care Retirement Community

CCRC

Demonstration Plans:
Social HMO

SHMO

Minnesota Disability Health Options

MN DHO

Minnesota Senior Health Options

MN SHO

Wisconsin Partnership Program

WI PP

Massachusetts Health Senior Care Options

MA HSCO

National PACE
1876 Cost
Medical Savings Account
Prescription Drug Plans:
Medicare Prescription Drug Plan
Employer Sponsored Prescription Drug Plan

PACE
1876 Cost
MSA

Fallback Plans
Fallback Plan

PDP
ESPDP

Fallback

Line 9 – Enrollee Type
Select the enrollee type from the drop-down-menu if applicable. Options are “Part B Only”
and “A/B.”

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Line 10 – PD Region
Enter “Multiple” or National” if applicable, or enter the PD Region from the valid options are
listed below:
Region

Description

Maine and New Hampshire

Connecticut, Massachusetts, Rhode Island, and Vermont

New York

New Jersey

District of Columbia, Delaware, and Maryland

Pennsylvania and West Virginia

Virginia

North Carolina

South Carolina

Georgia

Florida

Alabama and Tennessee

Michigan

Ohio

Indiana and Kentucky

Wisconsin

Illinois

Missouri

Arkansas

Mississippi

Louisiana

Texas

Oklahoma

Kansas

Iowa, Minnesota, Montana, Nebraska, North Dakota, South Dakota, and Wyoming

New Mexico

Colorado

Arizona

Nevada

Oregon and Washington

Idaho and Utah

California

Hawaii

Alaska

American Samoa

Guam

Northern Mariana Islands

Puerto Rico

Virgin Islands

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Line 11 – Plan Benefit Type
Enter the plan benefit type that identifies the type of plan reflected in this bid. The options
are “DS” for Defined Standard, “AE” for Actuarially Equivalent, “BA” for Basic Alternative and
“EA” for Enhanced Alternative.
Line 12 – Payment Demo Type
Enter the predefined payment demo type to identify whether this bid is a payment
demonstration and if so, which type. The options are “NA” (when the plan is not offering
supplemental benefits under a payment demonstration), “Fixed Cap” (the flexible capitation
option), “Flex Cap” (the flexible capitation option) and “MA Rebate” (the MA Rebate option).

Section II – Base Period Background Information
Line 1 – Time Period Definition
Enter the base period experience incurral information on the first two lines. In addition to the
incurral dates, enter the “paid through” date. For example, if the incurral period is calendar
year 2005, the “incurred from” date is 1/1/2005 and the “incurred to” date is 12/31/2005. If
the data reflect payment information through February 2006, then the “paid through” date is
2/28/2006. Note that we do not require that the base time period incurral data be based on a
calendar year.
Line 2 – Member Months
Enter the number of member months represented in the base period experience used.
Line 3 – Credibility
If the base period experience is fully credible, enter “F”; if partially credible; enter “P” .If the
plan has no applicable, credible experience, enter "N”.
Line 4 – Risk Score
Enter the plan’s prescription drug risk score underlying the base period data. The CMS drug
model risk score must be used, and must be estimated to three decimal places. If the plan
risk score is not known, CMS will provide information so that plans can estimate the
projected risk score for their population.
Line 5 – Completion Factor
Enter the factor used to adjust the paid data to an incurred basis. The base period data must
represent the best estimate of incurred claims for the time period, including any unpaid
claims as of the “paid through” date.
Line 6 – Base period description
Use the text box provided to briefly describe the base period data. The base period data
need not reflect the same benefit plan or service area as the contract year. Do not adjust
data for credibility, which is addressed on Worksheet 2 with the manual rate. Examples of
different base period data include:

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•

Same benefit plan, but larger or smaller service area.

•

Same benefit plan, but an entirely different service area.

•

Similar benefit plan in same or different service area.

Section III – Part D Claims Experience
Section III summarizes the base period experience for Part D coverage. Please note that
these data:
•

Need not exactly match the benefit plan or service area for the bid (see Section II
instructions).

•

Reflect either calendar year or other annualized experience.

•

Reflect the current best estimate of incurred claims including estimates of unpaid
claims, but excluding margin for adverse deviation (which must be included as part of
the gain/loss margin).

•

Include total services (both in-network and out-of-network).

Lines 1 through 11 must include experience relating to Part D covered drugs only. Lines 12
through 14 summarize experience for any drugs that are covered by the plan but are not on
the Part D covered drug list at the time they are dispensed.
Lines 1 through 5 stratify the members, member months, and covered Part D claims
expenses into intervals based upon the allowed Rx expense per member. Columns d
through g reflect the total values, while columns h through m reflect per member values.
Enter claims for which Part D is primary in lines 1 through 5. Enter claims for which Part D is
secondary in line 10.
Column d, Lines 1 through 5 – Number of Members
Enter the number of members with total allowed claims in the interval experience period
defined for each line. For example, if 7,000 members had allowed expenses between $250
and $2,249, then 7,000 would be entered in line 3 of column d.
Column e, Lines 1 through 5 - Member Months
For each line, enter the number of member months associated with the members included in
column d.
Column f, Lines 1 through 5 - Total number of Scripts
For each line, enter the number of Part D covered Rx prescriptions filled in the experience
period for the members included in column d.
Column g, Lines 1 through 5 - Total Allowed Dollars
For each line, enter the total allowed dollars for the prescriptions filled in the experience
period for the members included in column d. Allowed expenses are defined as ingredient

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cost plus dispensing fee, plus state sales tax where applicable, prior to application of any
rebates recovered after the point of sale of the prescription.
Column h, Lines 1 through 5 - Average Allowed Amount per Member
For each line, this amount is automatically calculated based on the entries in columns d and
g (column g divided by column d).
Column i, Lines 1 through 5 – Average Paid Amount per Member
For each line, enter the total dollars paid by the plan for prescriptions filled in the experience
period, divided by the number of members in column d. Dollars paid include both basic and
supplemental payments for Covered Rx drugs, and must not be net of rebates,
reimbursements received by the plan for low-income subsidy payments, Federal
reinsurance, or other reimbursements received with respect to such payments.
Column j, Lines 1 through 5 – Supplemental Cost-Sharing Reduction per Member
For each line, enter the difference between the average paid amount in column i and the
amount that would have been entered in column j if the Rx plan had been defined standard
coverage.
Column k, Lines 1 through 5 – Reimbursement for Low-Income Cost-Sharing Subsidy
per Member
For each line, enter the average low income cost-sharing subsidy amount received or
receivable with respect to the members included in column d.
Column l, Lines 1 through 5 – Reimbursement for Federal Reinsurance per Member
For each line, enter the average federal reinsurance amount received or receivable with
respect to the members included in column d.
Column m, Lines 1 through 5 – Net Plan Responsibility per Member
This value is automatically calculated by subtracting the values in columns j, k, and l from the
value in column i.
Line 6, Columns d through m – Subtotal
For columns d through g, this line represents the sum of lines 1 through 5. For columns h
through m, this line represents the weighted average of lines 1 through 5 based on the
number of members included in column d.
Line 7, Columns g and i – % OON
For column g, enter the percent of total allowed dollars from line 6 for prescriptions filled outof-network. For column i, enter the percent of average paid dollars from line 6 for
prescriptions filled out-of-network.

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Line 8, Column g and Columns i through m – PMPM Values
This line represents the calculated PMPM values for these columns based on the amounts in
line 6.
Line 9, Columns i, l, and m – Minus PMPM Rebates
Enter, in each of columns i and l, the PMPM value of rebates received with respect to the
claims included in lines 1 through 5. Total rebates should be allocated to the plan using a
method that reasonably represents the way in which the rebates were generated, and
rebates should be allocated to columns j and m based upon the amount on line 6 for each
column. Column m is calculated based upon the entries in the other columns. All rebates
and price concessions not used to directly reduce the cost at the point of sale must be
included. Rebates and price concessions must be reported in full. Any charges or fees for
the administration of rebates or price concessions must be included separately as a
component of direct administrative costs.
Line 10, Columns i and m – PMPM Value of Part D as Secondary
Enter in column i the PMPM value of any payments for Part D covered drugs for which Part
D is secondary. Column m is calculated based upon column i.
Line 11, Columns I through m – PMPM Net Expenses
This line is calculated as line 8 minus 9 plus 10.
Line 12, Columns g and i - PMPM Value of Non-Part D Covered D Drugs
Enter the PMPM value of claims for drugs covered by the plan that are not Part D covered
drugs. Enter the allowed PMPM in column g and paid PMPM in column i.
Line 13, Column i - PMPM - Rebates on Non-Part D Covered D Drugs
Enter the PMPM value of any rebates allocable to the drug payments included on line 12.
Line 14, Columns i and m – Net PMPM on Non-Part D Covered D Drugs
Column i and m are calculated automatically.

Section IV – PMPM Non-Benefit Expense
This section summarizes the PMPM value of the components of Part D non-Benefit
expenses in the base period. The allocation of expenses between basic and supplemental
benefits must be allocated proportionately between the cost of the supplemental coverage
and the value of the standard benefit.
Enter amounts on lines 1 through 4 of columns e and f. Line 5 and column g are calculated
automatically.

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Section V – PMPM Premium Revenue
This section summarizes the PMPM value of the components of premium revenue for Part D
during the base period.
Enter amounts on lines 1 through 4 of column e and on line 3 of column f. Line 5 and
column g are calculated automatically.

Section VI – PMPM Income Statement Summary
This section provides an income statement summary of the base period for Part D coverage,
including the amount of MA rebate allocable to Part D in the base period.
Enter an amount on line 4 for MA rebate used for Part D.

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Worksheet 2 - PDP Projection of Allowed/Non-Benefit
The purpose of this worksheet is (i) to identify the components of trend in the allowed Rx
cost for covered Part D drugs and for non-benefit expenses between the base period and the
contract period, and (ii) to blend in manual rate information for plans that do not have fully
credible base period experience data. The base period information must be consistent with
that in Worksheet 1, and the projection information must be consistent with that in Worksheet
3.
Worksheets 2 and 6 develop for a proposed plan, summaries of the distribution of generic,
brand name drugs (preferred and non-preferred), and specialty drugs, including allowed
amounts and cost-sharing amounts. These summaries assist in determining actuarial
equivalence, and are cross referenced with information submitted in the plan’s formulary and
Plan Benefit Package (PBP). T
Brand Drugs
Single source drugs with no generic equivalent that were FDA-approved under an original
new drug application (NDA), and Innovator Multisource Drugs originally marketed under an
original NDA that now have generic equivalents.
Preferred / Non-Preferred Brand Drugs
Brand name drugs placed in the most favorable position on the formulary in comparison to
other similar brand drugs. In contrast, brand drugs that are positioned in a less favorable
position on the formulary should be allocated to the non-preferred brand category when
completing the bid tool.
Generic Drugs
Non-Innovator Multisource Drugs are generic drugs.
Specialty Drugs
The addition of a separate reporting category for specialty drugs is a significant change to
Worksheet 2 in the BPT for contract year 2008. Specialty drugs are reported separately
under type of script only when a plan utilizes a designated specialty tier within the formulary
and benefit design in accord with CMS guidelines. The CMS guidelines require that (i) only
one tier is designated a specialty tier, (ii) cost sharing associated with that tier is limited to
25% in the initial coverage range, and (iii) only Part D drugs with plan negotiated prices
greater than $500 per month may be placed in the tier.
When a designated specialty tier is used, all drugs in the designated specialty tier must be
reported by place of service, on lines 4 and 8, under both Section II and Section III of
Worksheet 2. When a designated specialty tier is used, the drugs in the specialty tier are
not sorted by brand or generic status, and are not reported as a component of the brand and
generic drugs in the non-specialty tiers.
When a plan does not utilize a designated specialty drug tier in the formulary and benefit
design, specialty drugs should be sorted by generic, preferred brand, and non-preferred
brand status, and reported in these categories by place of service. In this situation, the
specialty categories in Section II and Section III of Worksheet 2 should not be completed.

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Section I – General Information
This information is carried forward from Worksheet 1.

Section II – Utilization for Covered Part D Drugs
Lines 1 through 8, Column e - Number of Scripts/1000
For each type of prescription, enter the number of prescriptions that were filled in the base
period, expressed in terms of annual prescriptions per 1,000 beneficiaries.
Lines 1 through 8, Column f - Allowed per Script
For each type of prescription, enter the average allowed amount per script for scripts filled in
the base period. The amount allowed is defined as the ingredient cost plus the dispensing
fee, plus state sales tax where applicable. Do not include rebates and medication or
utilization management costs.
Lines 1 through 8, Column g - PMPM Allowed
The value is automatically calculated and equals column e times column f, divided by
12,000.
Lines 1 through 8, Column h - Trend in Scripts/1,000
For each type of prescription, enter the factor that would be applied to the base period
scripts/1,000, if there were no change in formulary, population, or benefit plan, to project
scripts/1,000 in the contract period.
Lines 1 through 8, Column i - Formulary Change
For each type of prescription, enter the factor that would be applied to the base period
scripts/1,000 to reflect changes in classification of certain drugs from the base period to the
contract period. Reflect changes in classification as well as new to market entities.
Lines 1 through 8, Column j - Risk Change
For each line, enter the factor that represents the impact of the covered population’s change
in risk between the base period and the contract period.
Lines 1 through 8, Column k - Induced Utilization
For each line, enter the factor that would be needed to adjust the scripts/1,000 for the
expected utilization difference that would apply if the base period benefit plan were modified
to be the defined standard prescription drug plan.
Lines 1 through 8, Column l – Other Change
For each line, enter the factor that represents the impact of any other changes not captured
in the previous columns. Additional documentation may be requested to support entries in
this column.

