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DRAFT
INSTRUCTIONS FOR COMPLETING THE
MEDICARE PRESCRIPTION DRUG PLAN
BID PRICING TOOL
FOR CONTRACT YEAR 2009
December 27, 2007
Deleted:
October 1
Deleted:
Formatted: Font: 12 pt
CMS-10142 (03/2009)
Deleted: ¶
Table of Contents
Introduction........................................................................................................................ 3
Special Considerations.................................................................................................... 4
Worksheet 1 - Rx Base Period Experience................................................................ 16
Worksheet 2 - PDP Projection of Allowed/Non-Benefit............................................ 29
Worksheet 3 - Contract Period Projection for Defined Standard Coverage ......... 34
Worksheet 4 - Standard Coverage with Actuarially Equivalent Cost Sharing ...... 38
Worksheet 5 - Alternative Coverage ........................................................................... 40
Worksheet 6 - Script Projections for Defined Standard, Actuarially Equivalent, or
Alternative Coverage ..................................................................................................... 44
Worksheet 7 – Summary of Key Bid Elements ......................................................... 52
Appendix A – Actuarial Certification............................................................................ 54
Appendix B – Supporting Documentation .................................................................. 60
Appendix C – Employer/Union-only Group Requirements ...................................... 66
Appendix D – Calculation of the National Average Monthly Bid Amount.............. 67
Appendix E – Calculation of Low Income Benchmark Premium Amounts ........... 69
Appendix F - Bid Pricing Tool Technical Instructions............................................... 71
Appendix G – Red-Circle Validation Edits.................................................................. 72
Glossary of Terms.......................................................................................................... 77
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Introduction
Introduction
Each Prescription Drug Plan (PDP) and 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 upon 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.
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 by 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 completing 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
o
Report the Medicare base period experience.
o
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.
If you have any questions about the content of the bid form, please e-mail them to CMS
Office of the Actuary (OACT) 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 F - Bid Pricing Tool
Technical Instructions, or contact the HPMS Help Desk at 1-800-220-2028 or
[email protected] .
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Special Considerations
Special Considerations
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 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 that operated in 2007 will have appropriate base period
experience to be used in completing Worksheet 1 for contract year 2009. A plan that has
appropriate base period data must exercise actuarial judgment in determining the credibility
factor for a plan’s base period experience. Based on an application of classical credibility
theory to Medicare Fee-for-Service experience, CMS has established a guideline for full
credibility for Medicare Advantage plans of 24,000 base period member months. The
formula for partial credibility is the square root of the result of base period member months
divided by 24,000. Although credibility guidelines for the Part D benefit have not been
established, prescription drug experience is expected to have a higher level of credibility than
medical coverage for a similarly sized group. Actuaries should take into account the quality
of the data being relied upon in establishing credibility.
Plans with experience providing Part D benefits in contract year 2007 are expected to use
Prescription Drug Event (PDE) transactions, including state-to-plan and plan-to-plan PDEs
as base period experience for contract year 2009, unless the PDEs do not appropriately
capture the plan’s expected experience.
In the event that a plan has PDE data that does not appropriately represent the plan’s
expected experience, plan-specific pharmacy claims experience should be adjusted to reflect
the plan’s best expectation of the final PDE transactions that will be sent to CMS for payment
reconciliation. A mapping of PDE fields to required pricing tool inputs is provided in the
instructions for completing Worksheet 1.
When a plan relies on pharmacy claims experience in lieu of PDE data, the plan must
provide a detailed written explanation of the variation and sufficient data to support the
development of the base period experience. The supporting data and written narrative must
be uploaded into HPMS at the time of bid submission.
As explained later in these instructions, a plan that does not have fully credible base period
experience in the form of PDE or pharmacy claims data must develop manual rates for the
pricing tool, using available data that is adjusted to reflect the expected contract year
population and the benefit design being offered.
In summary:
•
Plans with fully credible experience must complete all sections of Worksheet 1 and
Sections II, III, and V of Worksheet 2.
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Special Considerations
•
Plans with partially credible experience must complete all sections of Worksheet 1
and Worksheet 2.
•
Plans that have 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. 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, columns f, g, and h of Section II of Worksheet 6 and Worksheet 7.
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 or 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 ($2,510) are no less than the average
standard benefits at the initial benefit limit.
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Special Considerations
•
The fourth test ensures that the deductible is no greater than $275.
•
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 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 $2510
with Standard Coverage.” All of the utilization for the population with total allowed costs that
do not exceed $2510 must be reported in this section.
Lines 10 through 17 collect data on all allowed costs for the “Population Exceeding $2510
with Standard Coverage.” All of the utilization for the population with total allowed costs that
exceed $2510 must be reported in this section.
Lines 19 through 26 collect data on all allowed costs up to $2510 for the “Population
Exceeding $2510 with Standard Coverage.” All of the utilization for allowed costs allocated
up to $2510, for the population with allowed costs that exceed $2510, is reported in this
section.
Lines 28 through 35 collect data on all allowed costs over the catastrophic coverage limit for
the “Population Exceeding $2510 with Standard Coverage.” All of the utilization for allowed
costs allocated over catastrophic coverage, for the population with allowed costs that exceed
$2510, is reported in this section.
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%.
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Special Considerations
•
The ratio of A/B is between .98 and 1.02.
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.
Risk Score
Risk Score Development for CY 2009:
The CY 2009 risk score must be based on the Part D RxHCC risk model, be adjusted for
normalization, and reflect appropriate projection factors. The RxHCC model was
recalibrated based on the experience of fee-for-service (FFS) beneficiaries in the year 2002
and Medicaid dual eligible beneficiaries in 2000, with both dollar values trended forward to
2006.
At time of payment, the risk scores for each plan enrollee will be adjusted by a factor, known
as the Part D normalization factor, which is TBD for 2009. This adjustment accounts for the
expectation of higher intensity in the aggregate risk scores for the contract year vs. the
model calibration year. Accordingly, the 2009 bid projected risk scores must reflect the TBD
normalization factor. Additional information on the 2009 normalization factor is contained in
the 2009 rate book announcement:
http://www.cms.hhs.gov/MedicareAdvtgSpecRateStats/AD/list.asp#TopOfPage
Acceptable approaches for the development of risk scores depend on whether or not the
plan pricing is based on manual rates or actual plan experience. Plans that are priced using
a manual rating approach must estimate risk scores based on the expected expenses for
their projected enrollees. Further, the risk scores for new plans must be developed
consistent with the Part D RxHCC risk model. Details of this model may be found at:
http://www.cms.hhs.gov/MedicareAdvtgSpecRateStats/, under “risk adjustment”. Additional
information on the risk adjustment process can be found at the web site:
http://www.csscoperations.com/new/usergroup/july2006_regtrn/raps-participantguide_081606.pdf.
Use of the Part D RxHCC risk scores for the 2007 enrollee cohort is the preferred basis for
the projecting the 2009 risk scores for experienced-rated plans. CMS has released planspecific risk score data that may be used as the basis for projecting CY2009 risk scores.
This information is available in HPMS under the “Risk Adjustment” link from the HPMS Home
page. (Note: You must have HPMS user access to view this information. The HPMS
weblink
is
either:
https://32.90.191.19/hpms/secure/home.asp
or
https://gateway.cms.hhs.gov , depending on your firm’s connection method.) The risk score
data posted in HPMS is accompanied by technical notes to assist actuaries with interpreting
the data presented. There are several advantages to using the 2007 cohort Part D RxHCC
risk scores in the projection of the CY 2009 risk score including: (i) consistency with the
base-period medical expenses; (ii) they are based on a mid-year cohort and require no
adjustment for seasonality; (iii) they reflect non-lagged diagnosis data; and (iv) they are
based on the latest risk model.
The projection of scores from 2007 to 2009 must reflect relevant projection factors, which
include, but are not limited to, coding intensity trend, changes in plan population and the
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Special Considerations
effect of partial year enrollments. Since the mid-year risk scores may be the most
appropriate basis for projecting the 2009 risk scores without making adjustment for partial
year enrollments, actuaries should note that the underlying experience for 2007 may need to
be adjusted to reflect the effects of partial year enrollments. Please note that the reported
scores are based on a mid-year cohort with nearly-complete run-out of data and require no
explicit adjustment for (i) transition from lagged to non-lagged diagnosis data, (ii) incomplete
reporting of diagnosis data, and (iii) seasonality. Finally, the projected “raw” scores must be
normalized by dividing by the 2009 Part D normalization factor of TBD.
An alternate approach to forecasting the CY 2009 Part D risk scores for experience-rated
plans is to use as the base scores, the scores from a 2008 Medicare Membership Report
(MMR) file. This approach may be appropriate in situations where the plan was first offered
in 2008, there was limited enrollment in 2007, or there were significant changes in plan or
enrollment characteristics between 2007 and 2008.
The starting “raw” risk scores for this alternative approach are the average risk scores from
one, or more, of the 2008 MMR files for non-adjustment records. These scores are trended
to 2009 with explicit adjustment for the following factors:
•
•
•
•
•
•
Coding intensity,
Impact of lagged vs. non-lagged diagnosis data,
Run-out of diagnosis data,
Seasonality,
Population changes, and
Other appropriate factors.
Finally, the projected “raw” scores must be normalized by dividing by the 2009 Part D
normalization factor of TBD.
