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INSTRUCTIONS FOR COMPLETING THE
MEDICARE PRESCRIPTION DRUG PLAN
BID PRICING TOOL
FOR CONTRACT YEAR 2010
September 25, 2008
CMS-10142 (03/2011)
Table of Contents
Introduction........................................................................................................................ 3
Special Considerations.................................................................................................... 4
Worksheet 1 - Rx Base Period Experience................................................................ 18
Worksheet 2 - PDP Projection of Allowed/Non-Benefit............................................ 34
Worksheet 3 - Contract Period Projection for Defined Standard Coverage ......... 39
Worksheet 4 - Standard Coverage with Actuarially Equivalent Cost Sharing ...... 42
Worksheet 5 - Alternative Coverage ........................................................................... 44
Worksheet 6 - Script Projections for Defined Standard, Actuarially Equivalent, or
Alternative Coverage ..................................................................................................... 48
Worksheet 7 – Summary of Key Bid Elements ......................................................... 57
Appendix A – Actuarial Certification............................................................................ 59
Appendix B – Supporting Documentation .................................................................. 63
Appendix C – Employer/Union-Only Group Requirements ..................................... 70
Appendix D – Calculation of the National Average Monthly Bid Amount.............. 71
Appendix E – Calculation of Low Income Benchmark Premium Amounts ........... 73
Appendix F - Bid Pricing Tool Technical Instructions ............................................... 75
Glossary of Terms.......................................................................................................... 76
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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 upon request, to provide CMS and its
representatives with documentation to support the development of their bids. 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; that is, by using the CMS bid form in accord with these instructions.
Organizations must 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 base period experienceo
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 must be completed when plans have appropriate base period experience for
modeling the Part D benefit.
•
Plans with fully credible experience must complete all sections of Worksheet 1 and
Sections II, III, and V of Worksheet 2.
•
Plans with partially credible experience must complete all sections of Worksheet 1
and Worksheet 2.
•
Plans that have no applicable, fully or partially credible experience must complete
Section I of Worksheet 1 and Section IV of Worksheet 2.
CMS expects that most plans that operated in 2008 will have appropriate base period
experience to be used in completing Worksheet 1 for contract year 2010. 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 Part D experience, CMS has established a guideline for full credibility for Part D
plans of 12,000 base period member months. The formula for partial credibility is the square
root of the result of actual base period member months divided by 12,000. Actuaries must
take into account the quality of the data being relied upon in establishing credibility.
Plans with experience providing Part D benefits in contract year 2008 are expected to use
Prescription Drug Event (PDE) transactions, including plan-to-plan PDEs as base period
experience for contract year 2010, unless the PDEs do not appropriately capture the plan’s
expected experience.
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 serve 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 (PBMs), if they are retained in lieu of
higher service fees. CMS must assume that if a PBM retains a portion of the manufacturer
rebates that it negotiates on behalf of a Part D sponsor, the direct payment that the sponsor
pays the PBM for its services will be less, such that the sponsor will have received a price
concession from the PBM. This price concession received by the Part D sponsor is a
retained rebate and thus must be reported as DIR for payment purposes.
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.
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Special Considerations
In the event that a plan has PDE data that do not appropriately represent the plan’s expected
experience, plan-specific pharmacy claims experience must 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.
A plan that has experience in contract year 2008 and that does not use PDE data for
completing Worksheet 1 must provide written support outlining the circumstances that
require the use of pharmacy claims or manual rating in lieu of PDEs. The supporting data
and written narrative must specifically address the credibility of the data, and explain why
claims were used in lieu of PDEs. This support must be uploaded into HPMS at the time of
bid submission.
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 are adjusted to reflect the expected contract year population and the benefit design
being offered.
Plans must complete Worksheet 1 in accord with the following:
•
Every plan with experience in contract year 2008 must complete Worksheet 1,
regardless of the level of enrollment.
•
Base period experience must be reported without adjustment. Adjustments may be
made in Worksheet 2 to accommodate population, benefit design, or other changes
for the base period to the projection period.