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Lines 1 through 8, Column m - Total Utilization Change
The value is automatically calculated as the product of the factors in columns h through l.
Lines 1 through 8, Column n - Projected Scripts/1000
The value is automatically calculated as the product of columns e and m.
Lines 9 through 14, Columns e through n
The values are automatically calculated using the information on lines 1 through 8.

Section III – Cost for Covered Part D Drugs
Lines 1 through 8, Column e - Inflation Trend
For each line, enter the factor representing the expected change in cost between the base
period and the contract period due to changes in drug prices.
Lines 1 through 8, Column f - Discount Change
For each line, enter the factor representing the expected change in contracted discounts and
dispensing fees between the base period and the contract period. Do not include any
changes in expected rebates.
Lines 1 through 8, Column g - Formulary Change
For each line, enter the factor representing the expected change in cost per script due to
changes in the formulary structure.
Lines 1 through 8, Column h - Other Change
For each line, enter the factor representing the expected change in cost per script due to
changes other than those described in columns e through g. As an example, an anticipated
change in the day’s supply per script would be entered here.
Lines 1 through 8, Column i - Total Unit Cost Change
The value is automatically calculated as the product of columns e through h.
Lines 1 through 8, Column j The value is automatically calculated using Section III, column i and Section II, column f.
Lines 1 through 8, Column k - Projected Allowed PMPM
The value is automatically calculated using Section III, column j, and Section II, column n.
Lines 9 through 14, Columns e through k
The value is automatically calculated using lines 1 through 8.

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Section IV – Projected Allowed PMPM
Lines 1 through 8, Columns l and m - Manual Utilization/1000 and Manual Unit Cost
For base experience that is not fully credible, enter in columns l and m the utilization/1,000
and unit cost, respectively, from a credible, non-plan manual rate source.
Lines 1 through 8, Column n - Manual Rate PMPM
The manual rate PMPM is automatically calculated based on inputs in columns l and m (lines
1through 8).
Lines 1 through 8, Column o – Credibility
Enter the credibility percentage that is applied to the actual experience to blend the manual
experience to produce contract period projections.
Lines 1 through 8, Column p - Blended Allowed PMPM
The value is automatically calculated using columns k, n, and o.
Lines 7 through 14, Columns l through p.
The value is automatically calculated using lines 1 through 8.

Section V – PMPM Non-Benefit Expense
This section identifies the PMPM value of the components of Part D non-benefit expenses.
A full reporting of all administrative expense is required in this section, including any
administrative expense that may be offset through direct or indirect remuneration. The nonbenefit expenses must be shown separately for the following categories:
•

Sales and Marketing

•

Direct Administration (for example, functions that are directly related to the
administration of the program, such as customer service, billing and enrollment,
claims administration, calculation of LIS reimbursement, and True Out-of-Pocket
(TrOOP administration).
o

Pharmacy benefits management (PBM) administration. All of the costs for
performing call center, claims, formulary management, network development,
rebate management functions at the plan, or through a subcontractor must
be reported in the BPT as direct administration.

Crossover Fees. (These are the fees paid to obtain information from other
payers in order to calculate TrOOP expenses).

Medicare User Fees.

Uncollected enrollee premium.

Medication Therapy Management Program expenses.

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Disease management functions (such as patient education and disease
monitoring are considered to be direct administration).

Over the Counter (OTC) drug utilization. To the extent that OTCs are
permitted to be covered, they must be reported as a component of direct
administration, and not as a Part D covered drug or as supplemental
coverage.

•

Indirect Administration (for example, functions that may be considered “corporate
services,” such as accounting operations, actuarial services, legal services, and
human resources).

•

Net Cost of Private Reinsurance (that is, reinsurance premium less projected
reinsurance recoveries).

All non-benefit expenses must be reported using the appropriate generally accepted
accounting practice (GAAP) methodology. For example, acquisition expenses and capital
expenditures must be deferred and amortized according to the relevant GAAP standards (to
the extent this is consistent with the organization’s standard accounting practices, if not
subject to GAAP). Also, acquisition expenses (marketing and sales) must be deferred and
amortized in a manner consistent with the revenue stream anticipated on behalf of the newly
enrolled members. Guidance on GAAP standards are promulgated by the Financial
Accounting Standards Board (FASB). Of particular applicability are FASB’s Statement of
Financial Accounting No. 60, Accounting and Reporting by Insurance Enterprises.
Additionally, for organizations that have entered into administrative service agreements, the
non-benefit expense must reflect the actual cost of providing services, which may be
different from the contractual charge.
Costs not pertaining to administrative activities, including goodwill amortization, income
taxes, changes in statutory surplus, and investment expenses must be excluded from nonbenefit expenses. Similarly, non-insurance revenues pertaining to investments and feebased activities cannot be reflected in the bid.
Start-up costs that are not considered capital expenditures under GAAP are reported as
follows:
•

Expenditures for tangible assets must be capitalized and amortized according to
relevant GAAP principles, e.g., a new computer system purchased to support
Part D in 2005.

•

Expenditures for non-tangible assets, e.g., salaries and benefits, must be reported
consistent with the organization’s internal accounting practices and the reporting of
similar expenditures in other lines of business.

We expect costs common to offering a Medicare Advantage-Prescription Drug (MA-PD) plan
to be allocated proportionately between the Medicare Advantage and Part D bid pricing tools.
Lines 1 through 5, Column e – Base Period
Base period non-benefit expenses carry over from Section IV of Worksheet 1.

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Lines 1 through 4, Column f – Trend
When base period non-benefit expenses are carried over from Section IV of Worksheet 1
into column e, enter trend values in lines 1through 8 of column f to project from the base
period to the contract period. Leave column f blank if base period non-benefit expenses
were not entered on Worksheet 1, then column f may be left blank.
Lines 1 through 5, Column g – Contract Period PMPM Non-Benefit Expense
The value is automatically calculated using columns e and f.
Lines 1 through 4, Column h– Manual Rate Non-Benefit Expense
When base period non-benefit expenses are not fully credible, enter in lines 1 through 8 a
manual rate non-benefit expense from a credible source.
Lines 1 through 4, Column i – Credibility
Enter the percentage that would be applied to the trended base non-benefit expenses when
blending with manual rate non-benefit expenses to produce contract period projections.
Lines 1 through 5, Column j – Blended Contract Period PMPM Non-Benefit Expense
The value is automatically calculated using columns g, h, and i.

Section VI – Development of Manual Rate
Describe the source and year of the information used as the manual rate, as well as any
other relevant information, such as benefit design, group size, group characteristics,
utilization trends, pricing basis, formulary changes, induction, and risk assumptions.

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Worksheet 3 - Contract Period Projection for Defined Standard Coverage
This worksheet is used for the development of the Defined Standard Bid Amount and must
tie to Worksheet 2 and Worksheet 6, columns f, g, and h. All plans are required to fill out this
worksheet.

Section I - General Information
This section automatically populates from entries on Worksheet 1.

Section II - Projection Data
Line 1 – Projected Member Months
The projected member months is carried over from the subtotal value for the member
months in Section III.
Line 2 - Projected Average Risk Score
Enter the projected Rx risk score for the enrollees expected in the contract period. This
value must be consistent with the base period risk score (if any) and with the expectation for
the change in risk score from Worksheet 2.
Line 3 - Projected Low Income Subsidy (LIS) Member Months
Enter the estimated number of member months for the contract period for those enrollees
who qualify for and obtain low-income subsidy (LIS) status.

Section III – Part D Covered Drug claims
Entries in Sections III, IV, and V must reflect the risk score included in Section II, line 2.
Lines 1through 5, Column d - Number of Members
Enter the number of members who are expected to have allowed Part D Rx expenses falling
in the range applicable to the line. For example, when modeling 6,500 members with
allowed expenses falling in the range between $265 and $2,400, enter 6,500 on line 3,
column d. For purposes of lines 1through 5, do not include estimates for any claims for
which Part D is secondary coverage.
Lines 1through 5, Column e - Member Months
For each line, enter the number of member months expected in the contract period for the
members identified.
Lines 2 through 5, Columns f and g - Number of Scripts, Projected Allowed Dollars
For each line, enter the number of scripts and projected allowed dollars expected in the
contract period for the members identified in column d. Allowed dollars must reflect the price
incurred at the point of sale. Any rebates or price concessions reflected at the point of sale
must reduce allowed dollars.

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Lines 1through 5, Column h – Avg Amt Allowed PMPM
The average allowed PMPM is calculated automatically.
Lines 2 through 5, Column i - Cost Sharing
For each line, enter the total amount of cost sharing that would apply to the individuals
identified in the line under the assumption that the benefits are those of Part D defined
standard coverage with no low-income subsidy and no supplemental coverage from any
source. The member liability in the gap, before TrOOP is satisfied, is considered cost
sharing for this purpose. The cost sharing amounts should be consistent with the total
allowed dollars in column g.
Lines 4 through 5, Column j - GAP PMPM
For each line, enter the PMPM amount corresponding to amounts between the initial
coverage limit and the catastrophic limit for the individuals identified in column d. For 2006,
this amount would correspond to allowed amounts between $2,400 and $5,451.25 of total
drug spending.
Lines 2 through 5, Columns k and l- PMPM Deductible, Other Cost Sharing PMPM
For each line, for individuals identified in column d, enter the projected PMPM values for the
deductible and other cost sharing (based on 25% coinsurance below the initial coverage limit
and catastrophic coinsurance above the catastrophic limit). Calculate the PMPM values
based on the total dollars for each category, divided by the total projected member months in
Section II, line 1.
Line 5, Column m - Federal Reinsurance PMPM
Enter the Federal Reinsurance applicable to the individuals identified in column d. Calculate
the PMPM values based on the total dollars divided by the total projected member months in
Section II, line 1.
Lines 1through 5, Column n - Plan Liability
The plan liability PMPM is calculated automatically.
Lines 2 through 5, Column o - Federal LIS Cost Sharing PMPM
For each line, enter the projected dollar amount of low-income cost sharing subsidy
applicable to individuals identified in column d who are eligible for low-income subsidy,
divided by the total projected member months in Section II, line 1.
Line 6, all Columns - Subtotal
Each column is calculated automatically.
Line 7, Columns g, h, m, and n – Minus Rebates
Although rebates are not directly allocable to individual claims, the method used to allocate
rebates to the plan must be reasonable and similar to the way in which the rebates are

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generated. For the purpose of this worksheet, rebates must include any price concession
recognized after the point of sale.
Enter, as a positive dollar amount in column g and as a positive PMPM in column h, the total
projected rebates generated in the contract period. This amount is allocated to columns m
and n based on the relative amount of reinsurance compared to all allowable costs.
Line 8, Columns h, m and n – Minus Other Insurance
As positive amounts in columns h and m, enter the estimated PMPM reduction due to the
presence of other Rx insurance. Column n is calculated automatically.
Line 9, Columns h, m and n – Plus Part D as Secondary
Enter in columns h and m the estimated PMPM liability of the plan where Part D coverage is
secondary. Column n is calculated automatically.
Lines 10 and 11, Column e - Out-of-Network (OON) Expenses
In line 10, enter the percentage of line 6, column g that represents OON allowed claims. In
line 11, enter the percentage of line 6, column n that represents OON plan liability.
Line 12, Columns g through o - Total
The values are automatically calculated based on the previous lines.

Section IV – PMPM Non-Benefit Expense and Gain/ (Loss)
Lines 1 through 5
The values for lines 1 through 5 are automatically calculated by the BPT from entries on
Worksheets 2, 3, and 5.
Line 6
Enter the value for the plan’s expected total Gain/ (Loss). Consistent with statutory intent,
the gain/loss margin must reflect the revenue requirements of benefits provided under the
plan. CMS’ interpretation of this requirement is that the gain/loss margin must be developed
using an accepted actuarial technique, such as a Return on Investment or Return or Equity
approach.
One component of CMS’ review will be assessment of the reasonableness of the gain/loss
margin relative to other bids. Organizations will be required to provide justification of the
margin for bids with relatively large projected gains/losses. Examples of support to be
provided are (i) illustration of return on investment/equity requirement(s), (ii) demonstration of
corporate return requirement(s), and/or (iii) other actuarial support. The development of
margin requirements may reflect revenue offsets not captured in non-benefit expenses (such
as investment expenses, income taxes, and changes in statutory surplus) and may also
include investment income.