Lock-In versus Pass-Through Model for PBM Gain/Loss
For plan year 2009, a Part D Plan that uses a PBM may use either the lock-in amount or the
pass-through amount as the basis for developing bidding assumptions. The plan must
choose only one approach to develop their bids, and cannot switch between them in the
contract year for purposes of calculating cost-sharing and allowed drug costs.
More specifically, regardless of which approach Part D Sponsors choose, they must use a
consistent basis for: (i) calculating beneficiary cost sharing; (ii) accumulating gross covered
drug costs; (iii) calculating TrOOP; (iv) reporting drug costs on the Prescription Drug Event
(PDE) records, and (v) developing bids submitted to CMS. This ensures that the beneficiary
cost sharing and reinsurance payments received by the Part D Sponsor are consistent with
the Sponsor’s bidding assumptions.
Direct and Indirect Remuneration (DIR)
All rebates, subsidies, and other price concessions from any source that serve to decrease
the costs incurred by the Part D sponsor must be reported as a rebate when these subsidies
are not used to directly reduce the cost at the point of sale. Any charges or fees for the
administration of rebates, price concessions, or other services must be included separately
in the bid pricing tool as a component of direct administrative costs.
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Special Considerations
Plans must include all expected amounts that will be reported as Direct and Indirect
Remuneration (DIR) under Rebate in the bid pricing tool. It is important for plans to
understand that the DIR reported under Rebate into the bid tool represents the plans best
expectation of all DIR categories and amounts the plan expects to report under the Part D
payment reconciliation process for the respective contract year.
Defining Direct and Indirect Remuneration (DIR)
Per 42 C.F.R. Section 423.308, direct and indirect remuneration (DIR) is any and all rebates,
subsidies, or other price concessions from any source (including manufacturers, pharmacies,
enrollees, or any other person or entity) that serves to decrease the costs incurred by the
Part D sponsor (whether directly or indirectly) for the Part D drug. DIR includes discounts,
chargebacks, average percentage rebates, cash discounts, free goods contingent on a
purchase agreement, up-front payments, coupons, goods in kind, free or reduced-price
services, grants, or other price concessions or similar benefits.
DIR also includes price concessions from pharmaceutical manufacturers for purchases
under the Medicare prescription drug benefit that are received by subcontractors of Part D
Sponsors, such as pharmaceutical benefit managers (PBM), if they are retained in lieu of
higher service fees. As stated in the 2007 Call letter, CMS must assume that if a PBM
retains a portion of the manufacturer rebates it negotiates on behalf of a Part D sponsor, the
direct payment the sponsor pays the PBM for its services will be less, such that the sponsor
receives a price concession from the PBM. Thus, as a price concession received by the Part
D sponsor, these retained rebates must be reported as DIR for payment purposes.
In accordance with CMS guidance, sponsors may enter into risk sharing arrangements with
entities other than CMS by sharing risk only around the cost of the drug as reflected on
claims data, not around administrative services, professional services or other disallowed
fees. Any gains or losses that the Part D Sponsor may receive as a result of these risk
sharing arrangements also constitute DIR that must be reported to CMS. As with other types
of DIR, the value can be negative.
Generic dispensing incentive payments and any adjustments to generic dispensing incentive
payments made to pharmacies after the point of sale dispensing event are also considered
DIR. Please note that generic dispensing incentive payments made to the pharmacy at the
point of sale are part of the dispensing fee reported on the prescription drug event (PDE)
record and therefore are not included in the DIR Report for Payment Reconciliation.
Part D Payment Demonstration
The Part D Payment Demonstration allows 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
•
Flexible MA rebate option
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Special Considerations
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 $4,050 of
true out-of-pocket payments (TrOOP) with a capitation amount reflecting the actuarial value
of that subsidy under the defined standard benefit structure. The distinction between the
flexible and fixed options is that catastrophic coverage is required to begin at $5,726.25 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 $4,050 of TrOOP spending.
The Flexible 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
non-demonstration 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.
Benefit Design
Defined
Standard
Enhanced
Alternative
Flexible
Capitation
Fixed
Capitation
Flexible MA
Rebate
Deductible
$250
$250
$250
$250
$250
Coinsurance
25%
25%
25%
25%
25%
Coverage Gap Begins
$2,250
$3,250
$3,250
$3,250
$3,250
Catastrophic Threshold
$5,100
$5,850
$5,850
$5,100
$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
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Special Considerations
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, is 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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Special Considerations
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:
$0
$240
$220
$315
$315
$1,250
$2,250
$500
$750
$500
$750
$500
$750
$500
$750
$500
$750
$3,250
$5,100
$1,750
$3,600
$1,000
$2,850
$1,000
$2,850
$1,000
$2,850
$1,000
$2,850
$5,600
$6,100
$3,625
$3,650
$3,350
$3,613
$3,350
$3,613
$2,875
$2,900
$2,875
$2,900
$10,000
Value of Supplemental
Benefit:
$3,845
$3,808
$3,808
$3,095
$3,095
$1,250
$2,250
NA
NA
$0
$0
$0
$0
$0
$0
$0
$0
$3,250
$5,100
NA
NA
$750
$750
$750
$750
$750
$750
$750
$750
$5,600
$6,100
NA
NA
$275
$38
$275
$38
$750
$750
$750
$750
$10,000
NA
$38
$38
$750
$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. 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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Special Considerations
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.
Gain/Loss Margin Guidance
Individual-market plans (that is, non-EGWP & non-SNP):
Overall Medicare margin levels for individual-market plans are to be consistent with the plan
sponsor’s corporate requirement. Overall Medicare margin levels may be determined either
at the contract level or at a more aggregated level. The sponsor’s Medicare margin
requirement, as measured by percentage of revenue, is to be within a reasonable range (for
example, plus or minus 1% or 1.5%) of other lines of business. Additionally, for sponsors
that price based on return or investment (ROI) or return on equity (ROE) bases, the
projected Medicare returns must be consistent with the company’s return requirements.
Comparisons to other lines of business should take into account the degree of risk or reserve
levels of the business.
It is expected that the overall margin level expectations will be consistent on a year-by-year
basis. Actual organization returns are expected to vary year-to-year in practice, but are
expected to achieve the organization’s requirement over a longer term period (for example,
three to five years). Individual plan margins may vary from the overall organization level.
The overall margin levels included in the MA and Part D components of MA-PD bids must be
within a reasonable range of each other (for example, plus or minus 1% or 1.5%) with any
differences reflecting the different levels of risk underlying the two reimbursements. The
individual Part D margin of an MA-PD bid may be allocated by applying the overall Part D
margin requirement to each Part D bid of the MA-PD organization or alternatively, in similar
relationships as the MA margins.
Plans with negative margins must develop and follow a business plan to get to profitability.
An exception to the business plan requirement are cases where multiple MA products are
offered in a given service area and the pricing reflects implicit “subsidies” to mitigate
premium spirals.
Anti-competitive practices will not be accepted. For example, significantly low or negative
margins for plans that have substantial enrollment and stable experience or “bait and switch”
approaches to specific plan margin buildup, will be rejected, absent sufficient support that
such pricing is consistent with these instructions.
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Special Considerations
Special Needs Plans serving Dual-Eligibles (DE-SNP):
The foundation for the claim and administrative costs for DE-SNPs should be based on
appropriate experience. The margin assumptions used for individual plans should be the
basis for the margin requirements for DE-SNP plans. There may be small differences (that is,
up to 1 percent) in the margin levels between DE-SNP and individual plans.
If corresponding individual-market plans are not offered, then the margin guidance for
individual-market plans applies to the DE-SNP margin pricing. That is, overall DE-SNP
margin levels are to be consistent with the organization’s margin requirement and this
requirement is to be within a reasonable range (for example, plus or minus 1% or 1.5%)
around a return-on-equity or return-on-investment type measure or comparable to other
comparative lines of businesses.
Documentation Requirements
Supporting documentation for the gain/loss margin is required (see Appendix B).
documentation must include the following:
•
•
•
•
This
Support for overall margin levels, including description of methodology used to
develop margin assumptions, demonstration of year-by-year consistency, and
supporting data.
Support for bids with negative margins, i.e., a business plan that illustrates
profitability within few years.
Justification of the margin for bids with relatively large projected overall 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
supporting documentation. 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.
If applicable, further analysis of the organization’s ROI / ROE and distinctions
between recouping start-up costs versus ongoing organizational gain/loss.
Note that supporting documentation requirements are the same regardless of the source of
the assumption: whether developed by the actuary, the plan sponsoring organization, or a
third party.
Support for variation that accounts for the difference in risks between products for DE-SNPs
must be available upon request.
In future years, comparisons to the original business plan are to be provided including
details and source of deviation from prior years’ plans.
The development of the 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.
First Dollar Generic Coverage
Plans that are implementing a deductible that is not applied consistently among categories of
drugs (for example, $0 deductible for generic drugs, and $275 deductible for brand drugs)
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Special Considerations
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 $2,510, and for the population with spending over $2,510 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 2009. 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 $2,510. The entries on Worksheet 6 (Script Projection) must
fit in the specified intervals. For example, for members with allowed drug costs (under
defined standard coverage) above $2,510, their entire allowed amounts and scripts are to be
entered in the section for persons with expenses above $2,510, regardless of the alternative
plan's benefit limit. Note that the section for persons with expenses above $2,510 also
includes amounts for members with expenses exceeding $5,726.25. 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 $4,050 in 2009 (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
Worksheet 1 - Rx Base Period Experience
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, fully or partially 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 non-benefit expenses, and Section V summarizes the various components of revenue
that relate to the Part D coverage. Section VI is an income statement summary.