•
Data from a number of plans can be presented in aggregate only when there are
enrollment changes associated with the dissolution of a plan and retained members
are mapped into existing plans. Each plan must be identified in Line 6, Section II, of
Worksheet 1.
•
Data from a number of plans cannot be used to aggregate data to achieve credibility.
•
When plans are aggregated, experience must be reported in whole at the plan level
for every contract-plan number relied upon; plans cannot include partial plan
experience on Worksheet 1.
•
When plans are aggregated, it is possible for a single plan to be reported on more
than one bid, depending upon the mapping of enrollment.
•
All adjustments for use of partial plan experience must be made on Worksheet 2.
•
Data presented in Worksheet 1 must reconcile in an auditable manner to the planlevel PDE data submitted to CMS for reconciliation.
Required Sections
Plans must complete different sections of the bid pricing tool depending on the type of
coverage that will be offered. Following are the sections that need to be completed for each
type of coverage.
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Special Considerations
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 coverage 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 ($2,700) are no less than the average
standard benefits at the initial coverage limit.
•
The fourth test ensures that the deductible is no greater than $295.
•
The fifth test ensures that the average alternative catastrophic cost-sharing
percentage is no greater than under standard coverage.
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.
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Special Considerations
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 must be left blank.
Data are 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 $2,700
with Standard Coverage.” All of the utilization for the population with total allowed costs that
do not exceed $2,700 must be reported in this section.
Lines 10 through 17 collect data on all allowed costs for the “Population Exceeding $2,700
with Standard Coverage.” All of the utilization for the population with total allowed costs that
exceed $2,700 must be reported in this section.
Lines 19 through 26 collect data on all allowed costs up to $2,700 for the “Population
Exceeding $2,700 with Standard Coverage.” All of the utilization for allowed costs allocated
up to $2,700, for the population with allowed costs that exceed $2,700, must be reported in
this section.
Lines 28 through 35 collect data on all allowed costs over the catastrophic coverage limit for
the “Population Exceeding $2,700 with Standard Coverage.” All of the utilization for allowed
costs allocated over catastrophic coverage, for the population with allowed costs that exceed
$2,700, must be 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%.
•
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.
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Special Considerations
Risk Score
Risk Score Development for CY 2010:
The CY 2010 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 calibrated
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 the Part D
normalization factor for 2010. This adjustment accounts for the expectation of higher
intensity in the aggregate risk scores for the contract year versus the model calibration year.
Accordingly, the 2010 bid-projected risk scores must reflect the normalization factor.
Additional information on the 2010 normalization factor is contained in the 2010 Rate
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/2007raps/ra-particpantguide_120607.pdf
Use of the Part D RxHCC risk scores for the 2008 enrollee cohort is the preferred basis for
projecting the 2010 risk scores for experienced-rated plans. CMS has released plan-specific
risk score data that may be used as the basis for projecting CY 2010 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 are
accompanied by technical notes to assist actuaries with interpreting the data presented.
There are several advantages to using the 2008 cohort Part D RxHCC risk scores in the
projection of the CY 2010 risk score: (i) they are consistent with the base-period prescription
drug expenditures; (ii) they are based on a mid-year cohort and require no adjustment for
seasonality; (iii) they reflect the most complete MA diagnosis data for 2006 dates of service
submitted through January 31, 2009, which is the final reporting deadline for this period; and
(iv) they are based on the latest risk model.
The projection of scores from 2008 to 2010 must reflect relevant projection factors, which
include, but are not limited to, coding intensity trend, changes in plan population, and the
effect of partial-year enrollments. While the mid-year cohort may be the most appropriate
basis for projecting the 2010 risk scores, the underlying experience for 2008 may need to be
adjusted to reflect the effects of partial year enrollments. 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 2010 Part D normalization factor.
An alternate approach to forecasting the CY 2010 Part D risk scores for experience-rated
plans is to use the scores from a 2009 Monthly Membership Report (MMR) file as the base
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Special Considerations
scores. This approach may be appropriate if the plan was first offered in 2009, there was
limited enrollment in 2008, or if there were significant changes in plan or enrollment
characteristics between 2008 and 2009.