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Section V – Defined Standard Coverage Bid Development
The values for Section V are automatically calculated by the BPT from entries on worksheet
3.

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Worksheet 4 - Standard Coverage with Actuarially Equivalent Cost Sharing
This worksheet is only completed for standard coverage with actuarially equivalent cost sharing plan
benefit types. Following are the two tests that must be met to demonstrate actuarial equivalence
are:
•

The average coinsurance percentage for amounts between the deductible and the initial
coverage limit must be actuarially equivalent to 25 %.

•

The average coinsurance percentage above the catastrophic limit must be actuarially
equivalent to the percentage for defined standard coverage.

The amount of the bid must be determined since the bid is based upon the cost of the proposed plan
rather than the defined standard plan.
Considerations for Actuarial Equivalent Coverage
Although defined standard plans have 25% cost sharing for all classes of drugs, it is expected that
Actuarial Equivalent (AE) plans will restructure the 25% to provide incentive for beneficiaries to
access the benefit in a way that results in more efficient drug use. AE plans will generally have
higher use in the generic and possibly preferred brands, and lower use in non-preferred brands, and
plans are expected to generally have higher mail use. When these favorable shifts occur, AE bids
will have lower costs under the initial coverage limit (ICL) and the catastrophic phases of the benefit
than do the defined standard bids. It is expected that the utilization in Worksheet 6 will adequately
reflect these changes.
Plans must appropriately model the impact of the alternative benefit compared to the defined
standard by making appropriate adjustments in utilization and possibly average script pricing in
Worksheet 6. The distribution of utilization between generic and brand, and retail and mail must be
reasonable given the proposed benefit. Significant changes to the benefit are expected to result in
meaningful differences in utilization when compared to the defined standard bid. For example, it is
reasonable to expect a noticeable increase in the utilization of generic drugs in an actuarially
equivalent plan with a zero dollar generic cost share.

Section I – General Information
The information in this section carries forward from Section I of Worksheet 1.

Section II – Projection Data
The information in this section carries forward from Section II of Worksheet 3.

Section III – Development of Bid for Defined Standard Coverage
The information in this section carries forward from Section V of Worksheet 3.

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Section IV – Development of Bid Components and Tests for Actuarial Equivalence
Lines 1 through 3 and 5 through 14, Columns e, h, and k.
These items are calculated automatically.
Lines 4, Columns e and h - Allowed PMPM
For amounts below the initial coverage limit, enter in column e the allowed PMPM for standard
coverage with actuarially equivalent cost sharing. For amounts above the catastrophic threshold,
enter the allowed PMPM in column h.
Lines 15, Columns h and k - Rebates
Enter in column k the total rebate amount for the plan. Rebates will be prorated for reinsurance.
Lines 16 and 17, Column e - Success/Failure of Actuarial Equivalence Tests
If line 8 of column e equals line 9 of column e using the threshold test for equivalence, line 16 of
column e will display “Yes”.
If line 8 of column h equals line 9 of column h using the threshold test for equivalence, line 17 of
column e will display “Yes”.
If both equivalence tests display “Yes,” the bid for standard coverage with actuarially equivalent cost
sharing will be automatically be calculated in Section IV.

Section V – Standard Coverage Bid Development with Actuarially Equivalent Cost
Sharing
Lines 1 through 5 are automatically calculated. The amounts in the first column reflect the plan risk
score, while those in the second column reflect a 1.000 risk score.
Line 6, LIS
Enter the estimated value of low-income cost sharing consistent with the anticipated risk factor.

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Worksheet 5 - Alternative Coverage
This worksheet is only used for alternative coverage plan benefit types. Basic alternative
coverage plans result in no supplemental premium. The supplemental premium for
enhanced alternative coverage is automatically calculated by this worksheet.
Considerations for Basic and Enhanced Alternative Plans
Although defined standard plans have 25% cost sharing for all classes of drugs, it is
expected that alternative plans will restructure the 25% to provide incentive for beneficiaries
to access the benefit in a way that results in more efficient drug use. Alternative plans may
also change cost sharing up to the ICL and are likely to restructure to provide incentive for
beneficiaries to increase the efficiency of their drug use. It is expected that these plans will
generally have higher use in the generic and possibly preferred brands and lower use in nonpreferred brands, as well as higher mail utilization. When these favorable shifts occur, bids
will have lower costs under the initial coverage limit (ICL) and the catastrophic phases of the
benefit than do the defined standard bids.
Plans must appropriately model the impact of the alternative benefit compared to the defined
standard by making appropriate adjustments in utilization and possibly average script pricing
in Worksheet 6. The distribution of utilization between generic and brand, and retail and
mail must be reasonable given the proposed benefit. Significant changes to the benefit are
expected to result in meaningful differences in utilization when compared to the defined
standard bid. For example, it is reasonable to expect a noticeable increase in the utilization
of generic drugs in an alternative plan with a zero dollar generic cost share.
Alternative plans can reduce the value of the deductible, which may in turn reduce the risk
profile of the group. Although these changes may be compensated by increased cost
sharing up to the initial coverage limit (ICL), it is reasonable to expect some induced
utilization.
Finally, alternative plans may provide for coverage in the payment gap. Since the value of
coverage up to the ICL must remain the same relative to defined standard, unless the cost of
the additional coverage is offset by savings in catastrophic coverage, in a supplemental
premium will result. Additional coverage in the gap can also delay the point at which a
beneficiary (i) achieves $3,850 of true out-of-pocket (TrOOP) cost-sharing, and (ii) gets
catastrophic coverage. This delay can reduce the amount of reinsurance that will be
provided, can cause induced utilization, and can also increase the risk profile of the group,
although those with extremely high spending will not benefit as much as those with a
moderate amount of spending and may not opt for these plans.

Section I – General Information
The information in this section is automatically populated from Section I of Worksheet 1.

Section II – Projection Data
The information in this section is automatically populated from Section II of Worksheet 3.

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Section III – Development of Bid for Defined Standard Coverage
The information in this section is automatically populated from Worksheet 3.

Section IV – Development of Bid Components
Columns d through o – Part D Covered Drugs
These amounts represent Part D covered drugs.
Column q – Non-Part D Covered Drugs
These amounts represent Non-Part D covered drugs.
Line 5, Columns k and m – Allowed PMPM in Gap and Above Catastrophic
Enter the amounts that represent the allocation of the total PMPM of the gap and
catastrophic coverage for the alternative benefit.
Line 6, Column d - Proposed Deductible
Enter the deductible to be used in the development of alternative coverage.
Line 8, Column f – Value of Proposed Deductible
Plans must adequately demonstrate the impacts of different approaches for pricing various
deductibles as well as the impact on the initial coverage limit. Please review the information
under “Special Considerations” for more information on first dollar generic coverage.
Enter the value of the proposed deductible for members not meeting the initial coverage limit.
Line 12, Column k - Coinsurance Percentage in Gap
Enter the effective coinsurance percentage for alternative coverage provided in the gap.
This amount must take into account the benefit structure for these benefits, including any
variations made to the initial coverage limit.
Line 18, Columns o and q - Alternative Plan Rebates
Enter the rebates generated for covered Part D drugs in column o and for non-Part D
covered drugs in column q. The rebates for covered drugs will be allocated to reinsurance.
Line 20, Columns m, o and q - Alternative minus Other Insurance
Enter the impact of other insurance on total covered, reinsurance-eligible covered and noncovered drugs.
Line 22, Columns m, o, and q - Alternative Plus Part D as Secondary
Enter the cost of Part D as the secondary payer for total covered, reinsurance eligible
covered, and non-covered drugs.

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Section V – Development of Actuarial Equivalent Test
Lines 1 through 8 are calculated automatically. No entries are required. No calculations are
made in the second column of lines 6 and 7.
Line 9 - LIS
Using the projected risk scores, enter the estimated PMPM value of Low Income Cost
Sharing subsidy under the alternative plan.

Section VI – Tests for Alternative Coverage
This section applies the various tests to determine if the proposed benefit plan qualifies as
Alternative Coverage. No entries are required.

Section VII – Development of Supplemental Premium
Lines 1 through 5 and line 8 are calculated automatically. No entries are required.
Line 6 - Additional Non-Benefit Expenses
Line 6 is calculated automatically from worksheet 3. No entries are required.
Line 7 - Additional Gain/ (Loss)
Line 7 is calculated automatically from worksheet 3. No entries are required.

Section VIII – Development of Induced Utilization Adjustment
This section captures the additional costs for basic coverage associated with offering an
enhanced alternative plan with supplemental benefits, and will be used to adjust allowable
costs for risk corridor payments.
Line 2 - Impact of Alternative Utilization on Standard Benefit
Enter the additional basic Part D costs in the first column if the utilization for alternative
coverage was used to price defined standard coverage. This adjustment must reflect the
additional costs associated with basic coverage. For the 2006 benefit year, this amount
represents 75% of costs between the $265 deductible and the $2,400 initial coverage limit,
plus 15% of costs in excess of the basic catastrophic limit or $5,451.25. This adjustment
should be calculated only for enhanced alternative plans and the adjustment must be a
positive number.

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Worksheet 6 - Script Projections for Defined Standard, Actuarially Equivalent, or
Alternative Coverage
The purpose of this worksheet is to illustrate the underlying assumptions that are being used
in the demonstration of the actuarial equivalence tests in Worksheets 4 and 5. All of the data
in Section II are collected in a manner that supports an actuarial comparison of the proposed
benefit to the defined standard benefit.
There are two significant changes to Worksheet 6 in the BPT for contract year 2008.
Specialty drugs are broken out and reported separately under type of script, and data is now
collected for four levels of allowed spend under “Projections for Equivalence Tests.”
Specialty Drugs
Plans that include a designated specialty drug tier in their plan benefit package (PBP) must
separately identify the mail and retail utilization for the specialty tier in each level of spend in
Section II of Worksheet 6. The additional information is expected to minimize the distortion
of cost sharing that occurs when high cost specialty drugs are reported in the brand
categories, and permit a more accurate comparison of the cost sharing on Worksheet 6 with
the plan benefit package in HPMS.
A separate breakout of specialty drugs on Worksheet 6 is only required when a plan utilizes
a designated specialty tier within the formulary and benefit design in accord with CMS
guidelines. The CMS guidelines require that (i) only one tier is designated a specialty tier,
(ii) cost sharing associated with that tier is limited to 25% in the initial coverage range, and
(iii) only Part D drugs with plan negotiated prices greater than $500 per month may be
placed in the tier.
When a designated specialty tier is used, all drugs in the designated specialty tier must be
reported by place of service, on lines 4 and 8, 13 and 17, 22 and 26, 31 and 35 in Section II
of Worksheet 6. When a designated specialty tier is used, the drugs in the specialty tier are
not sorted by preferred brand, non-preferred brand or generic status, and are not reported as
a component of the brand and generic drugs in the non-specialty tiers.
When a plan does not utilize a designated specialty drug tier in the formulary and benefit
design, specialty drugs should be sorted by preferred brand, non-preferred brand or generic
status, and reported in these categories according to status and place of service. In this
situation, the specialty categories in Section II of Worksheet 6 should not be completed.
Data Required for Levels of Allowed Spend
Data is collected for four levels of allowed costs on lines 1 through 36 of “Projections for
Equivalence Tests,” Section II of Worksheet 6. Members and member months are no longer
captured on Worksheet 6, however the distribution of population and data reported in Section
II of Worksheet 6 must be consistent with the distribution and data reported on Worksheet 3.
Lines 1 through 8 collect data on all allowed costs for the “Population Not Exceeding $2400
with Standard Coverage.” All utilization for the population with total allowed costs that do not
exceed $2400 must be reported in this section.
Lines 10 through 17 collect data on all allowed costs for the “Population Exceeding $2400
with Standard Coverage.” All of the utilization for the population with total allowed costs that
exceed $2400 must be reported in this section.