Discussion on Base Period Data
Plans with experience providing Part D benefits in contract year 2007 are expected to use
Prescription Drug Event (PDE) transactions, including state-to-plan and plan-to-plan PDEs
as base period experience for contract year 2009, unless the PDEs do not appropriately
capture the plan’s expected experience.
In the event that a plan has PDEs that do not appropriately represent the plan’s expected
experience, plan-specific pharmacy claims experience should be adjusted to reflect the
plan’s best expectation of the final PDE transactions that will be sent to CMS for payment
reconciliation.
When a plan relies on pharmacy claims experience in lieu of PDE data, the plan must
provide a detailed written explanation of the variation and sufficient data to support the
development of the base period experience. The support data and written narrative must be
uploaded into HPMS at the time of bid submission.
As explained later in these instructions, a plan that does not have fully credible base period
experience in the form of PDE or pharmacy claims data must develop manual rates for the
pricing tool, using available data that is adjusted to reflect the expected population and the
benefit design being offered. The support data and written narrative that documents the
development of the manual rates must be uploaded into HPMS at the time of bid submission.
Note that scripts and allowed amount data are input into Section III of Worksheet 1 in
aggregate for each allowed claim interval, while paid amount, cost sharing, supplemental
cost sharing reduction, reimbursement for LIS and reimbursement for federal reinsurance are
input on a per member basis. The per member per month (PMPM) values are calculated on
line 8 of the worksheet. Also note that it is important to enter data on covered Part D drugs
in lines 1 through 5 of Section III of Worksheet 1, and non-covered Part D drugs on lines 12
and 13.
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Worksheet 1
A mapping of PDE fields to required pricing tool inputs is provided in the following table.
When relying upon PDE data, actuaries must be familiar with how the plan develops the PDE
transactions from the claims data, and the timing of the adjustment and deletion process to
ensure that the summary of claims appropriately reflects the final transaction. For example,
only one script count should be reflected in Worksheet 1 even if there were three adjustment
records processed for the claim.
Mapping of Prescription Drug Events to Section III, Part D Claims Experience
in Worksheet 1
Column
Field Name
Total Number of Scripts
(f)
Total Allowed Dollars
(g)
Average Paid Amount per Member
(i)
Average Cost Sharing per Member
(j)
(k)
Supplemental Cost Share Reduction per
Member
Reimbursement for LIS per Member
(l)
Reimbursement for Federal Reinsurance
per Member
(m)
PDE Reference Information
Count # of PDEs where (Ingredient
Cost + Dispensing Fee + Sales Tax)
> Zero
Σ (Ingredient Cost + Dispensing Fee
+ Sales Tax)
Σ [Covered Plan Paid Amount (CPP)
+
Non-Covered Plan Paid Amount
(NPP) + Low Income Cost Sharing
(LICS)] / Members
Σ [Patient Pay Amount + Other
TrOOP Amount + Patient Liability
Reduction due to other Payer
Amount (PLRO)] / Members
Σ [Non-Covered Plan Paid Amount
(NPP)] / Members
Σ [Low Income Cost Share (LICS)] /
Members
Σ {[Gross Drug Cost Above Out-ofPocket Threshold (GDCA) with
Catastrophic Coverage Codes A or
C]* 0.8} / Members
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.
Line 3 – Segment ID
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Worksheet 1
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.
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Worksheet 1
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
Employer/Union Only Direct Contract Private
Fee-for-Service Plan
PFFS
ED PFFS
Continuing Care Retirement Community
Continuing Care Retirement Community
CCRC
Demonstration Plans:
ESRD I
ESRD I
ESRD II
ESRD II
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
Prescription Drug Plans:
Medicare Prescription Drug Plan
Employer/Union Only Direct Contract
Prescription Drug Plan
Fallback Plans
Fallback Plan
PACE
1876 Cost
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PDP
ED PDP
Fallback
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Worksheet 1
Line 9 – Enrollee Type
Select the enrollee type from the drop-down-menu if applicable; options are “Part B Only”
and “A/B.” When plan type is “PDP”, “ED PDP” or “Fallback”, the enrollee type cell is white
and locked; no input is required.
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Worksheet 1
Line 10 – PD Region
Enter “Multiple” or National” if applicable, or enter the PD Region from the valid options listed
in the following table:
Region
Description
1
Maine and New Hampshire
2
Connecticut, Massachusetts, Rhode Island, and Vermont
3
New York
4
New Jersey
5
District of Columbia, Delaware, and Maryland
6
Pennsylvania and West Virginia
7
Virginia
8
North Carolina
9
South Carolina
10
Georgia
11
Florida
12
Alabama and Tennessee
13
Michigan
14
Ohio
15
Indiana and Kentucky
16
Wisconsin
17
Illinois
18
Missouri
19
Arkansas
20
Mississippi
21
Louisiana
22
Texas
23
Oklahoma
24
Kansas
25
Iowa, Minnesota, Montana, Nebraska, North Dakota, South Dakota, and Wyoming
26
New Mexico
27
Colorado
28
Arizona
29
Nevada
30
Oregon and Washington
31
Idaho and Utah
32
California
33
Hawaii
34
Alaska
35
American Samoa
36
Guam
37
Northern Mariana Islands
38
Puerto Rico
39
Virgin Islands
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Worksheet 1
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 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 fixed 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 2007, the “incurred from” date is 1/1/2007 and the “incurred to” date is 12/31/2007. If
the data reflect payment information through February 2008, then the “paid through” date is
2/28/2008. Note that we do not require that the base time period incurral data be based on
one calendar year.
Line 2 – Member Months
Enter the number of member months represented in the base period experience used.
Line 3 – Risk Score
Enter the plan’s prescription drug risk score underlying the base period data. The CMS drug
model must be used, and must be estimated to three decimal places.
Line 4 – 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.
Deleted: 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 –
Formatted: Don't keep with next,
Don't keep lines together
Formatted: Font: Not Bold
Deleted: 5
Line 5 – Network Pricing
Formatted: Font: Bold
Select one of the following two choices from the drop-down box: “pass-thru” or “lock-in.”
Line 6 – Mapping
Enter the contract-plan number and corresponding member months for every plan where the
plan’s experience is mapped to the base period experience.
Line 7 - 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
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Worksheet 1
data for credibility, which is addressed on Worksheet 2 with the manual rate. Examples of
different base period data include:
•
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).
Note that scripts and allowed amount data are input into Section III of Worksheet 1 in
aggregate for each allowed claim interval, while paid amount, cost sharing, supplemental
cost sharing reduction, reimbursement for LIS and reimbursement for federal reinsurance are
input on a per member basis. The per-member per-month values are calculated on line 8 of
the worksheet. Also note that it is important to enter data on covered Part D drugs in lines 1
through 5 of Section III of Worksheet 1, and non-covered Part D drugs on lines 12 and 13.
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 Part
D covered 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 n 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.
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Worksheet 1
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
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 Part D 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 – Average Cost-Sharing Per Member
For each line, enter the average cost-sharing per member with respect to the members
included in column d.
Column k, Lines 1 through 5 – Supplemental Cost-Sharing Reduction per Member
For each line, enter the average value of supplemental cost-sharing with respect to the
members included in column d.
Column l, 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 m, 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 n, Lines 1 through 5 – Net Plan Responsibility per Member
This value is automatically calculated by subtracting the values in columns j through m, from
the value in column i.
Line 6, Columns d through n – Subtotal
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Worksheet 1
For columns d through g, this line represents the sum of lines 1 through 5. For columns h
through n, 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, i and j – % 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. For column j, enter the percent of average cost-sharing
per member from line 6 for prescriptions fill out-of-network.
Line 8, Column g, i and columns k through n – PMPM Values
This line represents the calculated PMPM values for these columns based on the amounts in
line 6.
Line 9, Columns g, I, m and n – Minus PMPM Rebates
All rebates, subsidies, and other price concessions from any source that serve to decrease
the costs incurred by the Part D sponsor must be reported as a rebate when these subsidies
are not used to directly reduce the cost at the point of sale. Any charges or fees for the
administration of rebates, price concessions, or other services must be included separately
in the bid pricing tool as a component of direct administrative costs.
Plans must include all expected amounts that will be reported as Direct and Indirect
Remuneration (DIR) under Rebate in the bid pricing tool. It is important for plans to
understand that the DIR reported under Rebate into the bid tool represents the plans best
expectation of all DIR categories and amounts the plan expects to report under the Part D
payment reconciliation process for the respective contract year.
Defining Direct and Indirect Remuneration (DIR)
Per 42 C.F.R. Section 423.308, direct and indirect remuneration (DIR) is any and all rebates,
subsidies, or other price concessions from any source (including manufacturers, pharmacies,
enrollees, or any other person or entity) that serves to decrease the costs incurred by the
Part D sponsor (whether directly or indirectly) for the Part D drug. DIR includes discounts,
chargebacks, average percentage rebates, cash discounts, free goods contingent on a
purchase agreement, up-front payments, coupons, goods in kind, free or reduced-price
services, grants, or other price concessions or similar benefits.