The starting “raw” risk scores for this alternative approach are the average risk scores from
one or more, of the 2009 MMR files for non-adjustment records. These scores are trended
to 2010 with explicit adjustment for the following factors:
•
•
•
•
•
•
•
FFS normalization (multiply MMR scores to reverse 2009 normalization)
Coding intensity
Impact of lagged versus non-lagged diagnosis data
Run-out of diagnosis data
Seasonality
Population changes
Other appropriate factors
Finally, the projected “raw” scores must be normalized by dividing by the 2010 Part D
normalization factor.
Pass-Through Model for PBM Gain/Loss
For contract year 2010, as in 2006-2009, Part D sponsors that use a PBM may apply either
the pass through or lock-in pricing approach when calculating cost-sharing and reporting
drug costs. Part D sponsors must choose only one approach and cannot switch between
them for purposes of calculating cost-sharing and reporting drug costs. Thus, the chosen
pricing approach must be used consistently as a basis for: (i) calculating beneficiary costsharing; (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.
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 in the BPT 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” represents their best estimate of all DIR
categories and amounts that they expect to report under the Part D payment reconciliation
process for the respective contract year.
Defining Direct and Indirect Remuneration (DIR)
Per 42 CFR Section 423.308, direct and indirect remuneration (DIR) comprises any and all
rebates, subsidies, or other price concessions from any source (including manufacturers,
pharmacies, enrollees, or any other person or entity) that serve 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.
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Special Considerations
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 (PBMs), if they are retained in lieu of
higher service fees. CMS must assume that if a PBM retains a portion of the manufacturer
rebates that it negotiates on behalf of a Part D sponsor, the direct payment that the sponsor
pays the PBM for its services will be less, since the sponsor will have received a price
concession from the PBM. This price concession received by the Part D sponsor, is a
retained rebate and thus 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 risksharing 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
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 $4,350 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, for a beneficiary in the fixed option, catastrophic coverage is
required to begin at $6,153.75 of total drug expenditures (consistent with the point at which
the beneficiary would have catastrophic coverage under the defined standard benefit). The
flexible option permits catastrophic coverage to begin at any point after the beneficiary has
$4,350 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 the beneficiary has satisfied the TrOOP requirement. No change to
the bidding requirements or bid pricing tool (BPT) is necessary to support plans choosing this
option.
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Special Considerations
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, neither should entail 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
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.
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 reductions
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.
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Special Considerations
Modeling Considerations
Plans must consider the effects of the chosen benefit design 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 as 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 to enroll
greater proportion of these beneficiaries 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:
$1,250
$0
$240
$220
$315
$315
$500
$500
$500
$500
$500
$2,250
$3,250
$750
$1,750
$750
$1,000
$750
$1,000
$750
$1,000
$750
$1,000
$5,100
$5,600
$3,600
$3,625
$2,850
$3,350
$2,850
$3,350
$2,850
$2,875
$2,850
$2,875
$6,100
$10,000
Value of Supplemental
Benefit:
$3,650
$3,845
$3,613
$3,808
$3,613
$3,808
$2,900
$3,095
$2,900
$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 a standard
plan were offered.
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
General enrollment (that is, non-EGWP and non-SNP plans and institutional / chronic care
SNPs:
Overall Medicare margin levels for general enrollment plans and institutional / chronic care
SNPs are to be consistent with the Plan sponsor’s corporate requirement. (Please note that
the 2008 bid instructions included the term “individual market,” not “general enrollment,” to
describe non-EGWP, non-SNPs.) 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 on investment (ROI) or return on equity (ROE), the projected
Medicare returns must be consistent with the company’s return requirements. Comparisons
to other lines of business must take into account the degree of risk or reserve levels of the
business.
The overall margin level expectations are likely to be consistent on a year-by-year basis.
Actual organization returns are expected to vary year to year in practice, but 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
variation reflecting the different levels of financial risk underlying the two components. 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 achieve profitability.