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Lines 19 through 26 collect data on all allowed costs up to $2400 for the “Population
Exceeding $2400 with Standard Coverage.” All of the utilization for allowed costs allocated
up to $2400, for the population with allowed costs that exceed $2400 is reported in this is
section.
Lines 28 through 35 collect data on all allowed costs over the catastrophic coverage limit for
the “Population Exceeding $2400 with Standard Coverage.” All of the utilization for allowed
costs allocated over catastrophic coverage, for the population with allowed costs that exceed
$2400 is reported in this is section.
Considerations
Although this worksheet is not expected to be a detailed model of the cost sharing of the
proposed plan design, the impact of alternative cost sharing, and other programs such as
mandatory generic on utilization should be clearly demonstrated compared to the defined
standard benefit. The distribution of utilization between generic and brand, and retail and
mail must be reasonable given the proposed benefit, and significant changes in the
alternative benefit are expected to result in meaningful differences in utilization when
compared to the defined standard bid. For example, it is reasonable to expect a noticeable
increase in the utilization of generic drugs in an alternative plan with a zero dollar generic
cost share.
Plans submitting a bid for standard coverage with actuarially equivalent cost sharing must
satisfy the two tests to demonstrate actuarial equivalence on Worksheet 4. Plans submitting
a bid for alternative coverage must satisfy the various tests on Worksheet 5 to qualify.
Worksheet 6 illustrates the assumptions used in demonstrating actuarial equivalence as it
develops values to support the tests in Worksheets 4 and 5.
All plans are required to develop projected utilization and costs for their proposed defined
standard benefit in columns f, g, and h in Section II of Worksheet 6. In addition, plans
submitting a bid for an actuarially equivalent or alternative benefit are required to report
projected utilization and costs in columns i, j, and k. If the bid is defined standard only, then
column i through k may be left blank.
Data in Section II of Worksheet 6 are collected in a manner that supports an actuarial
comparison of the proposed benefit to the defined standard benefit and is not expected to
model all of the aspects of plan design. Lines 1 through 18 summarize all of the claims
expected to be utilized, with lines 1 through 9 capturing the claims for individuals with less
than $2,400 in annual drug claims and lines 10 through 18 capturing the claims for
individuals with $2,400 or more in annual drug claims. Lines 19 through 27 captures the
claims or amounts allocated up to ICL for individuals with $2400 or more in allowed costs.
Lines 28 through 36 captures the claims for individuals expected to reach catastrophic
coverage, is $5451.25 or more in annual drug claims for contract year 2007. Note that
amounts summarized in lines 19 through 27, and 28 through 36 are subsets of the amounts
summarized in lines 10 through 18; amounts in the gap are intentionally excluded.
Plans should follow instructions carefully in developing cost sharing values for column h in
Section II of Worksheet 6 because this column is not expected to specifically model all of the
cost sharing elements for the proposed defined standard benefit. For lines 1 through8, and
lines 19 through 27, column h captures the cost sharing for the claims summarized in
columns f and g using the cost sharing applicable between the deductible and the initial
coverage limit for all claims allocated up to the ICL. This means that column h develops cost

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sharing without the impact of the deductible, the gap in coverage and catastrophic coverage.
For the purpose of this worksheet, plans should ignore the impact of low-income cost sharing
subsidy. Since column h summarizes the defined standard benefit, all of the claims reflect
cost sharing of 25%.
The worksheet must be completed for column h for lines 28 through 36 using cost sharing
applicable beyond the catastrophic threshold. For defined standard coverage, this amount is
greater of 5% or $2 for generic/ $5 for brand name drugs.
Plans submitting a bid to provide an actuarially equivalent or alternative benefit are required
to report the projected utilization and costs on the proposed benefit in Section II, column i, j,
and k. Plans must appropriately model the impact of the alternative benefit compared to the
defined standard by making appropriate adjustments in utilization and average script pricing
in Worksheet 6. Specifically, the distribution of utilization between generic and brand, and
retail and mail must be reasonable given the proposed benefit. The distributions should be
based on the splits as outlined in the defined standard coverage. For example, lines 1
through 9 should reflect the utilization for the actuarial equivalent or alternative plan for
individuals expected to have less than $2,400 in annual coverage based on the defined
standard coverage. In other words, the amounts summarized in columns i, j and k are based
on the same population summarized in columns f, g, and h.
Plans should follow instructions carefully in developing the cost sharing values in lines 1
through 9, and lines 19 through 27, of column k in Section II of Worksheet 6. Values in
column k are calculated using the copay and coinsurance structure of the proposed
actuarially equivalent or alternative benefit, for all claims allocated up to the ICL. As does
column h, column k develops cost sharing without the impact of the deductible, any gap in
coverage and catastrophic coverage. Calculate lines 28 through 36 assuming the cost
sharing applicable beyond the catastrophic threshold for the actuarial equivalent or
alternative coverage.
Plans should be aware of the situations outlined in the “Special Considerations” section of
these instructions for Worksheet 6 implications for plans that offer first dollar generic
coverage or for plans that reduce the initial coverage limit.

Section I – General Information
The information in this section is automatically populated from Section I of Worksheet 3.

Section II – Projections for Equivalence Tests
Data is collected for four levels of allowed costs on lines 1 through 36 of “Projections for
Equivalence Tests,” Section II of Worksheet 6. Members and member months are no longer
captured on Worksheet 6, however the distribution of population and data reported in Section
II of Worksheet 6 must be consistent with the distribution and data reported on Worksheet 3.
Lines 1 through 8
Columns f through h – Enter the projected scripts, allowed dollars, and cost sharing
for defined coverage, with cost sharing calculated as if there were no deductible and
no LIS subsidy.

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Columns i through k – If offering an actuarially equivalent standard or alternative
benefit, enter the projected scripts, allowed dollars, and cost sharing for the
population identified in line 1, using the copay/coinsurance structure being proposed
for actuarially equivalent or alternative coverage. These numbers include changes to
utilization patterns that could be expected based upon the difference between
defined standard coverage and the coverage being proposed.
Line 9
The value is automatically calculated as the sum of lines 1 through 8.
Lines 10 through 17
Columns f through h –Enter the projected scripts and allowed dollars for defined
standard coverage, with coinsurance calculated at 25% as if there were no
deductible, no GAP, and no LIS subsidy.
Columns i through k If offering an actuarially equivalent standard or alternative
benefit, enter the projected scripts and allowed dollars for the population identified in
Section III of Worksheet 3, cells D-23 plus D-24. These numbers must include
changes to utilization patterns that could be expected based upon the difference
between defined standard coverage and the coverage being proposed.
Line 18
The value is automatically calculated as the sum of lines 10 through 17.

Lines 19 through 26
Columns f through h – For amounts allocated up to the ICL, enter the projected
scripts, allowed dollars, and cost sharing for defined standard coverage, with
coinsurance calculated at 25% as if there were no deductible, no gap, and no LIS
subsidy.
Columns i through k - If offering an actuarially equivalent standard or alternative
benefit, for amounts allocated up to the ICL, enter the projected scripts, allowed
dollars and cost sharing for the population identified in Section III of Worksheet 3,
cellsD-23 plus D-24, using the copay/coinsurance structure being proposed for
actuarially equivalent or alternative coverage prior to the catastrophic limit. These
amounts must include changes to utilization patterns that could be expected based
upon the difference between defined standard coverage and the coverage being
proposed.
Line 27
The value is automatically calculated as the sum of lines 19 through 26.
Lines 28 through 35.
Columns f through h – Enter the projected scripts, allowed dollars, and cost sharing
for defined standard coverage, with cost sharing calculated using the

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copay/coinsurance structure that applies in defined standard coverage once the
catastrophic threshold has been reached.
Columns i through k - If offering an actuarially equivalent standard or alternative
benefit enter the projected scripts, allowed dollars and cost sharing for the population
identified in Section III of Worksheet 3, cell D-24 using the copay/coinsurance
structure being proposed for actuarially equivalent or alternative coverage once the
catastrophic coverage limit has been reached. These amounts
must
include
changes to utilization patterns that could be expected based upon the difference
between defined standard coverage and the coverage being proposed.
Line 36.
The value is automatically calculated as the sum of lines 28 through 35.
Line 37
For columns i through k, enter the projected scripts, allowed dollars, and copay/coinsurance
structure for non-Part D covered drugs.

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Worksheet 7 – Summary of Key Bid Elements
The purpose of this worksheet is to capture a summary of the key payment-related
components of the bid and the plan’s estimate of the National Average Monthly Bid amount
and calculated premiums. The inputs on this worksheet must be reasonable and represent
the plan’s best estimates of these projected values.

SECTION II – 2007 Defined Standard Benefit Parameters
Line 1 – Deductible
This value is the deductible for a defined standard package.
Line 2 - Initial Coverage Limit
This value is the initial coverage limit (ICL) for the benefit priced in this bid.
Line 3 - Out-of-pocket Limit
This value is the out-of-pocket limit (OOP) for the benefit priced in this bid.

SECTION III – Summary of Key Bid Elements
Line 1 – Standardized Part D Bid
This value is the plan’s Standardized Part D bid. The value is automatically calculated from
the plan bid.
Line 2 - National Average Monthly Bid Amount
This field requires a manual input at the time of bid submission. Enter the estimated National
Average Monthly Bid Amount that the plan is anticipating. The final value for the National
Average Bid Amount for contract year 2007 will be released some time after this value is
entered, and the bid is submitted.
Line 3 – Base Beneficiary Premium
This field requires a manual input at the time of bid submission. Enter the estimated Base
Beneficiary Premium amount that the plan is anticipating. Together with the National
Average Monthly Bid Amount and the Basic Part D A/B Rebate allocation reported on the MA
Bid Pricing Tool for MA plans, these amounts will determine the plan’s basic Part D Target
Premium that will be used during the rebate reallocation period.
Line 4 and 5 – Basic Part D Premium (prior to A/B rebate reallocation)
The values on lines 4 and Line 5 are the plan’s expected base beneficiary premium,
calculated from the plan’s manual inputs on lines 1, 2, and 3 of this section. Line 4 reflects
the value of the Basic Part D premium before application of the rounding rule, and line 5
reflects the value after the rounding rule selected on Line 8 of this section has been applied.
These amounts will be updated to reflect the actual National Average Monthly Bid Amount
and Base Beneficiary Premium after these amounts are published in early August.

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Lines 6 and 7 - Supplemental Part D Premium (prior to A/B rebate allocation)
This value is the plan’s Supplemental Part D Premium before rebate allocation and is only
developed when supplemental benefits are offered. The value is reflected both before and
after the application of the rounding according to the rule in line 11 of this section. Line 6
reflects the value of the Basic Part D premium before application of the rounding rule, and
line 7 reflects the value after the rounding rule has been applied.
Line 8 - Prospective Federal Reinsurance (non-standardized)
This value is the prospective federal reinsurance requirement developed in the bid.
Line 9 - Prospective Low-income Cost Sharing Subsidy (non-standardized)
This value is the prospective Federal reinsurance requirement developed in the bid.
Line 10 - Target Adjustment (allowed costs as a ratio of bid)
This value is the administrative cost percentage of the bid and the value is used in
calculating the target amount for risk corridor payments. The target amount is calculated
according to the following:
[(1.00 – administration cost percentage) X (total direct subsidy payments + total
beneficiary premiums related to the standardized bid amount)]
Line 11 - Rounding Rule
This field requires a manual input. MA-PD plans are required to round to the nearest $0.10;
PD plans are required to round to either the nearest $0.10 or nearest $0.50 and must select
the preferred method for rounding the Part D premium from the drop-down menu. The
default will be $0.10 in all cases where a selection is not made.

Section IV - Part D Bid Pricing Tool Contacts
Plans are required to identify two persons who are readily available and are authorized to
discuss the development of the bid. Provide the requested contact information (name,
phone, and e-mail) for the Plan Bid Contact and Part D Certifying Actuary.

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Appendix A
Appendix A – Actuarial Certification
CMS requires an actuarial certification to accompany every bid submitted to HPMS. A
qualified actuary who is a member of the American Academy of Actuaries (MAAA) must
complete the certification. The objective of obtaining an actuarial certification is to place
greater reliance on the actuary’s professional judgment and to hold him/her accountable for
the reasonableness of the assumptions and projections.
At the actuary’s professional discretion, a certification may apply to more than one bid.
However, the document must list all bids to which the certification applies.

Actuarial Standards of Practice
In preparing the actuarial certification, the actuary must consider whether the actuarial work
supporting the bid conforms to Actuarial Standards of Practice (ASOP), as promulgated by
the Actuarial Standards Board. While other ASOPs apply, particular emphasis is placed on
the following:
•

ASOP No. 5, Incurred Health and Disability Claims.

•

ASOP No. 8*, Regulatory Filings for Rates and Financial Projections for Health
Plans. Particular focus is placed on the sections dealing with the Recognition of
Benefit Plan Provisions (5.2), Consistency of Business Plan and Assumptions (5.3),
Reasonableness of Assumptions (5.4), and Use of Past Experience to Project Future
Results (5.5).

•

ASOP No. 16, Actuarial Practice Concerning Health Maintenance Organizations and
Other Managed-Care Health Plans.

•

ASOP No. 23, Data Quality. Particular focus is placed on Section 5, Analysis of
Issues and Recommended Practices, and Section 6, Communications and
Disclosures.

•

ASOP No. 25, Credibility Procedures Applicable to Accident and Health, Group Term
Life, and Property/Casualty Coverage.

•

ASOP No. 31, Documentation in Health Benefit Plan Ratemaking.