DIR also includes price concessions from pharmaceutical manufacturers for purchases
under the Medicare prescription drug benefit that are received by subcontractors of Part D
Sponsors, such as pharmaceutical benefit managers (PBM), if they are retained in lieu of
higher service fees. As stated in the 2008 Call letter, CMS must assume that if a PBM
retains a portion of the manufacturer rebates it negotiates on behalf of a Part D sponsor, the
direct payment the sponsor pays the PBM for its services will be less, such that the sponsor
receives a price concession from the PBM. Thus, as a price concession received by the Part
D sponsor, these retained rebates must be reported as DIR for payment purposes.
In accordance with CMS guidance, sponsors may enter into risk sharing arrangements with
entities other than CMS by sharing risk only around the cost of the drug as reflected on
claims data, not around administrative services, professional services or other disallowed
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Worksheet 1
fees (please refer to Q&A 4877 issued on June 6, 2005). Any gains or losses that the Part D
Sponsor may receive as a result of these risk sharing arrangements also constitute DIR that
must be reported to CMS. As with other types of DIR, the value can be negative.
Generic dispensing incentive payments and any adjustments to generic dispensing incentive
payments made to pharmacies after the point of sale dispensing event are also considered
DIR. Please note that generic dispensing incentive payments made to the pharmacy at the
point of sale are part of the dispensing fee reported on the prescription drug event (PDE)
record and therefore are not included in the DIR Report for Payment Reconciliation.
Enter in column g the total amount 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 column m based upon the amount on line 6. Column i and n are calculated
based upon the entries in the other columns.
Line 10, Columns g, i and n – PMPM Value of Part D as Secondary
Enter in column g the total PMPM value of any payments for Part D covered drugs for which
Part D is secondary. Column i and n are calculated.
Line 11, Columns i, k through n – 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 n – Net PMPM on Non-Part D Covered D Drugs
Column i and n are calculated automatically.
Section IV – PMPM Non-Benefit Expense
This section summarizes the PMPM value of the Part D non-benefit expenses throughout the
base period. The intent is for plans to include all costs associated with operating a
prescription drug plan including any administrative expense that may be offset through direct
or indirect remuneration. A plan that provided Part D benefits in 2006, 2007 and 2008 is
expected to prepare the 2009 bid using data that reflects the actual cost to administer the
program by function.
Plans must provide documentation outlining the development of the non-benefit expense at
the time of bid submission, and be prepared to provide CMS with additional data upon
request. In support of the development of the non-benefit expense, plans must provide the
following at the time of bid submission:
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Worksheet 1
•
•
Document non-benefit expenses by line item.
Show the development of each line item using relevant data, assumptions, contracts,
financial information, business plans and other experience.
Plans must be prepared to report on the contractual terms of administrative services, and to
identify when the service is performed by the plan sponsor, by a related party, or by an
unrelated party. Administrative service agreements with related parties must reflect a
competitive cost for the contracted services, and be prepared to support this upon request.
For example, a plan or the related party could demonstrate that the terms of related party
agreement are comparable to those terms offered by a comparable and competitive
unrelated party for performing a comparable service.
The non-benefit expenses must be shown separately on the bid pricing tool for the following
categories:
•
Sales and Marketing (for example, the cost of marketing materials, commissions,
enrollment packages, identification cards).
•
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.
o
Crossover Fees. (fees paid to obtain information from other payers in order
to calculate TrOOP expenses).
o
Medicare User Fees.
o
Uncollected enrollee premium.
o
Uncollected cost-sharing (for example, plan liability resulting from costsharing not recovered in state-to-plan or plan-to-plan transactions).
o
Medication Therapy Management Program expenses.
o
Disease management functions (such as patient education and disease
monitoring) are considered to be direct administration.
o
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
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Worksheet 1
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.
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.
•
Expenditures for non-tangible assets, e.g., salaries and benefits, must be reported
consistently with the organization’s internal accounting practices and the reporting of
similar expenditures in other lines of business.
Costs that are common to offering a Medicare Advantage-Prescription Drug (MA-PD) plan
must be allocated proportionately between the Medicare Advantage and Part D bid pricing
tools based on total revenue.
Enter amounts on lines 1 through 4 of columns e and f. Line 5 and column g are calculated
automatically.
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
Worksheet 2 - PDP Projection of Allowed/NonBenefit
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.
A plan that has appropriate base period data must exercise actuarial judgment in
determining the credibility factor for a plan’s base period experience. Based on an
application of classical credibility theory to Medicare Fee-for-Service experience, CMS has
established a guideline for full credibility for Medicare Advantage plans of 24,000 base period
member months. The formula for partial credibility is the square root of the result of base
period member months divided by 24,000. Although credibility guidelines for the Part D
benefit have not been established, prescription drug experience is expected to have a higher
level of credibility than medical coverage for a similarly sized group. Actuaries should take
into account the quality of the data being relied upon in establishing credibility.
Worksheets 2 and 6 summarize the utilization, allowed amounts and cost sharing amounts of
generic, preferred brand, non-preferred brand and specialty drugs, by place of service for the
proposed defined standard plan. In addition, Worksheet 6 summarizes the same information
for the proposed alternative plan, when applicable. These summaries assist in determining
actuarial equivalence and are cross referenced with information submitted in the plan’s
formulary and Plan Benefit Package (PBP).
Brand Drugs
Single source drugs with no generic equivalent that were FDA-approved under an original
new drug application (NDA), and Innovator Multi-source 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 should be allocated to the preferred brand drug category. 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 Multi-source Drugs are generic drugs.
Specialty Drugs
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Worksheet 2
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 $600 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.
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. This cost should be adjusted to include rebates
credited at the point-of-sale but should not include 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.
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Worksheet 2
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. This change may include the effect
for adjusting the base period claims experience to account for partial year enrollments.
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.
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
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Worksheet 2
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 – Projected Unit Cost
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.
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 9 through 14, Columns l through p.
The value is automatically calculated using lines 1 through 8.
Section V – PMPM Non-Benefit Expense
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Worksheet 2
This section summarizes the PMPM value of the Part D non-benefit expenses by component
and is expected to include any administrative expense that may be offset through direct or
indirect remuneration.
Lines 1 through 5, Column e – Base Period
Base period non-benefit expenses carry over from Section IV of Worksheet 1.
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 1 through 8 of column f to project from the base
period to the contract period. 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
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.
Plans are required to provide a written description of the plan’s average discount and rebate
assumptions for the utilization in Worksheet 3 and 6. This documentation must be uploaded
into HPMS at the time of bid submission. Rebate assumptions should be provided on a per
claim basis. The discount assumptions should reflect information on generic, brand and
specialty drugs separately for mail and retail.
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. Reference the section on Risk Scores in the
Special Considerations section of the instructions for more information.
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.
Line 4 – Network Pricing
Select one of the following two choices from the drop-down box: “pass-thru” or “lock-in.”
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
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Worksheet 3
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 $275 and $2,510, 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 1 through 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.
Lines 1 through 5, Column h – Avg Amt Allowed PMPM
The average amount 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 2009
this amount would correspond to allowed amounts between $2,510 and $5,726.25 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 1 through 5, Column n - Plan Liability
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Worksheet 3
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
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 to be 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 – Total Gain/ (Loss)
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Worksheet 3
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.
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
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. 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 on 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; AE 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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Worksheet 4
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, Column k - Rebates
Enter in column k the total rebate amount for the plan.
reinsurance.
Rebates will be prorated for
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
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 as compared to
the expectation from the modeling of the defined standard benefit.
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, a supplemental
premium will result. Additional coverage in the gap can also delay the point at which a
beneficiary (i) achieves $4,050 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
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Worksheet 5
The information in this section is automatically populated from Section II of Worksheet 3.
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
Type of Deductible
Select one of the following three choices from the drop-down box: applies to all drugs;
applies to brand drugs only; other.
Alternative Coverage ICL
Enter the initial coverage limit (ICL) for the proposed Alternative Coverage benefit.
Type of Gap Coverage
Select one of the following five choices from the drop-down box: no coverage; full coverage;
partial - increased ICL; partial - generics only; partial - other.
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
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Worksheet 5
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.
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
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Worksheet 5
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 2009 benefit year, this amount
represents 75% of costs between the $275 deductible and the $2,510 initial coverage limit,
plus 15% of costs in excess of the basic catastrophic limit or $5,726.25. This adjustment
should be calculated only for enhanced alternative plans and the adjustment must be a
positive
number.
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Worksheet 6
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 2009.
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 as brand drugs, 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 $600 per month 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 the respecting lines in Section II of Worksheet 6. When a
designated specialty tier is used, the drugs in the specialty tier should only be reported in the
specialty line items and not in any other category. In this situation, the specialty drugs 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 identified 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.
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Worksheet 6
Lines 1 through 8 collect data on all allowed costs for the “Population Not Exceeding $2,510
with Standard Coverage.” All of the utilization for the population with total allowed costs that
do not exceed $2,510 must be reported in this section.
Lines 10 through 17 collect data on all allowed costs for the “Population Exceeding $2,510
with Standard Coverage.” All of the utilization for the population with total allowed costs that
exceed $2,510 must be reported in this section.
Lines 19 through 26 collect data on all allowed costs up to $2,510 for the “Population
Exceeding $2,510 with Standard Coverage.” All of the utilization for allowed costs allocated
up to $2,510, for the population with allowed costs that exceed $2,510, is reported in this
section.