Exceptions to the business plan requirement are cases in which 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
Employer-Only Group and Union-Only Waiver Plans (EGWPs):
The foundation for the claim and administrative costs for EGWP plans should be appropriate
EGWP experience. The margin assumptions used for general enrollment plans must be the
basis for the margin requirements for EGWP plans. Organizations may choose to use the
overall margin levels for general enrollment plans as the basis for the group plan margin
assumptions or may rely on the margins used in comparable general enrollment plans.
There may be small differences (that is, up to 1%) in the margin levels between EGWP and
general enrollment plans. If corresponding general enrollment plans are not offered, then the
margin guidance for general enrollment plans applies to the EGWP margin pricing. That is,
overall EGWP 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 similar lines of businesses.
Special Needs Plans Serving Dual-Eligible (DE-SNP):
The foundation for the claim and administrative costs for DE-SNPs should be appropriate
experience. The margin assumptions used for general enrollment plans should be the basis
for the margin requirements for DE-SNP plans. There may be small differences (that is, up to
1%) in the margin levels between DE-SNP and general enrollment plans.
If corresponding general enrollment plans are not offered, then the margin guidance for
general enrollment 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
similar lines of businesses.
Relationship of Margin Requirements and Non-Benefit Expenses:
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.
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 a description of the methodology used to
develop margin assumptions, demonstration of year-by-year consistency, and
supporting data.
•
Support for bids with negative margins, for example, a business plan that illustrates
profitability within a 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
methodological illustrations. The development of margin requirements may reflect
revenue offsets not captured in non-benefit expenses (such as investment expenses,
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Special Considerations
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.
Supporting documentation requirements are the same regardless of the source of the
assumption, for example, whether developed by the actuary, the Plan-sponsor, 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 $295 deductible for brand drugs)
must make several modifications to the pricing of this benefit in the BPT. Specifically,
Worksheet 5 of 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 $2,700 and for the population with spending
over $2,700, 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 costsharing 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 2010. 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 $2,700. 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 $2,700, their entire allowed amounts and scripts are to be
entered in the section for persons with expenses above $2,700, regardless of the alternative
plan's benefit limit. Note that the section for persons with expenses above $2,700 also
includes amounts for members with expenses exceeding $6,153.75. 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.
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Special Considerations
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 $4,350 (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 must 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 the nonbenefit expenses and Section V 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 2008 must report their
Prescription Drug Event (PDE) transactions, including plan-to-plan PDEs as base period
experience for contract year 2010, unless the PDEs do not appropriately capture the plans’
expected experience.
Plans must complete Worksheet 1 in accord with the following:
•
Every plan with experience in contract year 2008 must complete Worksheet 1,
regardless of the level of enrollment.
•
Base period experience must be reported without adjustment. Adjustments may be
made in Worksheet 2 to accommodate population, benefit design, or other changes
for the base period to the projection period.
•
Data from a number of plans can be presented in aggregate only when there are
enrollment changes associated with the dissolution of a plan and retained members
are mapped into existing plans. Each plan must be identified in Line 6, Section II, of
Worksheet 1.
•
Data from a number of plans cannot be used to aggregate data to achieve credibility.
•
When plans are aggregated, experience must be reported in whole at the plan-level
for every contract-plan number relied upon; plans cannot include partial plan
experience on Worksheet 1.
•
When aggregating plans, it is possible for a single plan to be reported on more than
one bid, depending upon the mapping of enrollment.
•
All adjustments for use of partial plan experience must be made on Worksheet 2.
•
Data presented in Worksheet 1 must reconcile in an auditable manner to the plan
level PDE data submitted to CMS for reconciliation.
The base period experience reported on Worksheet 1 must be used in the projection of
allowed costs in the contract year according to the level of credibility reported in Worksheet
2.
A plan that has fully credible base period experience is expected to use the data without
blending with a manual rate.