* Note that a revised edition of ASOP No. 8 was adopted by the Actuarial Standards Board in
December 2005 and will be effective May 1, 2006. The certifying actuary should be aware of
the changes to this standard of practice.
Resubmission of Actuarial Certifications
Throughout the bid review process, resubmissions may occur for a variety of reasons. After
the initial bid submission in June, no substantive changes to the language of the actuarial
certifications will be considered without prior permission from CMS Office of the Actuary.
The actuarial certification submitted in early June with the initial bid submission will be
considered the definitive certification, unless changes are requested by OACT. Any changes
to the certification language would require prior permission from OACT, including changes or
additions to any qualifications.

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Appendix A
Toward the end of the CY2007 bid review process (likely in mid-August), each plan will be
required to submit the final actuarial certification. Again, no material changes to the
certification language will be considered. The certification must be updated for the following:
•
•
•

Date of the signed certification.
Date BPT prepared (see worksheet 6 of MA BPT, worksheet 7 of PD
BPT).
HPMS version # of accompanying PBP (or HPMS PBP upload date).

The resubmission of the actuarial certification is necessary as resubmissions are likely to
occur throughout the bid review process and the final package submitted to CMS must have
an accompanying actuarial certification. A final signed actuarial certification needs to be
uploaded to HPMS before contracts/Benefits Attestations are signed.
The identifying information above (date of certification, date BPT prepared, and PBP version
#) are identifiers that will be used by the plan and CMS as part of the quality control process
of bid submissions. These identifiers should direct the certifying actuary to ensure that the
actuarial certification is applicable to the final benefit package submitted and the pricing for
these benefits is appropriate.
While the resubmission of a final actuarial certification is a new requirement, plans are no
longer required to resubmit certifications repeatedly throughout the bid review process during
resubmissions. CMS will collect an actuarial certification with the initial bid submission in
June, and then require another at the end of the bid review process with updated bid
submission identifiers (described above).
Required Elements
The certification must include the following information:
•

Signature of the certifying actuary. CMS prefers that the certification uploaded to
HPMS contains an electronic signature. However, if the electronic certification
uploaded to HPMS does not contain the signature, mail the paper copy of the signed
certification (postmarked by Monday June 5, 2006) to:
Rhoda Friedman
Centers for Medicare & Medicaid Services
Office of the Actuary, Mail Stop N3-26-00
7500 Security Boulevard
Baltimore, MD 21244

•

Name of the certifying actuary, title, employing firm, contact information, credentials,
qualifications, and relationship of the actuary to the organization submitting the bid.
As indicated at the beginning of this appendix, the certifying actuary must be a
member of the American Academy of Actuaries (MAAA).

•

The date of the certification.

•

The specific contract, plan ID(s), and segment ID(s) associated with the certification.

•

The Contract Year of the bid(s) contained in the certification.

•

Indication of whether the certification applies to the Medicare Advantage bid, the
Prescription Drug bid, or both.

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Appendix A
•

The date that the BPT was prepared (must match the date entered on BPT
Worksheet 6 for MA and Worksheet 7 for PD).

•

The MA (and PD) PBP version #, assigned by HPMS, that identifies the benefits
priced in the BPT. If version # is unavailable, the certification must include the PBP
upload date (i.e., the date that the latest PBP was uploaded to HPMS). The
certifying actuary should be made aware of any changes to the PBP after the initial
bid submission.

•

Specification that the certification complies with the applicable Federal laws, rules,
and instructions and is based on the “average revenue requirements in the payment
area for an [Medicare Advantage/Prescription Drug] enrollee with a national average
risk profile.”

•

Attestation of the reasonableness of the data and assumptions for the plan’s benefit
package (PBP). Attestation that the data and assumptions are in accordance with
the organization’s business plan.

•

Attestation that the bid was prepared based on the current standards of practice as
promulgated by the Actuarial Standards Board of the American Academy of
Actuaries and that the bid complies with the appropriate ASOPs.

•

Reliances. If the actuary has relied upon another person for certain assumptions or
data, this reliance must be disclosed, and the actuary must obtain a letter of reliance
from that person. The reliance letter does not need to be included with the initial bid
submission but must be available upon request and for an audit.

•

Limitations and qualifications.

Sample Language
The following is an example of a certification statement. This language may be revised, as
appropriate, for each particular bid, but must contain all of the required elements described in
this appendix.

I, __(Name)__________, am a Member of the American Academy of Actuaries and am
a __(Title)__________ with the firm of __(Firm)______ and have been retained by
__(Organization)__________ to prepare the bids identified in this certification. I am familiar
with the requirements for preparing Medicare Advantage and Prescription Drug bid
submissions and meet the Academy’s qualification standards for doing so. This bid has
been prepared for the Centers for Medicare & Medicaid Services to approve a benefit
plan under a contract in calendar year _(CY)___ as identified in the following table:
Organization
Name

Health One
Health One
Health One

Bid ID
(Contract Plan Segment)

Certification
applies to
MA bid?

MA BPT
Date
Prepared

H9999001-00
H9999002-00
H9999003-00

05/15/200
6
05/04/200
6
05/10/200
6

Y
Y

MA
PBP
HPMS
version
#
1

Certification
applies to
PD bid?

PD BPT
Date
Prepared

05/20/200
6

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PDP
PBP
HPMS
version
#
1

6/1/2006

Appendix A

I hereby certify that, to the best of my knowledge and judgment, the entire bids identified
in this certification are in compliance with the appropriate laws1, rules2, and instructions
and comply with the appropriate Actuarial Standards of Practice. In making this
statement, I certify that:
•

In accordance with Federal law, the bid is based on the “average revenue
requirements in the payment area for an [Medicare Advantage/Prescription Drug]
enrollee with a national average risk profile.”

•

The data and assumptions used in the development of the bid are reasonable for
the plan’s benefit package (PBP) and are consistent with the organization’s
current business plan.

•

The bid was prepared based on the current standards of practice as promulgated
by the Actuarial Standards Board of the American Academy of Actuaries.

In preparing this bid, I relied upon others for certain data and assumptions. I found the
data and assumptions upon which I relied to be reasonable. I have uploaded supporting
documentation that contains further information describing the nature of these data and
assumptions. A copy of each individual’s certification is available upon request.
The impact of unanticipated events subsequent to the date of this bid submission is
beyond the scope of my certification.

Sincerely,
_(Signature)_____________________
[Name and Credentials]
[Title, Firm]
[Date of Certification]
[Address]
[Phone]
[E-Mail Address]

Social Security Act Sections 1851 through 1859; and Social Security Act Sections 1860D-1
through 1860D-42.

42 CFR Parts 400, 403, 411, 417, 422, and 423.

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Appendix B
Appendix B – Supporting Documentation
Organizations must provide CMS with supporting material in addition to the bid form and
actuarial certification. All data submitted as part of the bid process are subject to review and
audit by CMS or by any person or organization that CMS designates.
Before submitting the Rx bid forms, plans must complete a series of calculations and enter
the results on the appropriate worksheet. Therefore, it is required that any relevant
supporting information be summarized and included with the bid submission to CMS.
Supporting materials are to be in electronic format (i.e., Microsoft Excel, Microsoft Word, or
Adobe Acrobat) and must be uploaded to HPMS. Organizations will not be required to send
paper copies of supporting documentation, except as noted in Appendix A for signed copies
of the actuarial certifications.
CMS requires that the following supporting documentation be included with the Rx bid
submission:
•

Signed actuarial certification.

•

Support for the manual rate development.

The following additional items are not required to be included with the initial submission, but
must be available upon request as part of the bid review process, and will be reviewed at
audit:
•

Reconciliation of base period experience with company financial data.

•

Support for projection assumptions.

•

Support for non-benefit expense assumptions.

•

Support for risk factors.

Organizations often upload numerous documents that contain supporting documentation. It
would expedite the bid review process if organizations were to upload a “cover sheet” listing
all of the uploaded files. This cover sheet would serve as a “table of contents” that would
enable CMS to quickly identify the various files that have been submitted.
Note that multiple files can be submitted to HPMS at one time by using “zip” files, whereby
multiple files are zipped into one file.
To expedite the bid review process, CMS strongly encourages plans to upload supporting
documentation with the initial bid submission to HPMS.
Supporting documentation must be clearly labeled and easily understood by CMS reviewers.
The documentation for the bid must include quantitative support and details, rather than just
narrative descriptions of assumptions

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Appendix C

Appendix C – Employer/Union-only Group Requirements
The Medicare Modernization Act (MMA) gives employers and unions a number of options for
providing prescription drug coverage to their retirees. Employers and unions can:
•
•
•

Provide coverage at least as good as Medicare’s Part D Defined Standard benefit
and receive a tax-free retiree subsidy of 28% of a retiree’s drug costs between $265
and $5,350.
Purchase customized benefits from a PDP or MA-PD pursuant to CMS waivers, or
Contract directly with CMS to become a PDP and provide customized benefits
pursuant to CMS waivers.

Under Sections 1860D-22(b) and 1857(i) of the Social Security Act (SSA), CMS may waive
or modify Part D requirements that hinder the design of, offering of or enrollment in an
employer or union Part D retiree plan. The waiver authority applies to PDPs and MA-PDs
that offer employer/union-only group plans and employer/union-only groups that contract
directly with CMS to become a PDP.
For CY2006, CMS issued guidance waiving or modifying many of the requirements for these
entities. CMS waiver guidance is located at http://cms.hhs.gov/EmpGrpWaivers. All of the
standard Part D bidding guidelines applies with the exception of those specifically waived.
The following summarizes the key requirements for Part D employer/union-only group
bidding:
•
•
•
•
•

All Part D bids are based on Defined Standard coverage with no supplemental
benefits.
For Part D sponsors offering calendar and non-calendar year plans, separate bids
must be submitted.
The service area can be defined as “national” to enable employers and unions to
cover all retirees nationwide under the same plan.
Each employer/union-only group bid must reflect the composite characteristics of the
individuals expected to enroll in the plan in CY2007.
There is no requirement to charge the filed PD basic premium to any
employer/union-group only.

The CY2007 Call Letter may contain additional guidance regarding employer/union-only
group bidding.

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Appendix D
Appendix D - Bid Pricing Tool Technical Instructions after Download from HPMS
Installation Requirements Summary
There are five critical elements that must be configured for the BPT to work correctly after
download from HPMS. You must:
Note:
-

Create a C:\Program Files\BPT2007 folder on your workstation
If you are using Windows XP Home Edition you may need to unhide your C:\Program
Files directory.
Place the BPT Add-In (BPT.xla) file in C:\Program Files\BPT2007 folder
Always overwrite the existing BPT Add-In file saved on your workstation with the
newer one. (Do not move/copy the add-in to another location on your workstation.)
Set your Macro Security Settings to Medium (or Low)
Enable Macros when you open the BPT workbook

BPT Add-In
The 2007 BPT (BPT) is composed of two files:
-

BPT workbook (.xls file)

BPT Add-In (.xla file)

The BPT workbook file contains the editable BPT worksheets. The BPT add-in contains the
code to support the BPT workbook functionality. The add-in must be installed in the correct
location on your computer in order to update the BPT workbooks. The add-in is
automatically downloaded with the Plan Benefit Package (PBP) or can be obtained as a
separate download from the HPMS Bid Submission Module. The initial PBP installation will
save the BPT workbooks to the C:\Program Files\PBP2007 folder. The add-in file will be
saved in the C:\Program Files\BPT2007 folder. If you download the add-in file directly from
HPMS, you must create the C:\Program Files\BPT2007 folder and save the add-in to the
BPT2007 folder.
If you do not save the add-in in the designated folder, you will receive a message stating that
the .xla file (add-in file) cannot be found. The BPT will open in a read only mode. You will not
be able to save any changes you make to the BPT if the add-in is not saved in the correct
folder.
In certain situations, the Centers for Medicare & Medicaid Services may deploy a new
version of the add-in file (e.g. change in a formula, change in a reference value). The new
version will be made available to the user community through the HPMS system. You will
receive an HPMS generated email informing you that a new add-in is available and will be
instructed to download it from the HPMS. It is imperative that you overwrite the existing addin with the more current add-in in the C:\Program Files\BPT2007 folder. If you save multiple
versions of the add-in to the BPT2007 folder or elsewhere on you computer, you cannot be
assured of using the latest version of the add-in file due to a Microsoft limitation.
Note:

If you receive the add-in file via email and it is saved to your temporary directory as
part of the email download process, you must delete it.

When you open your BPT for the first time after downloading the new add-in file, you will
receive a message stating that the BPT is out of date and is being updated. You must click
OK to start the update process. As part of this process, a back up version of your previous
BPT will be saved to a C:\Program Files\BPT2007\Update Version (version number) folder.

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Appendix D
The add-in will not interfere with any non-BPT files.
Note:

If you want to open multiple BPTs at the same time, you will need to open them from
within the same Excel window using either the File, Open menu or by dragging a file
from the explorer window into your Excel window. If you open a new Excel window
for a second BPT, the file will open in read-only mode. (Clicking on a file from
Windows Explorer opens a new Excel window).