Lines 28 through 35 collect data on all allowed costs over the catastrophic coverage limit for
the “Population Exceeding $2,510 with Standard Coverage.” All of the utilization for allowed
costs allocated over catastrophic coverage, for the population with allowed costs that exceed
$2,510, is reported in this 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 $2,510 in annual drug claims and lines 10 through 18 capturing the claims for
individuals with $2,510 or more in annual drug claims. Lines 19 through 27 capture the
claims or amounts allocated up to ICL for individuals with $2,510 or more in allowed costs.
Lines 28 through 36 capture the claims for individuals expected to reach catastrophic
coverage, which is $5,726.25 or more in annual drug claims for a defined standard benefit in
contract year 2009. Note that amounts summarized in lines 19 through 27, and 28 through
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Worksheet 6
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 through 8, 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
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 $2.25 for generic/preferred multi-source brand or $5.60 for all others.
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 $2,510 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 when offering first dollar generic coverage or
reducing 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
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Worksheet 6
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.
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, cells D-21 plus D-22, 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 g – 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 j - 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,
cells D-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
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Worksheet 6
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
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.
Example
Below is an illustrative example of how lines 10 through 36 should be completed. The
example assumes that Beneficiaries A and B reach catastrophic coverage with total allowed
costs of $10,000 and $6,425, respectively. The following cost sharing provisions apply:
Cost Sharing
Retail Generic
Retail Preferred Brand
Retail Non-Preferred Brand
Retail Specialty
Mail Order Generic
Mail Order Preferred Brand
Mail Order Non-Preferred Brand
Mail Order Specialty
Up to ICL
$5
$25
$50
25%
$10
$50
$100
25%
Catastrophic
$2.25
$2.25
$5.60
5%
$2.25
$2.25
$5.60
5%
For illustrative purposes only, the beneficiaries are shown separately and in aggregate.
Beneficiary A’s costs are distributed as follows:
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Worksheet 6
Population Exceeding $2,510 with Standard Coverage
10. Retail Generic
11. Retail Preferred Brand
12. Retail Non-Preferred Brand
13. Retail Specialty (2)
14. Mail Order Generic
15. Mail Order Preferred Brand
16. Mail Order Non-Preferred Brand
17. Mail Order Specialty (2)
18. Total
Utilization
20
15
8
2
10
10
5
70
Beneficiary A
Allowed
Cost-sharing
$
500.00
$ 1,500.00
$ 1,200.00
$ 2,000.00
$
550.00
$ 2,250.00
$ 2,000.00
$ 10,000.00
Amounts Allocated Up to ICL $2,510
19. Retail Generic
20. Retail Preferred Brand
21. Retail Non-Preferred Brand
22. Retail Specialty (2)
23. Mail Order Generic
24. Mail Order Preferred Brand
25. Mail Order Non-Preferred Brand
26. Mail Order Specialty (2)
27. Total
5.02
3.77
2.01
0.50
2.51
2.51
1.26
17.57
$
125.50
$
376.50
$
301.20
$
502.00
$
138.05
$
564.75
$
502.00
$
$ 2,510.00
$
$
$
$
$
$
$
$
$
25.10
94.13
100.40
125.50
25.10
125.50
125.50
621.23
Amounts Allocated over Catastrophic Coverage
28. Retail Generic
29. Retail Preferred Brand
30. Retail Non-Preferred Brand
31. Retail Specialty (2)
32. Mail Order Generic
33. Mail Order Preferred Brand
34. Mail Order Non-Preferred Brand
35. Mail Order Specialty (2)
36. Total
8.55
6.41
3.42
0.85
4.27
4.27
2.14
29.92
$
213.69
$
641.06
$
512.85
$
854.75
$
235.06
$
961.59
$
854.75
$
$ 4,273.75
$
$
$
$
$
$
$
$
$
19.23
14.42
19.15
42.74
9.62
9.62
11.97
126.74
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Worksheet 6
Beneficiary B’s costs are distributed as follows:
Population Exceeding $2,510 with Standard Coverage
10. Retail Generic
11. Retail Preferred Brand
12. Retail Non-Preferred Brand
13. Retail Specialty (2)
14. Mail Order Generic
15. Mail Order Preferred Brand
16. Mail Order Non-Preferred Brand
17. Mail Order Specialty (2)
18. Total
Amounts Allocated Up to ICL $2,510
19. Retail Generic
20. Retail Preferred Brand
21. Retail Non-Preferred Brand
22. Retail Specialty (2)
23. Mail Order Generic
24. Mail Order Preferred Brand
25. Mail Order Non-Preferred Brand
26. Mail Order Specialty (2)
27. Total
Amounts Allocated over Catastrophic Coverage
28. Retail Generic
29. Retail Preferred Brand
30. Retail Non-Preferred Brand
31. Retail Specialty (2)
32. Mail Order Generic
33. Mail Order Preferred Brand
34. Mail Order Non-Preferred Brand
35. Mail Order Specialty (2)
36. Total
PRA CY2009 PD BPT Instructions Redline.doc
Utilization
18
12
10
5
8
3
56
7.03
4.69
3.91
1.95
3.13
1.17
21.88
1.96
1.31
1.09
0.54
0.87
0.33
6.09
Beneficiary B
Allowed Cost-sharing
$ 450.00
$ 1,200.00
$ 1,500.00
$
$ 275.00
$ 1,800.00
$ 1,200.00
$ 6,425.00
$ 175.80
$ 468.79
$ 585.99
$
$ 107.43
$ 703.19
$ 468.79
$
$ 2,510.00
$
$
$
$
$
$
$
$
$
35.16
117.20
195.33
19.53
156.26
117.20
640.68
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
4.40
2.94
6.09
1.22
1.96
1.83
18.44
48.94
130.51
163.13
29.91
195.76
130.51
698.75
Page 50 of 85
Worksheet 6
The aggregate costs of Beneficiaries A and B are distributed as follows:
Population Exceeding $2,510 with Standard Coverage
10. Retail Generic
11. Retail Preferred Brand
12. Retail Non-Preferred Brand
13. Retail Specialty (2)
14. Mail Order Generic
15. Mail Order Preferred Brand
16. Mail Order Non-Preferred Brand
17. Mail Order Specialty (2)
18. Total
Utilization
38
27
18
2
15
18
8
126
Total A & B
Allowed Cost-sharing
$ 950.00
$ 2,700.00
$ 2,700.00
$ 2,000.00
$ 825.00
$ 4,050.00
$ 3,200.00
$
16,425
Amounts Allocated Up to ICL $2,510
19. Retail Generic
20. Retail Preferred Brand
21. Retail Non-Preferred Brand
22. Retail Specialty (2)
23. Mail Order Generic
24. Mail Order Preferred Brand
25. Mail Order Non-Preferred Brand
26. Mail Order Specialty (2)
27. Total
12.05
8.45
5.91
0.50
4.46
5.64
2.43
39.45
$ 301.30
$ 845.29
$ 887.19
$ 502.00
$ 245.48
$ 1,267.94
$ 970.79
$
$ 5,020.00
$
60.26
$
211.32
$
295.73
$
125.50
$
44.63
$
281.76
$
242.70
$
$ 1,261.91
Amounts Allocated over Catastrophic Coverage
28. Retail Generic
29. Retail Preferred Brand
30. Retail Non-Preferred Brand
31. Retail Specialty (2)
32. Mail Order Generic
33. Mail Order Preferred Brand
34. Mail Order Non-Preferred Brand
35. Mail Order Specialty (2)
36. Total
10.51
7.72
4.51
0.85
4.82
5.14
2.46
36.01
$ 262.63
$ 771.57
$ 675.98
$ 854.75
$ 264.96
$ 1,157.35
$ 985.26
$
$ 4,972.50
$
$
$
$
$
$
$
$
$
23.64
17.36
25.24
42.74
10.84
11.57
13.79
145.18
(2) - The Specialty tier is only used when the Plan places Specialty drugs on a separate tier in
accordance with CMS guidelines.
Formatted: Font: (Default) Arial,
10.5 pt
Network Pricing
Formatted: Justified
Enter the percentage discount off AWP, and the Dispensing Fee for all generic, brand and
specialty drugs dispensed at mail or retail.
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Worksheet 7
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 – 2009 Defined Standard Benefit Parameters
Line 1 – Deductible
This value is the deductible for the defined standard benefit.
Line 2 - Initial Coverage Limit
This value is the initial coverage limit (ICL) for the defined standard benefit.
Line 3 - Out-of-pocket Limit
This value is the out-of-pocket limit (OOP) for the defined standard benefit.
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 2009 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.
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Worksheet 7
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.
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 low-income cost-sharing 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 and Date Prepared
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. Credentials are a
required input for the certifying actuary.
Section IV also contains a field labeled “Date Prepared.” This field must contain the date
that the BPT was prepared. If the BPT is revised and resubmitted during the bid review
process, then this date field should be updated accordingly.
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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.
Actuarial Standards of Practice and Other Considerations
In preparing the actuarial certification, the actuary must consider whether the actuarial work
supporting the bid conforms to the current 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 Health Plan Entities. Particular focus is placed
on the sections dealing with the Use of Business Plans to Project Future Results
(3.2.3), Use of Past Experience to Project Future Results (3.2.4), Recognition of Plan
Provisions (3.2.5), New Plans or Benefits (3.2.6), Regulatory Benchmark (3.2.8), and
Reasonableness of Assumptions (3.2.9).