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Worksheet 1
A plan that does not have fully credible base period experience must develop manual rates
for the pricing tool, using available data that are adjusted to reflect the expected population
and the benefit design being offered. These manual rates must be blended with the trended
base period experience according to the level of credibility reported in Worksheet 2. The
supporting 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 Section III of Worksheet 1. 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 on noncovered 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 must 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.
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Worksheet 1
Line 3 – Segment ID
If the bid is for a service area segment of a local plan, enter the segment ID.
Line 4 – Contract Year
This cell is automatically completed with the calendar year for which the contract applies.
Line 5 – Organization Name
Enter the organization’s legal entity name on Line 5.
Line 6 – SNP
Enter the Special Needs Plan (SNP) Indicator as “Y” or “N.”
Line 7 – Plan Name
Enter the name of the MA-PD or PDP plan that you are offering to Medicare enrollees.
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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
Preferred Provider Organization
HMOPOS
PSO State License
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
National PACE
PACE
1876 Cost
1876 Cost
1833 Cost
1833 Cost
Prescription Drug Plans:
Medicare Prescription Drug Plan
Employer/Union Only Direct Contract
Prescription Drug Plan
Fallback Plans
Fallback Plan
RFBs
Religious Fraternal Benefit PFFS
Religious Fraternal Benefit HMO
Religious Fraternal Benefit HMOPOS
Religious Fraternal Benefit Local PPO
Religious Fraternal Benefit PSO
Attachment E-2, CY2010 PD BPT Instructions PRA.doc
PDP
ED PDP
Fallback
RFB PFFS
RFB HMO
RFB HMOPOS
RFB Local PPO
RFB PSO
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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 2008, the “incurred from” date is 1/1/2008 and the “incurred to” date is 12/31/2008. If
the data reflect payment information through February 2009, then the “paid through” date is
2/28/2009.
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.
Line 5 – Network Pricing
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 used as a
source of experience to develop Worksheet 1. Report by the contract-plan ID in effect in the
base period, and the corresponding member months for every plan used as a source for
base period experience.
CMS expects that the contract-plan ID for the base period data will be the same as that
shown in Section I except for plan number changes.
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Worksheet 1
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
data for credibility, which is addressed on Worksheet 2 with the manual rate. Examples of
different base period data include the following:
•
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.
complete this section of Worksheet 1 in accord with the following:
Plans must
•
Plans with experience in contract year 2008 must complete Worksheet 1, regardless
of the level of enrollment.
•
Base period experience must be reported without adjustment. Adjustments may be
made in Worksheet 2 to accommodate population, benefit design, or other changes
for the base period to the projection period.
•
Data from a number of plans can be presented in aggregate only when there are
enrollment changes associated with the dissolution of a plan and retained members
are mapped into existing plans. Each plan must be identified in Line 6, Section II, of
Worksheet 1.
•
Data from a number of plans cannot be used to aggregate data to achieve credibility.
•
When plans are aggregated, experience must be reported in whole at the plan-level
for every contract-plan number relied upon; plans cannot include partial plan
experience on Worksheet 1.
•
When aggregating plans, it is possible for a single plan to be reported on more than
one bid, depending upon the mapping of enrollment.
•
All adjustments for use of partial plan experience must be made on Worksheet 2.
•
Experience presented in Worksheet 1 must reconcile in an auditable manner to the
plan level PDE data submitted to CMS for reconciliation.
•
Experience need not exactly match the benefit plan or service area for the bid (see
Section II instructions).
•
Experience must be on either calendar year or other annualized basis.
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Worksheet 1
•
Experience must 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).
•
Experience must 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 on non-covered Part D drugs in 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.
Lines 1 through 5, Column d – 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 $266
and $2,400, then 7,000 would be entered in Line 3 of Column d.
Lines 1 through 5, Column e - Member Months
For each line, enter the number of member months associated with the members included in
Column d.
Lines 1 through 5, Column f - 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.
Lines 1 through 5, Column g - 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.
Lines 1 through 5, Column h - 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).
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Worksheet 1
Lines 1 through 5, Column i – 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.
Lines 1 through 5, Column j – Average Cost Sharing per Member
For each line, enter the average cost-sharing per member with respect to the members
included in Column d.