Enable Macros
The BPT workbooks use macros to enable validation and other BPT functionality.
We recommend that you set your Macro Security Settings to ‘Medium’. You can do this by
selecting Tools Æ MacroÆ Security from your Excel menu. You will not be able to open the
BPT if your macro security settings are set to High or Very High.
If your Macro Security settings are set to Medium, you will be prompted to enable or disable
macros when you open the workbook. You must enable macros to use the BPT. If you
disable macros, the workbook will display a screen explaining that you must enable macros
to use the BPT. You will have to close and then reopen the workbook to enable macros.
Data Pre-population
When you open a BPT workbook that was downloaded with the Plan Benefit Package (PBP)
software, a subset of data in Section I will be populated for you. In some cases, you may
have to enter or change the Section I data. The Section I yellow highlighted cells on the first
worksheet of each BPT workbook are unprotected to allow you to enter or change values.
If you download a blank BPT, you will have to enter the data into Section I yourself.
Data Entry
All data entry fields in which you may enter values are highlighted in yellow. This includes the
cells for pre-populated data in Section I of each workbook’s first worksheet. When the
majority of the data to be entered in a BPT workbook is the same (such as for plan
segments), you can make a copy of your un-finalized BPT workbook and change the
necessary heading data cells on worksheet 1 to reduce the need to re-enter duplicate data.
When you download the BPT separately from the PBP, the BPT data is not pre-populated.
When we pre-populate the data for you, we adjust some of the formatting to display leading
zeros on certain entries, e.g. Plan ID. If you are manually inputting data in the following user
entered fields, we recommend that you add the apostrophe (‘) and leading zeros as part of
the value:
-

Plan ID (Worksheet 1, Section 1, General Information)

Segment ID (Worksheet 1, Section 1, General Information)

Region ID (Worksheet 1, Section 1, General Information)

County Code (MA Worksheet 5)

Examples:
Region 5 Æ Input the value ‘05. 05 will be displayed in the BPT.
Plan ID 30 Æ Input the value ‘030. 030 will be displayed in the BPT.

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Appendix D
Linking
You will be able to link information from other workbooks into the BPT. You will need to
follow specific instructions to link information into the BPT for the following cells:
•

Plan ID (Worksheet 1, Section 1, General Information)

•

Segment ID (Worksheet 1, Section 1, General Information)

•

Region ID (Worksheet 1, Section 1, General Information)

•

County Code (MA Worksheet 5)

If linking data into these cells, you will need to format the cells in your non-BPT workbook as
general and place an apostrophe and leading zeroes prior to the actual value. The
apostrophe is an Excel formatting character and will not be displayed in the BPT.
Examples:
Region 5 Æ Your input workbook must have the value ‘05. 05 will be displayed in the BPT.
Plan ID 30 Æ Your input workbook must have the value ‘030. 030 will be displayed in the
BPT.
Errors
Some of the user-entered data is validated for accuracy. For example, some percentage
fields cannot have values greater than 100%. Errors are indicated by red circles around the
on
cell(s). In order to check for errors, you must click on the Circle Invalid Data button
the BPT toolbar. Clicking the button will circle all cells that fail the validations. The Circle
Invalid Data function will also execute when opening and saving (including the finalized save)
the BPT.
If your cursor is on a cell with a red circle, a small message box will appear and display the
cell location and validation test for that cell. You may move this input message box to any
section of your screen by clicking and dragging the box. The error message will remain open
until you select another cell.
Changes Not Allowed
You may not make changes to the structure of the BPT worksheets. Each data item must be
in its pre-defined cell location for processing by the HPMS system.
Undo
The 2007 BPT will support the Excel undo functionality with certain exceptions. Modifying
any of the cells listed below will cause the actions/states stored in your undo history* to be
deleted. This means that after entering, changing, or deleting a value in any of the following
cells, you will not be able to undo your actions.
•

Plan Type

•

Contract Number

•

MA\PD Region

•

PD Benefit Type

•

County Codes

•

Use of ISAR
-

Any other cell composed of a drop down box

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Appendix D
-

Any cell that has a validation error removed due to a correction in the user entered
data

A new undo history will begin to compile after each of these cells are modified to pass the
validation.
*

The “undo history” is a built-in Excel feature that keeps a record of changes made to a
workbook. This allows a user to step backwards through a list of applied changes.
Unfortunately, other built-in Excel functions, including some of those used by the BPT,
erase this information automatically due to the large amounts of memory required to
maintain the undo history list.

Saving
There are two save processes available within the BPT. A non-finalized save can be invoked
by clicking on the Excel Save icon on the menu bar or by selecting File Æ Save from the
Excel menu. This save process will save any changes you have made to the BPT workbook.
If you are ready to complete your BPT, you will invoke the Finalize Save functionality. You
may do so by clicking on the Finalize BPT icon
Finalize BPT from the Excel menu.

on the toolbar or by selecting File Æ

If you are trying to finalize an MA workbook, a subset of validations will be run. If any of
these validations are not met, a message will display stating that you are unable to finalize
your BPT. You will need to modify the appropriate cells and invoke the finalization process
again. The validations that will prevent you from finalizing your MA BPT are listed below:
•

All rebates must be allocated

•

Part B and D rebates must be rounded to one decimal point

•

There are no negative premiums

•

Allocated rebates do not exceed the maximum value

•

There are no negative rebate allocations

•

For 800 Series plans, Part D rebates must equal 0

As part of the finalize process: 1. The working file will be saved; and, 2. A finalized file and a
back up file will be created using the following naming convention:
•

Back-up File: ContractNo+PlanID+SegmentID+WorkbookType+”Backup”-YYYYMM-DD-HHmm.xls
Example: H1111001001MABackup-2006-05-20-1000.xls

•

Finalized File: ContractNo+PlanID+SegmentID+WorkbookType.xls
Example: H1111001001MA.xls

The finalized file and the back up file are read only files. If you need to make additional
changes prior to your submission, you should modify your working file. Once complete, you

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Appendix D
can finalize the BPT again. Your previous finalized file will be overwritten. A new back up file
will be created. Backup files will not be overwritten. To modify a backup file, rename the file
and eliminate the word “backup” from the filename.
You must finalize your workbooks before packaging them with the Plan Benefit Package data
for upload to HPMS.
When you finalize a Part D workbook, blank worksheets that were not applicable to your bid
will be added to the workbook, e.g. a blank Actuarially Equivalent worksheet will be added
when you’re submitting a Defined Standard Coverage Bid. Any data that may have been
entered on these “extra” worksheets will be deleted during the finalization process.
File Naming for Bid Submission
Finalize
BPT
workbooks
are
saved
with
the
correct
file
name
(ContractNo+PlanID+SegmentID+WorkbookType.xls) required for a successful bid upload.
In order for the Plan Benefit Package to prepare your bid submission file, your BPT
workbooks must be finalized and named using this format.

Save/Update Batch Application
A batch application will be available to users to update the BPT add-in file and to finalize
BPTs. The batch file was created to reduce the process time for users that maintain a large
volume of BPTs. The batch file opens a workbook, runs the update or finalize function within
the BPT, and then closes the workbook. The estimated time for the batch file process can
vary greatly depending on the number of workbooks in the batch, the number of county
codes in the individual workbooks and the user’s workstation processing power. You may
want to run a small batch of five to ten workbooks to estimate how it will perform in your
individual setting. The batch file is available for download from the HPMS Bid Submission
module.
If a new version of the add-in has been deployed to HPMS, you will be able to run the batch
application to update all of your BPT workbook files to use the latest add-in. You can do so
by opening the batch application and selecting the ‘Update BPT’ option. Browse through your
folder structure and highlight the BPT (with file extension .xls) files to be updated by the new
version of the add-in. Upon clicking Update, the batch will begin to run. The batch will disable
all buttons that may disrupt the batch process. On the screen you will be able to track the
status of the updates. A success or failure message is displayed for each of the BPTs. If
any updates fail, the associated error messages will be displayed.
If you are trying to finalize multiple BPTs through the batch application, you must select the
Finalize BPT option. You will browse through your folder structure and highlight the BPT
(with file extension .xls) files to be finalized. Upon clicking Finalize, the batch will begin to
run. The batch process will disable all buttons that may disrupt the batch process. On the
screen you will be able to track the status of the finalization process. The batch tool will
display status messages for each workbook selected, either “Contract, Plan, Segment: The
BPT has been finalized” for successes or “Contract, Plan, Segment: The BPT cannot be
finalized” for failures.
The batch application will neither update the add-in nor finalize a previously finalized BPT, a
backup BPT, or a non-BPT file. The process will skip these files if they are selected and log
or display a message.
You must close all BPTs before running either of the batch processes. Failing to do so will
prevent you from running the batch process.

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Appendix D

Contacting HPMS
If you have any other questions concerning the use of the BPT workbooks, please contact
the HPMS Help Desk at 1-800-220-2028 or via email at [email protected].

CY2008 PD BPT Instructions 011007 - draft for PRA.doc

Appendix E
Appendix E – Red-Circle Validation Edits in the Prescription Drug Plan Bid Form
The purpose of the “red-circle” validation rules in the BPT is:
to highlight some of the fields that require data entry by the user, and
to highlight some user-entered data that may be invalid.
Following is a description of all validation rules in the PD BPT.
Worksheet 1
Section I
D5
D6
D7
F6
F7
I5
I6
I7

NM5
NM6
NM7

Contract Number cannot be blank and text length must be 5.
Plan ID Number cannot be blank and text length must be 3.
Segment ID Number cannot be blank and text length must be between 1 and 3.
The Organization Name cannot be blank and may be up to 200 characters.
The SNP Indicator must be "Y" or "N".
The Plan Name cannot be blank and the text length must be between 1 and 200.
The Plan Type cannot be blank must be between 1 and 40.
If the Plan Type is Employer Sponsored PDP, Medicare Prescription Drug Plan
or Fallback than the Enrollee Type must be blank, otherwise the Enrollee Type
must be 'A/B' or 'Part B Only'
The PD Region cannot be blank or 'N/A' if the Plan Type is RPPO, otherwise it
must be a number between 01 and 39 or 'Multiple', 'National', ’N/A’.
The PD Benefit Type must be DS, AE, BA or EA.
The Payment Demo Type must be NA, Fixed Cap, Flex Cap, or MA Rebate.

Section II
D12
Time Period Definition - Incurred from date must be earlier than today's date.
D13
Time Period Definition - Incurred to date must be between Incurred from date
and today's date.
D14
Time Period Definition - Paid through date cannot be greater than today's date.
I13
The Credibility must be 'F' for full credibility, 'P' for partial credibility, or 'N' for
none.
Section III
G37
The Total Amount of Rebates received by the Plan should be entered. The
PMPM value is calculated in Column I.
G38
The Total Value of Part D as Secondary should be entered. The PMPM value is
calculated in Column I.
The Net Plan Responsibility per Member Subtotal should be greater than zero.
NM33
Section IV
E48-E51 All Components of Non-Benefit expenses for Basic must be greater than or equal
to zero.
F48-F51 All Components of Non-Benefit expenses for Supplemental must be greater than
or equal to zero.
Section V
E58-E61 Each component of Premium Revenue for Basic must be greater than or equal to
zero.
F60
Member Premium for Supplemental must be greater than or equal to zero.
E62
The Total of Member Premium for Basic must be greater than or equal to zero.

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Appendix E
F62
G62

The Total of Member Premium for Supplemental must be greater than or equal to
zero if PD Benefit Type is equal to “EA”.
The Total of Member Premium must be greater than or equal to zero.

Worksheet 2
Section II
G32
The Total Allowed PMPM should be within +/- $1 of the Subtotal of the Average
Allowed Amount PMPM on Drug Plan Financials Worksheet (H33).
Section III
K56
The Total Projected Allowed PMPM must be greater than zero if the Total
Credibility is greater than zero %.
Section IV
N56
The Total Manual Rate PMPM must be greater than zero if the Total Credibility is
less than 100%.
Worksheet 3
Section II
H11
Projected Average Risk Score for the contract year must be between 0.3 and
10.0.
L11
The projected LIS member months for the contract year must be greater than or
equal to zero.
Section III
F25
The Subtotal of the Number of Scripts should be within +/- 2 from the sum of cells
F19 and F31 on Script Projections Worksheet.
G25
The Subtotal for Projected Allowed should be within +/- $5 from the sum of cells
G19 and G31 on Script Projections Worksheet.
G27
The Projected Allowed for Minus Rebates must be greater than or equal to 0.
E20-E24 Member Months should be less than or equal to the Projected Members times
12.
H25
The Subtotal for the Average Amount of Allowed PMPM should be within +/- $1
of the Total Blended Allowed Cost on Projection of Allowed-Admin Worksheet.
E31
The Allowed Member Months for the Projected % OON Included should be
between 0% and 100%
Section IV
D44
Enter the expected Gain/(Loss).