•
ASOP No. 23, Data Quality. Particular focus is placed on the following sections:
Analysis of Issues and Recommended Practices (Section 3), Communications and
Disclosures (Section 4).
•
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. Particular focus is
placed on the section dealing with the Extent of Documentation (3.2).
•
ASOP No. 41, Actuarial Communications. Particular focus is placed on the section
dealing with the Actuarial Report (3.3.3),
The certifying actuary must also consider whether the actuarial work supporting the bid
complies with applicable laws, rules, current bid instructions and CMS guidance. In addition,
actuaries must consider whether the actuarial work supporting the bid is consistent and
reasonable with the plan benefit package and the organization’s current business plan.
Background on previous certification process
In previous contract years (CY2006-2007), actuaries were required to prepare an actuarial
certification document. These documents were uploaded to HPMS by the plan sponsor with
the initial June bid submission.
During the bid review process, resubmissions may occur for a variety of reasons in order to
revise the bid package (i.e., the bid pricing and/or benefits). In such circumstances, the
initial certification submitted may become outdated. There was confusion among plan
sponsors regarding when/if a certification needed to be re-uploaded for certain types of
resubmissions.
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Appendix A
In CY2007, CMS attempted to address these issues. In addition to the initial certification,
plan sponsors were required to upload a “final” certification in late August. While no material
changes were permitted to the certification language, actuaries were expected to update the
certification document to contain certain HPMS references to the final bid that was pending
CMS approval.
While this alleviated some of the certification issues, other concerns with the certification
process still remained. Not all certifying actuaries had access to HPMS, which created
several problems. First, actuaries could not view the uploaded Bid Pricing Tool, Plan Benefit
Package, and certification to ensure that they were on a consistent basis. Secondly, CMS
sometimes released bidding guidance through HPMS, which actuaries could not easily
access. And lastly, when the final certifications were being prepared, actuaries had a difficult
time obtaining the HPMS bid references to include in the final certification.
In addition to the HPMS access issues, the certification process itself was not efficient.
Actuaries needed to prepare multiple free-form text documents (for each bid submitted).
When the final certifications were submitted in August, CMS had little time to re-review these
documents before the bid approval process was scheduled to begin. And there continued to
be confusion among plans regarding when/if a revised certification was required for
intermittent resubmissions.
Certification process for CY2009
All CY2009 certifying actuaries are required to have user access to HPMS. Actuaries will
have access to the bid package uploaded (BPT, PBP, substantiation, etc.) to ensure their
consistency. Actuaries will have access to any guidance that may be released by CMS via
HPMS. And most importantly, the only way to certify a bid in CY2009 will be through a new
certification module within HPMS.
(The previous process of uploading certification
documents will be replaced by the new certification module.)
The new certification module will contain the following features:
o Standardized required language (the required elements are described below in a
subsequent section)
o The ability to append free-form text language to the required standardized language
o A summary of key information from the submitted bids
o Links to additional information regarding the bid package (such as the PBP, BPT,
substantiation, etc.)
o The ability to certify multiple bids/contracts
o The ability to print and save the submitted certification
The new module will eliminate the need for actuaries to prepare and upload separate
certification documents to HPMS. The new certification module/process is similar to the
Benefit Attestation module/process that plan sponsors currently complete in HPMS.
An initial actuarial certification must be submitted via the new certification module in June.
And then in late August, the actuary must certify the final bid (that is pending CMS approval)
via the new certification module. Actuaries are not required to certify every intermittent
resubmission throughout the bid review process, but may do so if they choose to.
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Appendix A
As was instructed in previous contract years, material changes to the certification language
(after the initial June certification submission) are not permitted without prior written
permission from CMS Office of the Actuary.
Applying for access to the new certification module
All certifying actuaries and plan sponsors must take action to gain access to the new
certification module. This includes:
• All actuaries certifying the MA portion of a bid (i.e., MA BPT)
• All actuaries certifying the Part D portion of a bid (i.e., PD BPT)
• Consulting actuaries who will be certifying bids for a plan sponsor
• Health plan staff actuaries (i.e., actuaries employed by the plan sponsor) who will be
certifying bids
Even actuaries with current HPMS access must still take action to gain access to the new
certification module.
Detailed instructions on how to apply for access to the new certification module were
released via HPMS on March 9, 2007. The memo was also e-mailed to the certifying
actuaries on file from last year. Below contains instructions on how to apply for the module,
based on that memo.
Step 1: All certifying actuaries who do not have current HPMS access must submit an
application form. The application requirement applies to both consulting actuaries and health
plan staff actuaries. If the certifying actuary already has user access to HPMS, then skip
step 1 and proceed to step 2.
Complete the following:
Download the Application for Access to CMS Computer Systems
http://www.cms.hhs.gov/InformationSecurity/Downloads/EUAaccessform.pdf
form
at:
Complete the form as follows:
a) Section 1 – Check “New” as the type of request.
b) Section 2 – Check “Medicare Advantage / Medicare Advantage with Prescription
Drug / Prescription Drug Plan / Cost Contracts – Using HPMS Only”.
c) Section 3 – Enter the contract number(s) for which you will be submitting actuarial
certifications for CY 2009.
d) Section 4 – Check the first row beneath the "Default Non-CMS Employee” row (i.e.,
place a check in the Connect box of the third row). On the blank line beside your
check mark, write "HPMS_P_CommlUser".
e) Section 5 – State briefly that you require HPMS access to submit the actuarial
certification. Also indicate whether you are employed by the contracting organization
or whether you are under contract as an actuarial consultant with the contract
organization(s).
f) Section 6 – Leave blank.
g) Sign and date the Privacy Act Statement on page 3 of the form. Also enter your
name and Social Security Number at the top of page 3. This step is critical to
ensuring the successful processing of your request.
Common mistakes to avoid when completing the application form:
• You must include the contract number(s) in Section 3 for which you will be submitting
an actuarial certification.
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Appendix A
•
•
•
•
You must always provide a Social Security Number. CMS will not process a request
without this piece of information.
You must complete the form in ink, not pencil.
You must submit the original hardcopy form with an original signature and date.
Photocopies and faxes are not acceptable.
Step 2: All certifying actuaries must submit an official letter from each plan sponsor that
they intend to certify bids for in CY2009. The letter requirement applies to both consulting
actuaries and health plan staff actuaries, and also applies to actuaries who have current
HPMS access.
Letter requirements:
•
•
•
The letter must specify the contract number(s) and type of functionality required by
the certifying actuary:
– Actuarial Certification Profile only
• Actuarial certification submission functionality, and related PBP and
BPT reports
– Actuarial Certification Profile and Plan Profile
• Actuarial certification submission functionality and related reports, as
well as all other standard plan functionality, including bid upload,
formulary upload, marketing submission, etc.
The letter must be provided on the organization’s official letterhead, with an original
dated hardcopy signature of a senior official of the plan sponsoring organization.
If the certifying actuary already has HPMS access (and has skipped step 1), then the
official letter must include the HPMS user ID of the actuary and an explanation that
the user already has HPMS access.
CMS recommends using the following sample language for the letter (to be prepared on the
organization’s letterhead):
(Date of Letter)
Ms. Sara Walters,
(Name of Organization) hereby requests that (Name of Actuary) with the firm of (Name of
Consulting Firm, if applicable) requires HPMS access to submit actuarial certifications on our
behalf. (Name of Actuary) requires access to the following contract number(s):
(list specific contract numbers).
(Name of Actuary) requires the following HPMS access (please check one box):
▫ Actuarial Certification Profile only (actuarial certification submission functionality and
related PBP and BPT reports)
▫ Actuarial Certification Profile and Plan Profile (actuarial certification submission
functionality as well as all other standard plan functionality, including bid upload,
formulary upload, marketing submission, etc.)
[If the actuary currently has HPMS access, then add a sentence to indicate that the actuary
already has HPMS access and to indicate what is their HPMS user ID.]
If you have any questions, please feel free to contact me at (phone number).
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Appendix A
Sincerely,
(Signature of Plan Sponsor senior official)
(Name and title of Plan Sponsor senior official)
Step 3: Consider the following:
If a certifying actuary is serving multiple plan sponsors (for ex., as a consulting actuary), only
one application is required, but a letter must be provided from each plan sponsor for which
the actuary will be serving as an agent in HPMS.
At least one letter from a plan sponsor must be included with the application in order for the
HPMS access request to be processed. Please note that additional letter(s) from other plan
sponsor(s) may be submitted following the initial submission for HPMS access.
If the certifying actuary already has HPMS access, they do not need to resubmit the
application form (i.e., may skip step 1), but they still must submit the letter (see step 2).
Plan sponsors can have multiple actuaries assigned to one contract to perform the
certification module. For example, a consulting actuary may certify the Part D portion of a
bid while an internal plan staff actuary may certify the MA portion of the bid. Also, one
actuary may certify plan Hxxxx-001, while a different actuary may certify Hxxxx-002. The
instructions contained in this appendix should be followed by all actuaries who will be doing
any certification(s) for CY2009 bid(s).
Step 4: Submit the letter(s), and any applications, to CMS as soon as possible:
Please submit the original (not a copy) application and the corresponding organization
letter(s) via traceable carrier to:
Ms. Sara Walters
Re: Actuarial HPMS Access
7500 Security Blvd.
Location: C4-17-05 / Mailstop: C4-14-21
Baltimore, MD 21244
If you have any questions regarding the certification access instructions, please contact:
Sara Walters: 410-786-3330 or [email protected] .