Worksheet 4
Section IV
E34
The Standard with Actuarially Equivalent Cost Share Allowed PMPM for
members below the Initial Limit must be greater than zero if PD Benefit Type is
"AE".
H34
The Standard with Actuarially Equivalent Cost Share Allowed PMPM for
members above the Catastrophic Limit must be greater than zero if PD Benefit
Type is "AE".

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Appendix E
K54

The Standard with Actuarially Equivalent Cost Share Rebates Including
Reinsurance must be greater than zero if PD Benefit Type is "AE".
E59-E60 The Actuarial Equivalence Tests should equal "Yes" if the PD Benefit Type is
"AE".
Section V
K19
The Total Basic Bid must equal the sum of cells K16 through K18.
K21
The LIS for Bid with Actuarially Equivalent Cost Sharing must be greater than
zero if the Federal LIS PMPM Total is greater than zero and PD Benefit Type is
AE.
Worksheet 5
Section II
K11
The risk score must be consistent with the risk score from Standard Coverage
Worksheet.
Section IV
D39
Proposed Deductible for the Alternate Coverage should be greater than or equal
to zero and less than or equal to the Deductible on the Summary Worksheet.
F41
Value of the Proposed Deductible should be greater than zero if cell D39 is
greater than zero.
O36
Standard Total Allowed PMPM should be equal to the Average Amount Allowed
PMPM Subtotal on Standard Coverage Worksheet, +/- $0.02.
O37
Alternative Total Allowed PMPM should equal the sum of the Total Allowed
Dollars divided by the Projected Member Months, +/- $0.02.
K37
Allowed PMPM Amounts in Gap for Alternative Coverage must be greater than
zero.
K47
Coinsurance % for Alternative Coverage Amounts in Gap must be less than or
equal to 100%.
M37
The Allowed PMPM Amounts above Catastrophic Threshold for Alternative
Coverage must be greater than zero.
M59
Federal Reinsurance - Other Insurance Alternative Amounts above Catastrophic
Threshold must equal to Other Insurance Standard Amounts above Catastrophic
Threshold if Payment Demo Type is "Flex Cap" or "Fixed Cap".
M62
The Plus Part D as Secondary - Alternative Amounts above Catastrophic
Threshold must be equal to Plus Part D as Secondary - Standard Amounts
above Catastrophic Threshold if Payment Demo Type is "Flex Cap" or "Fixed
Cap".
O56
The Alternative Minus Rebates for all members must be greater than or equal to
zero.
O59
The Alternative Minus Other Insurance for All Members must be equal to
Standard Minus Other Insurance for All Members if Payment Demo Type is "Flex
Cap" or "Fixed Cap".
O62
The Alternate Part D as Secondary Total PMPM for All Members must be equal
to Standard Part D as Secondary Total PMPM for All Members if Payment Demo
Type is "Flex Cap" or "Fixed Cap".
O64
The Standard Net Cost Benefit for the Total PMPM should equal the Total Plan
Liability PMPM on Standard Coverage Worksheet.
Section V

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Appendix E
O24

The LIS at plan risk for Alternative Coverage must be greater than zero if the
Total of Federal LIS PMPM in Standard Coverage Worksheet (O33) is greater
than zero.

Section VI
G68
Total Coverage Actuarial Test should be "Yes" if PD Benefit type is "BA" or "EA".
G69
Unsubsidized Value Actuarial Test should be "Yes" if PD Benefit type is "BA" or
"EA".
G70
Average Cost at Initial Coverage Limit Actuarial Test should be "Yes" if PD
Benefit type is "BA" or "EA".
G71
Deductible Actuarial Test should be "Yes" if PD Benefit type is "BA" or "EA".
G72
Average Catastrophic cost sharing Actuarial Test should be "Yes" if PD Benefit
type is "BA" or "EA".
Section VII
O76
Development of Supplemental Premium Gain/Loss should be zero if PD Benefit
Type is "BA" or greater than zero if it is "EA".
Section VIII
F77
Impact of Alternative Utilization on Standard Coverage at plan risk must be blank
or greater than or equal to zero.
Worksheet 6
Section II
F19
Number of Scripts on Script Projection Worksheet must be within +/- 2 scripts of
the Standard Coverage Worksheet (F21:F22).
G19
Total Allowed Dollars must be within +/- $5 of the Standard Coverage Worksheet
(G21:G22).
Total Number of Scripts should be greater than zero if the associated
I1928
Population/Member Months cells are greater than zero and PD Benefit Plan type
is not DS.
Total Allowed Dollars should be greater than zero if the associated
J1928
Population/Member Months cells are greater than zero and PD Benefit Plan type
is not DS.
K19
Total Cost Sharing Dollars should be greater than or equal to zero if the
associated Population/Member Months cells are greater than zero and PD
Benefit Plan Type is not DS.
F31
Number of Scripts on Script Projection Worksheet must be within +/- 2 scripts of
the Standard Coverage Worksheet (F23:F24).
G31
Total Allowed Dollars must be within +/- $5 of the Standard Coverage Worksheet
(G23:G24).
I31
Total Number of Scripts should be greater than zero if the associated
Population/Member Months cells are greater than zero and PD Benefit Plan type
is not DS.
J31
Total Allowed Dollars should be greater than zero if the associated
Population/Member Months cells are greater than zero and PD Benefit Plan type
is not DS.
I42
Total Number of Scripts should be greater than zero if the associated
Population/Member Months cells are greater than zero and PD Benefit Plan type
is not DS.

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Appendix E
J42

Total Allowed Dollars should be greater than zero if the associated
Population/Member Months cells are greater than zero and PD Benefit Plan type
is not DS.
K42
The Total Cost Sharing Dollars should be greater than zero if the associated
Population/Member Months cells are greater than zero and PD Benefit Plan type
is not DS.
H34-H42 The Cost Sharing Dollars should be equal to 25% of the Allowed Dollars and it
should be greater than zero if the associated Population/Member Months cells
are greater than zero.
H45-H52 The Cost Sharing Dollars should be equal to 25% of the Allowed Dollars and it
should be greater than zero if the associated Population/Member Months cells
are greater than zero.
F53
Number of Scripts on Script Projection Worksheet must be within +/- 2 scripts of
the Standard Coverage Worksheet (F24).
G53
Total Allowed Dollars must be within +/- $5 of the Standard Coverage Worksheet
(G24).
I53
The Total Number of Scripts should be greater than zero if the associated
Population/Member Months cells are greater than zero and PD Benefit Plan is
not DS.
J53
The Total Allowed Dollars should be greater than zero if the Population/Member
Months cells are greater than zero and PD Benefit Plan is not DS.
K53
The Total Cost Sharing Dollars should be greater than or equal to zero if the
Population/Member Months cells are greater than zero and PD Benefit Plan is
not DS.
I56
Non-Part D Covered Number of Scripts for Actuarially Equivalent or Alternative
Coverage must be greater than or equal to zero if the PD Benefit Plan is not DS.
J56
Non-Part D Covered Allowed Amount for Actuarially Equivalent or Alternative
Coverage must greater than or equal to zero if PD Benefit Plan is not DS.
K56
The Total Cost Sharing Dollars should be greater than zero if the associated
Population/Member Months cells are greater than zero and PD Benefit Plan is
not DS.
Worksheet 7
Section III
F16
Summary of Key Bid Element for National Average Monthly Bid Amount must be
greater than zero.
F17
The Summary of Key Bid Elements for Base Beneficiary Premium must be
greater than zero and less than the Summary of Key Bid Element for National
Average Monthly Bid Amount.
F32
$0.10 or $0.50 must be selected. If neither is selected, the default is $0.10.
Section IV
C36
Plan Bid Contact Name cannot be blank.
C37
Plan Bid Contact Phone cannot be blank.
C38
Plan Bid Contact Email cannot be blank.
C40
Part D Certifying Actuary Name cannot be blank.
C41
Part D Certifying Actuary Phone cannot be blank.
C42
Part D Certifying Actuary Email cannot be blank.
C43
Date Prepared cannot be blank.

CY2008 PD BPT Instructions 011007 - draft for PRA.doc

Glossary
Glossary of Terms
The Part D program uses a number of terms that have specialized meanings. The terms
included here are primarily those that came about as a direct result of the Medicare
Modernization Act (MMA) or the development of the bid form.
Actuarial Equivalence. A state of equivalent value demonstrated through the use of
generally accepted actuarial principles and in accordance with the MMA and CMS
guidelines; refers to a determination that the overall value of drug coverage for a set of
beneficiaries under one plan can be shown to be equal to the overall value for those same
beneficiaries under another plan. See the definitions for “Standard Coverage with Actuarially
Equivalent Cost Sharing” and “Alternative Prescription Drug Coverage.”
Allocated Buy-Down. The use of rebate dollars to buy down Part D basic premium (not
true revenue).
Allowed Costs. The medical costs before reduction for member cost sharing, coordination
of benefits/subrogation, reinsurance recoveries or other amounts paid by a third party.
Alternative Prescription Drug Coverage. See the definition for “Actuarial Equivalence.”
Sponsoring organizations may offer this coverage through plans are approved by the
Secretary that provide (i) coverage, the actuarial value of which is at least equal to the
actuarial value of standard prescription drug coverage, (ii) access to negotiated prices. Such
coverage must meet certain other statutorily-defined parameters. Specifically, the proposed
benefit must meet the following specific actuarial equivalency requirements when compared
to defined standard benefit:
•

The total actuarial value of the alternate coverage equals or exceeds the total
actuarial value of standard coverage.

•

The unsubsidized value of the alternate coverage (defined as the amount by which
the total actuarial value exceeds the total actuarial value of federal subsidies) equals
or exceeds the unsubsidized value of standard coverage.

•

The total payment made for costs below the initial coverage limit under the alternate
coverage equals or exceeds the total payments made at that same limit under
standard coverage.

•

The alternate deductible does not exceed the standard deductible.

•

The alternate coverage provides the same out-of-pocket limit and beneficiary cost
sharing in the catastrophic coverage range as does standard coverage.

Annual Deductible. Standard drug coverage has an annual deductible of $250 in 2006.
For subsequent years, the deductible amount will be indexed to the annual growth in
average per capita spending by Medicare beneficiaries for Part D drugs and rounded to the
nearest $5. Plans providing basic coverage may apply a lower, but not greater, deductible
within the overall actuarial equivalence requirements.
Basic Coverage. Part D coverage that is either statutorily defined standard coverage or
alternative prescription drug coverage without supplemental benefits.

CY2008 PD BPT Instructions 011007 - draft for PRA.doc

Glossary
Basic Plan Premiums. Premiums that are based on a national percentage of the national
average monthly bid amount with adjustments up or down depending on the competitive
standing of the plan bid relative to this national average.
Basic beneficiary premium amounts up to 25.5% of the
Basic Premium Calculation.
national average bid amount adjusted for reinsurance. Plan-specific premiums will equal the
basic beneficiary premium adjusted for 100% of the variation between the plan’s
standardized bid and the national average bid amount.
Catastrophic Threshold. Catastrophic coverage is triggered when the beneficiaries true
out-of-pocket (TrOOP) expenses equals the following:
1) For 2006 - $3600. For defined standard this amount will be reached when the
beneficiary true out-of-pocket (TrOOP) expenses equal $5100 in allowed costs.
2) For years subsequent to 2006 - The amount specified for the previous year,
increased by the annual percentage increase specified in the CFR and rounded to
the nearest multiple of $50.
Coinsurance and Co-payments. The standard drug coverage has beneficiary coinsurance
of 25% for spending above the deductible and up to the initial coverage limit ($250 to $2,250
in 2006). Plans providing basic coverage may require different coinsurance or copayments
that are actuarially consistent with an average cost sharing of 25%. Once the annual out-ofpocket (OOP) threshold is reached ($3600 in 2006), enrollees will pay the greater of (i) $2 for
generics/$5 for brand name drugs, or (i) 5% coinsurance.
Completion Factor. Adjusts for incurred but not reported expenses (IBNR).
Credibility. The determination of the appropriateness of a plans experience must include
the evaluation of whether the group included in the experience is consistent with the group
that the plan expects to cover. In addition, the experience must be representative of the
benefits that will be offered in the contract period. For example, a plan that will be offering
defined standard Part D coverage must have experience for a benefit with a gap in benefits
and catastrophic coverage for a population similar to the population they expect to be
covering. Most plans will not have appropriate base period experience to be used for
contract years 2006 or 2007. However, a plan that has appropriate base period data needs
to evaluate the credibility of this data. Although we have not yet established credibility
guidelines, we expect prescription drug experience to have a higher level of credibility than
medical coverage for a group of similar size. We expect that an appropriate use of actuarial
judgment will be exercised in determining the credibility factor for a plan’s base period
experience.
Crossover Fees. Payments made by the Part D carrier to other entities in order to obtain
information about other available Rx coverage.
Defined Standard Benefit. All plans develop information for the defined standard benefit
which represents (i) the bid for plans offering defined standard, and (ii) comparison points for
actuarial equivalency tests for plans offering actuarially equivalent cost sharing or alternative
coverage. In 2006, defined standard coverage includes the following:
1) A deductible of $250.
2) Coinsurance of 25 percent up to an initial coverage limit of $2250.
3) Protection against high out-of-pocket prescription drug costs, with co-pays once an
enrollee’s out-of-pocket spending reaches a limit of $3,600of the greater of $2 for

CY2008 PD BPT Instructions 011007 - draft for PRA.doc

Glossary
generics and preferred multiple source drugs and $5 for all other drugs or 5 percent
of the price.
Defined Standard Coverage Bid. The total monthly plan bid for providing a Medicare eligible beneficiary with a national average risk profile with Part D coverage through a
defined standard benefit.
Direct Subsidy Payment. Monthly payments received by PDPs and MA-PD plans equal to
their bid amounts, risk-adjusted for enrollee health status and minus the enrollee premium.
Enhanced Alternative Prescription Drug Coverage.
prescription drug coverage with supplemental benefits.

A benefit that offers alternative

Induced Utilization. The factor that would adjust the scripts/1,000 for the expected
utilization difference that would apply if the enhanced alternative benefits in the base period
were modified to be the defined standard prescription drug plan.
Initial Coverage Limit. Allowed costs above any deductible for which coinsurance would
apply. The amount is equal to the following:
1) For 2006 - $2250 dollars in allowed costs.
2) For years subsequent to 2006 - The amount specified in this paragraph for the
previous year, increased by the annual percentage increase specified in paragraph
(e) (5) (IV), and rounded to the nearest multiple of $10.
Interim Prospective Payments. Monthly interim payments that will be made on estimated
reinsurance payments and low-income cost sharing. Amounts estimated in the bidding
process are used as interim payment, and reconciliation will occur after the plan year.

CY2008 PD BPT Instructions 011007 - draft for PRA.doc

Glossary
Low-Income Benefit. For 2006, the premium and cost-sharing subsidy amounts for
various subsidy eligible groups are as follows:
FPL & Assets

Percentage
of
Premium
Subsidy Amount
(1)
100%*

Deductible

Copayment up to
out-of-pocket limit

Copayment above
out-of-pocket limit

100%*

Full-benefit dual eligible –
Income above 100% FPL
(non-institutionalized
individual)

100%*

Non-full
benefit
dual
eligible beneficiary with
income below 135% FPL
and with assets that do not
exceed
$6,000
(individuals) or $9,000
(couples)
Non-full
benefit
dual
eligible beneficiary with
income below 135% FPL
and with assets that
exceed $6,000 but do not
exceed
$10,000
(individuals) or with assets
that exceed $9,000 but do
not
exceed
$20,000
(couples)

100%*

The lesser of: (1) an
amount that does
not
exceed
$1generic/preferred
multiple source and
$3-other drugs, or
(2)
the
amount
charged to other full
subsidy
eligible
individuals who are
not full-benefit dual
eligible individuals or
whose
incomes
exceed 100% of the
FPL
An amount that does
not
exceed
$2generic/preferred
multiple source and
$5-other drugs
An amount that does
not
exceed
$2generic/preferred
multiple source and
$5-other drugs

100%*

$50

15% coinsurance

An amount that does
not
exceed
$2generic/preferred
multiple source drug
or $5-other drugs

Full-benefit dual eligible –
institutionalized individual
Full-benefit dual eligible–
Income at or below 100%
FPL
(non-institutionalized
individual)

CY2008 PD BPT Instructions 011007 - draft for PRA.doc

Glossary
Non-full
benefit
dual
eligible beneficiary with
income at or above 135%
FPL but below 150% FPL,
and with assets that do not
exceed
$10,000
(individuals) or $20,000
(couples)

Sliding
scale
premium
subsidy
assistance
(100%-0%)

$50

15% coinsurance

An amount that does
not
exceed
$2generic/preferred
multiple source drug
or $5-other drugs

(1) Premium subsidy amount as defined in §423.780(b)
*The percentage shown in the table is the greater of the low income benchmark premium
amount or the lowest PDP premium for basic coverage in the region.
Low-Income Cost-Sharing Subsidy. The final low-income cost-sharing payment will be
based on actual reduction of beneficiary cost sharing resulting from the low-income subsidy.
Amounts estimated in the bidding process will be used as interim payment, and the
reconciliation will occur after the plan year.
Low-Income Premium Subsidy. Plan premiums are used to determine the low-income
regional benchmark. The weights are similar to those used in the national average but are
allocated to the regions of the projected enrollees. This benchmark is used to determine the
low-income premium subsidy.
MA. Medicare Advantage.
MA-Prescription Drug (MA-PD) Plan. A MA plan that provides qualified prescription drug
coverage under Part D of the Social Security Act. Effective January 1, 2006, MA plan
sponsors (except MA private fee-for service and MSA plans) must offer at least one plan in
each of their service areas that includes basic Part D coverage or Part D coverage that
includes supplemental benefits, the costs of which are offset by a rebate for Part A and Part
B benefits.
Manual Rate. Rate that is used when the experience period data are deemed to be less
than fully credible. In such cases, the projected experience rate is weighted with the
estimated costs developed under some other (fully credible) basis in the proportion to which
the experience data are deemed credible. Most plans will not have appropriate base period
experience to be used in completing Worksheet 1 for contract years 2006 or 2007. As
explained in the instructions, plans without appropriate base period experience must develop
manual rates to be used in the pricing tool using available data adjusted to reflect the
expected population and the benefit design that will be offered.
Medical Therapy Management Payments (MTMP). Those costs incurred by the Part D
carrier for managing drug therapy for complex cases as required by the MMA.
Medicare User Fees. The MMA expands user fees to apply to PDP sponsors as well as MA
plans. The expansion of the application of user fees recognizes the increased Medicare
beneficiary education activities that are required as part of the new prescription drug benefit.
In 2006 and beyond, user fees will help to offset the costs of educating over 41 million
beneficiaries about the drug benefit through written materials, internet sites, and other media.
The user fee provisions establish the applicable aggregate contribution portions for PDP
sponsors and MA organizations.

CY2008 PD BPT Instructions 011007 - draft for PRA.doc

Glossary
National Average Monthly Bid Amount. Bids will be aggregated to generate a single
national average monthly bid amount. Weights will be based upon prior enrollment. For plan
year 2006, MA plan bids will be based upon prior year enrollment; PDP weights will be based
upon the allocation of those not in the MA weights, applied across all PDPs in the Region.
Net Cost of Private Reinsurance. The re-insurance premium less projected reinsurance
recoveries.
Part D Drugs. Those drugs covered under the Medicaid program plus insulin, insulinrelated supplies, certain vaccines and smoking cessation agents. Drugs currently covered in
Parts A and B of Medicare will continue to be covered there, rather than Part D. The
definition excludes certain drugs, such as barbiturates and benzodiazepines.
Part D Premiums. The plan's premium for basic coverage will be set at approximately 25.5
percent of the national weighted average plan bid adjusted for reinsurance plus or minus the
difference between the average and the plan's bid. Premiums will vary by plan. The plan
premium will be uniform for all enrollees except that the premium will be increased by any
late enrollment penalty that applies or decreased if the enrollee is eligible for low-income
assistance. The plan will charge the full cost for any supplemental coverage it offers.
Plan Benefit Package (PBP). The summary of benefits offered by the MA-PDP or PDP
plan. Health plans fill out a separate form and submit the information to CMS.
Plan Standardized Bid. The organization submits a bid based upon the projected cost for
the standard benefit based upon the population assumed to enroll. The standard benefit
excludes beneficiary cost sharing, reinsurance, and low-income cost sharing subsidies.
Projected costs are adjusted by the projected risk score of the population to get a
standardized bid.
Prescription Drug Plan (PDP). Refers to a private prescription drug plan that offers drugonly Part D coverage under a policy, contract, or plan that has been approved as meeting
the requirements specified in the rule and that is offered by an MA organization that has a
contract with CMS that meets the contract requirements under part 423 of this chapter and
does not include a fallback plan unless specifically identified as a prescription drug plan.
Rebate. Price concessions that are provided after sale, as opposed to any price
concessions that may have contributed to a lower negotiated ingredient cost at point of sale
and that we would expect to be included in the price paid at the point of sale.
Reconciliation Process. Processes required to settle prepaid to actual enrollment, risk
adjustment, low-income subsidy, and reinsurance payments (in that order) prior to
calculation of risk sharing.
Reinsurance. For Part D services, reinsurance refers to the Federal government’s coverage
of 80% of costs over the catastrophic coverage level. Final reinsurance payment will be
based upon 80% of the allowable reinsurance costs after TrOOP threshold. The amount
estimated in the bidding process is used as interim payment, and reconciliation will occur
after the plan year.
Risk Adjusted Bid. The Basic Bid multiplied by the Risk Adjustment Factor.
Risk Adjustment Factor. Prescription drug risk adjustment methodology based on the
relationship of prescription drug utilization within the entire Medicare population to medical

CY2008 PD BPT Instructions 011007 - draft for PRA.doc

Glossary
diagnoses, and applied at the individual beneficiary level. The long-term plan is to refine the
risk adjustment model to account for predictable risk based on both medical and drug claim
data.
Risk Corridors. Used to limit an insuring entity's risk of losing money but also limit its gains
(profits). A target is established based on an estimate of the claims of the benefit. Gains or
losses inside a risk corridor around that target are the full responsibility of the insuring
organization. Additional gains or losses beyond the risk corridor are shared with the federal
government. There is no risk-sharing for supplemental benefits.
Risk Corridor Targets. Risk corridor payments are based on the direct subsidy payments
plus beneficiary premiums adjusted to exclude administrative expenses. The percent of the
standardized bid attributable to administrative costs are identified in the bid, and this
percentage will be used to adjust the total direct subsidy plus beneficiary premiums collected
in the risk corridor target development. Risk corridor payment adjustments will made on
allowed amounts actually incurred by the plan that are above or below the target amount.
For 2006, the first threshold will result in 75% payment of receipt for allowable costs between
2.5% and 5% of the target, and 80% for amounts greater than 5%.
Standard Coverage with Actuarially Equivalent Cost Sharing. See the definition for
Actuarial Equivalence. The proposed benefit must meet the following specific actuarial
equivalency requirements when compared to the defined standard benefit:
1) For individuals whose claim costs exceed the initial coverage limit, the average
coinsurance percent under the initial coverage limit must be 25%.
2) The average coinsurance percent above the catastrophic limit must be the same as it
would be for basic standard coverage.
Standardized Bid. The organization projects the cost for the standard benefit based on the
population assumed to enroll. The standard benefit excludes beneficiary cost sharing,
reinsurance and low-income cost-sharing subsidies. To get the standardized bid, the
projected costs are adjusted by the projected risk score of population.
Supplemental Benefits. Benefits that include reduced cost sharing or coverage of non-Part
D covered drugs. The full cost of supplemental benefits is paid for by beneficiary premiums
and includes the cost of induced utilization on standard benefits. The BPT includes the
development of the cost of enhanced coverage.
True out-of-pocket (TrOOP). The amounts actually paid by the enrollee or another person
on the enrollee's behalf (or by certain state programs) for covered Part D drugs that are
included (or treated as included) in the Part D plan's formulary count toward the out-ofpocket limit that must be reached before the catastrophic benefit becomes available. These
costs count as TrOOP only when they are paid for by the beneficiary, by another person on
their behalf (such as a family member), by a qualified State Pharmaceutical Assistance
Program (SPAP), or by a bona fide charity. A “person” is defined broadly to include any
individual (including non-family members), a corporation such as a pharmaceutical
manufacturer, association, etc. The deductible does not have to be satisfied by out-ofpocket payments; it can be paid by insurance or another payer such as Indian Health
Service. Amounts reimbursed by a third-party insurer, including an employer-sponsored
retiree plan or a supplemental package within a Part D plan, do not count.

CY2008 PD BPT Instructions 011007 - draft for PRA.doc

Glossary
User Fees. Fees whose purpose is to defray part of the ongoing costs of the national
beneficiary education campaign, which develops and disseminates print materials, and
maintains the 1-800-MEDICARE telephone line.

CY2008 PD BPT Instructions 011007 - draft for PRA.doc

According to the Paperwork Reduction Act of 1995, no persons are required to respond to a
collection of information unless it displays a valid OMB control number. The valid OMB
control number for this information collection is 0938-0944. The time required to complete
this information collection is estimated to average 5 hours per response, including the time to
review instructions, search existing data resources, gather the data needed, and complete
and review the information collection. If you have comments concerning the accuracy of the
time estimate(s) or suggestions for improving this form, please write to: CMS, 7500 Security
Boulevard, Attn: PRA Reports Clearance Officer, Baltimore, Maryland 21244-1850.

CY2008 PD BPT Instructions 011007 - draft for PRA.doc

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