Required Certification Elements
The certification module will contain the following information as part of the standardized
language:
•
When the certification is submitted, the certification will be “stamped” with the
certifying actuary’s name/user ID and the date.
•
Attestation that the actuary submitting the certification is a member of the American
Academy of Actuaries (MAAA).
As such, the actuary is familiar with the
requirements for preparing Medicare Advantage and Prescription Drug bid
submissions and meets the Academy’s qualification standards for doing so.
•
The specific contract, plan ID(s), and segment ID(s) of the bids associated with the
certification.
•
The Contract Year of the bid(s) contained in the certification.
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Appendix A
•
Indication of whether the certification applies to the Medicare Advantage bid, the
Prescription Drug bid, or both.
•
Attestation that the certification complies with the applicable laws1, rules2, CY2009
bid instructions and current CMS guidance.
•
Attestation that, in accordance with Federal law, the bid(s) is based on the “average
revenue requirements in the payment area for a Medicare Advantage/Prescription
Drug enrollee with a national average risk profile.”
•
Attestation that the data and assumptions used in the development of the bid(s) are
reasonable for the plan’s benefit package (PBP).
•
Attestation that the data and assumptions used in the development of the bid(s) are
consistent with the organization’s current 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.
•
•
Attestation that, in accordance with ASOP No. 23, any data and assumptions
provided by reliances were reviewed for reasonableness and consistency.
If you have any questions regarding the CY2009 certification instructions, please contact
CMS Office of the Actuary at [email protected] .
1
Social Security Act Sections 1851 through 1859; and Social Security Act Sections 1860D-1 through
1860D-42.
2
42 CFR Parts 400, 403, 411, 417, 422, and 423.
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Appendix B
Appendix B – Supporting Documentation
In addition to the bid form and actuarial certification, organizations must provide CMS with
supporting material. 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. Certifying actuaries
must be available to respond to inquiries from CMS reviewers regarding the submitted bids.
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 documentation requirements are the same regardless of the source of the
assumption: whether developed by the actuary, the plan sponsoring organization, or a third
party. If the actuary relied upon others for certain bid data and/or assumptions, they are still
subject to the same documentation requirements. The actuary may be asked for a list of
materials that were relied on and a reliance letter. The actuary must be prepared to produce
the substantiation, even if it was prepared based on a reliance.
Supporting documentation must be clearly labeled and easily understood by CMS reviewers.
The substantiation should clearly identify if it is related to MA, Part D or both. The
documentation for the bid must include quantitative support and details, rather than just
narrative descriptions of assumptions, and identify all reliances applicable to the materials
provided.
Acceptable forms of supporting documentation include, but are not limited to, the following
items:
•
•
•
•
•
•
Meeting minutes from any discussions related to bid development.
Email correspondence related to bid development.
A complete description of data sources, i.e., report name, file name, date obtained,
source file, etc.
Intermediate calculations showing each step taken to calculate an assumption.
A summary of contractual terms of administrative services agreements.
A business plan.
Supporting documentation that is not acceptable or that may result in a request for additional
information include, but are not limited to, the following items:
•
•
•
•
•
A reference to the supporting documentation for another plan such as “the same as
for plan Hxxxx-xxx” and not the documentation itself, i.e., the supporting
documentation for a plan must be self-contained.
A statement that the source of a pricing assumption is “professional judgment“, with
no additional explanation, reasoning, supporting factors, studies, etc.
“Living worksheets” that are overwritten with current data, (i.e. save the version of
the worksheet that is used in bid preparation.)
Information obtained after the bids are submitted.
A statement that a pricing assumption or methodology is assumed acceptable
based on inclusion in a bid approved by CMS in a prior contract year. Data,
assumptions, methodologies and projections must be determined to be reasonable
and appropriate for the current bid independently of prior bid filings.
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Appendix B
The supporting documentation for a plan should be self-contained and not contain
references such as “the same as for plan Hxxxx-xxx”.
Supporting materials must be in electronic format (i.e., Microsoft Excel, Microsoft Word, or
Adobe Acrobat) and must be uploaded to HPMS. CMS will not accept paper copies of
supporting documentation. Note that multiple substantiation files can be submitted to HPMS
at one time by using “zip” files, whereby multiple files are compressed into one file (.zip file
extension). Also, one file can be uploaded to multiple plans in HPMS by using the CTRL key
when selecting plans.
To expedite the bid review process, CMS requires plans to upload complete supporting
documentation with the initial June bid submission to HPMS.
Cover Sheet. Organizations often upload multiple documents that contain supporting
documentation. To expedite the bid review process, organizations must upload a “cover
sheet” that lists all of the supporting documentation that is uploaded or provided in the bid
form.
The cover sheet must include detailed information for each support item such as filename
and location within the file, if applicable. The cover sheet should clearly identify the bid IDs
and whether the substantiation is related to MA, Part D or both.
Note that certain documentation requirements will apply to every bid (for example, every bid
contains a risk score assumption), while other documentation requirements will only apply to
bids that contain certain assumptions (for example, manual rate documentation would only
apply if a bid’s projection is based on manual rates). For documentation categories that
apply for a subset of bids that contain a specified assumption, the cover sheet should not
refer to a “range” of bid IDs (such as “plans 001 – 030”, or “all plans under contract Hxxxx”).
For these items, the cover sheet should contain the exact bid IDs (contract/plan/segment)
that the documentation applies to.
For subsequent substantiation uploads, the cover sheet should only summarize the
additional documents uploaded at that time (i.e., the cover sheet should not be a maintained
as a cumulative list). The subsequent cover sheets should also contain the exact bid IDs,
rather than a “range” of bid IDs.
Sample cover sheets are provided at the end of this section.
Required Documentation
Initial June Bid Submission. The following items must be included with the initial bid
submission:
•
Support for the manual rate development.
o
•
Plans that develop manual rates for the pricing tool using available data
adjusted to reflect the expected population and the benefit design being
offered must provide data and a written narrative that supports the
development of the manual rates.
All plans must provide a written summary of the rebate assumptions on a per claim
basis for the utilization in Worksheet 6.
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Appendix B
•
All plans must provide the discount assumptions for generic, preferred and nonpreferred brand and specialty drugs obtained at mail and retail for the utilization in
Worksheet 6. This summary should include discounts and dispensing fee.
•
Plans that rely upon pharmacy claims experience in lieu of PDE data must provide a
detailed written narrative explaining the variation, accompanied by sufficient data to
support the development of the base period experience.
•
Supporting documentation for the development of projected risk scores is required,
and must include the following:
o
o
o
o
A detailed description of the methodology used to develop projected 2009
risk scores.
A description of the source data for the development of the projected 2009
risk scores.
A description of all projection factors and the basis for the factors.
A statement about the consistency between the development of the projected
risk scores for the plan population and the development of projected medical
expenses, if the plan pricing is based on manual rates.
•
Support for the credibility calculation if applicable.
•
Support for gain/loss margin assumptions (see Special Considerations section for
description of documentation requirements).
•
A written document outlining the development of the non-benefit expenses. In
support of the development of the non-benefit expense, plans must provide the
following at the time of bid submission:
o
o
Document non-benefit expenses by line item.
Show the development of each line item using relevant data, assumptions,
contracts, financial information, business plans and other experience.
Upon Request by CMS Reviewers. The following additional items are not required to be
included with the initial bid submission. Plans should prepare these items while developing
their bids so they are available upon request as part of the bid desk review and bid audit
processes. If these materials are requested by CMS reviewers, the requested substantiation
is expected to be provided within 48 hours.
•
The contractual terms of administrative services, and whether each is performed by a
related party, or by an unrelated party. Administrative service agreements with
related parties must reflect a competitive cost for the contracted services.
•
A plan that provided Part D benefits in 2006, 2007 and 2008 is expected to have
considered data that reflects the actual cost to administer the program by function.
•
Reconciliation of base period experience with company financial data.
•
Support for projection assumptions.
•
If applicable, a list of materials that were relied on and an accompanying reliance
letter.
•
Communication between CMS reviewers and the organization throughout the bid
review process (i.e., e-mail communication).
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Appendix B
•
Additional information (not specified in this list) may be requested by CMS reviewers,
as needed.
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Appendix B
Sample Cover Sheet – Submitted with initial bid upload
Supporting Documentation Cover Sheet
CY2009 Bid Submission
Organization Name: Health One
Contract(s): H1234, H9999, and S9999
Date: June 1, 2008
File Name
Cover 6-1-08.doc
Cover 6-1-08.doc
AdminProfit.xls
Location
within File (if
applicable)
n/a
Pages 2+
Sheet1
Applies to:
MA, PD, or
both
both
both
both
All bids
AdminProfit.xls
Sheet2
both
All bids
Risk CY09.xls
both
MA and/or Part D Manual
Rate Development, if
projection(s) based on manual
rates
MA Base period member
month distribution (if >4 plans
used)
H1234-003-0
S9999-001-0
Manual.xls
MA-Sheet 1
PD-Sheet 2
Section II
H1234-002-0
N/A (contained in the
MA BPT)
MA BPT
Worksheet 1,
Section II line
6 text box
MA
MA Credibility assumption if
differs from CMS guidelines
MA Significant Non-Covered
allowed costs, if any
MA Adjustment to cost
sharing for OOP max
MA Cost sharing test, if
outside limits
MA ESRD subsidy
N/A
H1234-001-0
H1234-004-0
N/A
N/A
Manual.xls
Section I
MA
All bids
Manual.xls
Section III
PD
All bids
PartD.xls
PD
H1234-001-0
H1234-002-0
H1234-004-0
H9999-001-0
S9999-001-0
PartD.xls
“Credibility”
worksheet
“Base”
worksheet
Documentation Requirement
Cover Sheet
Product Narrative
MA and Part D Non-Benefit
Expenses
MA and Part D Gain/Loss
Margins
MA and Part D Risk Scores
MA ISAR factors, if used
MA Actuarial swaps/
equivalences, if used
Part D rebate and discount
assumptions
Part D credibility assumptions
Part D base period experience
development
Specific
Bid ID(s) or
N/A
All bids
All bids
All bids
PD
N/A
N/A
N/A
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PD
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Appendix B
Sample Cover Sheet – Submitted with subsequent substantiation uploads
Supporting Documentation Cover Sheet #2
CY2009 Bid Submission
Organization Name: Health One
Contract(s): H1234, H9999, and S9999
Date: July 16, 2008
Documentation
Requirement
Cover Sheet
Reliance Letter
E-mail communication
with CMS Bid Reviewers
E-mail communication
with CMS Bid Reviewers
E-mail communication
with CMS Bid Reviewers
Specific
Bid ID(s) or
N/A
H1234-001-0
H1234-003-0
H1234-004-0
H1234-801-0
H9999-001-0
S9999-001-0
H1234-001-0
H1234-003-0
H1234-004-0
H1234-801-0
H1234-001-0
H1234-003-0
H1234-004-0
H9999-001-0
H9999-001-0
S9999-001-0
H9999-001-0
S9999-001-0
File Name
Cover 7-16-08.doc
Location within
File (if
applicable)
n/a
Applies to:
MA, PD, or
both
both
Reliance CY09.pdf
n/a
both
E-mail1.doc
n/a
MA
Email2.doc
n/a
PD
Email3.doc
n/a
PD
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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 $275
and $5,600.
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.
For CY2009, CMS does not require a Part D bid pricing tool for Employer/Union Only Group
Plans.
For additional information on CY2009 EGWP bidding policy, please refer to:
• The CY2009 Call Letter
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Appendix D
Appendix D – Calculation of the National Average
Monthly Bid Amount
For the 2006 contract year, the national average monthly bid amount was calculated using
equal weighting applied to all PDP sponsors, and assigned MA-PD plans a weight based
upon prior enrollment. New MA-PD plans were assigned a zero weight. This approach was
used because no PDP enrollment data existed for 2005.
For contract year 2007, the national average monthly bid calculation was performed
according to the guidelines established by the “Medicare Demonstration to Limit Annual
Changes in Part D Premiums due to Beneficiary Choice of Low-Cost Plans.” Specifically, 80
percent of the calculation for contract year 2007 was based on the 2006 averaging
methodology, also known as the uniform-weighting average, and 20 percent was based on
an enrollment-weighted average.
As announced in the April 2, 2007 Notification of Changes in Medicare Part Payment for
Calendar Year 2008, the 2008 national average monthly bid amount will be based on 40
percent of the uniform-weighted average and 60 percent of the enrollment-weighted average.
The following table illustrates the impact of the weighted enrollment methodology for two
enrollment periods, June 2006 and February 2007. The June 2006 enrollment shows the
basis of the actual 2007 benchmark calculation. Recall that the 2007 benchmark was
calculated as 80 percent of the uniform weighted approach, and 20 percent of the enrollment
weighted approach. The table summarizes the final benchmark as well as the components
of each weighting method.
The same values are presented based on the February 2007 enrollment. Since the 2008
benchmarks will be based on 2007 enrollment, these values may be useful for estimating the
2009 benchmarks. The final 2009 benchmarks will be based on the 2007 enrollments
applied to the 2009 bids. The left section of the table shows the actual 2007 benchmarks,
which were calculated based on June 2006 enrollment. The right section, titled “February
2007 Enrollment,” indicates how the 2007 benchmarks would have been calculated based on
more current enrollment data.
June 2006 Enrollment
2007
Demonstration
(80% uniform,
20% enrollment)
Uniform
Weighted
Approach
National
average
monthly bid
amount
80.43
Base
beneficiary
premium
Direct
subsidy
February 2007 Enrollment
Enrollment
Weighted
Approach
2007
Demonstration
(80% uniform,
20% enrollment)
Uniform
Weighted
Approach
Enrollment
Weighted
Approach
81.39
76.59
80.19
81.33
75.61
27.35
27.63
26.23
27.3
27.58
26.18
53.08
53.76
50.36
52.89
53.75
49.43
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Appendix D
This illustrative recalculation of the 2007 benchmarks with the revised weighting approach is
provided for the purpose of assisting plans in developing the projected 2008 national
average monthly bid amount and base beneficiary premium which will be used in the
calculation of the plan’s target premium. The final 2008 benchmarks will be based on the
2007 enrollments applied to the 2008 bids.
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Appendix E
Appendix E – Calculation of Low Income
Benchmark Premium Amounts
For the 2006 contract year, the low income benchmark premium amounts were calculated
using equal weighting applied to all PDP sponsors, and assigned MA-PD plans a weight
based upon prior enrollment. New MA-PD plans were assigned a zero weight.
This
approach was used because no PDP enrolment data existed for 2005.
For contract year 2007, the low income benchmark premium amounts were calculated
according to the guidelines established by the “Medicare Demonstration to Transition
Enrollment of Low Income Subsidy Beneficiaries.” Specifically, 100 percent of the
calculation for contract year 2007 was based on the 2006 averaging methodology, also
known as the uniform-weighting average.
As announced in the April 2, 2007 Notification of Changes in Medicare Part Payment for
Calendar Year 2008, the 2008 low income premium benchmark amounts will be based on 50
percent of the uniform-weighted average and 50 percent of the enrollment-weighted average.
The following table illustrates the impact of the enrollment-weighted methodology for the
enrollment used in the development of the 2007 low income benchmark premium amounts.
These amounts were based on enrollments as of June 2006. The final 2008 benchmarks will
be based on the 2007 enrollments applied to the 2008 premiums using the weighting
methodology described above.
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Appendix E
Region
01
02
03
04
05
06
07
08
09
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
State(s)
NH, ME
CT, MA, RI, VT
NY
NJ
DE, DC, MD
PA, WV
VA
NC
SC
GA
FL
AL, TN
MI
OH
IN, KY
WI
IL
MO
AR
MS
LA
TX
OK
KS
25
26
27
28
29
30
31
32
33
34
IA, MN, MT, ND,
NE, SD, WY
NM
CO
AZ
NV
OR, WA
ID, UT
CA
HI
AK
PRA CY2009 PD BPT Instructions Redline.doc
June 2006 Enrollment
Uniform
Enrollment
Weighted
Weighted
30.72
27.33
27.35
22.97
24.45
19.30
28.12
19.23
29.65
25.74
28.45
25.66
30.52
25.82
32.13
29.65
31.41
27.90
31.07
27.78
22.63
15.18
29.60
25.00
30.79
28.14
28.51
23.10
32.42
28.20
29.67
26.28
29.66
26.57
27.88
20.84
30.51
26.32
31.70
27.41
28.45
22.63
26.93
21.08
30.35
24.26
30.56
23.82
29.50
22.72
27.37
21.37
20.56
28.71
31.77
21.03
26.35
33.56
20.47
16.35
18.70
11.52
11.57
22.60
25.22
15.00
19.82
31.47
Page 70 of 85
Appendix F
Appendix F - Bid Pricing Tool Technical
Instructions
CMS strongly encourages all BPT users and certifying actuaries to read the Technical
Instructions before working with the CY2009 bid tools.
The CY2009 BPT Technical Instructions are located in HPMS under:
HPMS Home > Plan Bids > Bid Submission > CY2009 > Documentation > BPT Technical Instructions
If you have any technical questions regarding the Bid Pricing Tool workbooks, please contact
the HPMS Help Desk at 1-800-220-2028, or via email at: [email protected] .
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Appendix G
Appendix G – Red-Circle Validation Edits
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
N5
N6
N7
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.
N33
The Net Plan Responsibility per Member Subtotal should be greater than zero.
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.
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Appendix G
E62
F62
G62
The Total of Member Premium for Basic must be greater than or equal to zero.
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 (G36).
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 G
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 G
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).
I19
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.
J19
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.
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 G
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-H41 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.
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.
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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.
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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 Premium Calculation.
Basic beneficiary premium amounts up to 25.5% of the
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.
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
generics and preferred multiple source drugs and $5 for all other drugs or 5 percent
of the price.
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Glossary
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.
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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
$0
$0
$0
100%*
$0
$0
Full-benefit dual eligible –
Income above 100% FPL
(non-institutionalized
individual)
100%*
$0
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%*
$0
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)
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$0
$0
Page 80 of 85
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.
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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
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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.
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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.
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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.
PRA CY2009 PD BPT Instructions Redline.doc
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| File Type | application/pdf |
| File Title | Microsoft Word - PRA CY2009 PD BPT Instructions Redline.doc |
| Author | h2ir |
| File Modified | 2008-01-02 |
| File Created | 2008-01-02 |