Lines 1 through 5, Column k – 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.
Lines 1 through 5, Column l – 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.
Lines 1 through 5, Column m – 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.
Lines 1 through 5, Column n – 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
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
out-of-network (OON). 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 filled out-of-network.
Line 8, Column 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.
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Worksheet 1
Line 9, Columns g, i, m, and n – Minus 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” represents their best estimate of all DIR
categories and amounts that they intend to report on the DIR Report for Payment
Reconciliation under the Part D payment reconciliation process for the respective contract
year.
Defining Direct and Indirect Remuneration (DIR)
Per 42 CFR Section 423.308, direct and indirect remuneration (DIR) comprises any and all
rebates, subsidies, or other price concessions from any source (including manufacturers,
pharmacies, enrollees, or any other person or entity) that serve 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 (PBMs), if they are retained in lieu of
higher service fees. CMS must assume that if a PBM retains a portion of the manufacturer
rebates that it negotiates on behalf of a Part D sponsor, the direct payment that the sponsor
pays the PBM for its services will be less, since the sponsor will have received a price
concession from the PBM. This price concession received by the Part D sponsor, is a
retained rebate and thus 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 risksharing 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 must be allocated to the plan using a method that
reasonably represents the way in which the rebates were generated, and rebates must be
allocated to Column m based upon the amount in Line 6. Columns i and n are calculated
based upon the entries in the other columns.
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Worksheet 1
Line 10, Columns g, I, and n – Plus Part D as Secondary
Enter in Column g the total amount of payments for Part D covered drugs for which Part D is
secondary. Column i and n are calculated automatically.
Line 11, Columns i, k through n – Net Average Paid Amount PMPM
This line is calculated as Line 8 minus 9 plus 10.
Line 12, Columns g and i - Non-Covered Supplemental Drugs
Enter the total amount of claims for drugs covered by the plan that are not part D-covered
drugs. Column i is calculated automatically.
Line 13, Column i - Rebates on Supplemental Drugs
Enter the total amount of any rebates allocable to the drug payments included on Line 12.
Line 14, Columns i and n – Net PMPM on Supplemental Drugs
Columns 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. Plans must report 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 2008 must prepare the Non-Benefit
Expense in the 2010 bid using data that reflect the actual cost to administer the program by
function, and must develop the supporting documentation in a manner that explains the
relationship between the reported expenses, and auditable material such as corporate
financials and plan-level operational data.
Plans must upload a document outlining the following at the time of bid submission:
•
A list of all items that contribute to non-benefit expense.
•
A description of the development of each line item, using reference to relevant
operational data, assumptions, contracts, financial information, business plans, and
other experience.
•
A description of the relationship between the non-benefit expense line items reported
and auditable material such as corporate financials and plan-level operational data.
Non-benefit Expense
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, and identification cards).
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Worksheet 1
•
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,
and 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 cost
sharing 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, which 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 principles (GAAP) methodology. For example, acquisition expenses and capital
expenditures must be deferred and amortized according to the relevant GAAP standards (to
the extent that 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 is promulgated by the Financial
Accounting Standards Board (FASB). Of particular applicability are FASB’s Statement of
Financial Accounting No. 60, and 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:
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Worksheet 1
•
Expenditures for tangible assets must be capitalized and amortized according to
relevant GAAP principles, for example, a new computer system purchased to support
Part D.
•
Expenditures for non-tangible assets, for example, salaries and benefits, must be
reported consistently with the organization’s internal accounting practices and
consistently with the manner in which other lines of business report similar
expenditures.
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.
Related Party Agreements
The objective of these instructions is to obtain a level of disclosure of related-party
agreements that demonstrates that the operating results and financial positions for
organizations participating in such agreements are not significantly different from the
operating and financial arrangements that would have been achieved in the absence of the
relationships. This level of disclosure is consistent with our 2009 guidance, and comparable
to the level required by GAAP.
Plans are required to demonstrate that the above is true, and that fees associated with these
transactions are based on appropriately allocated, actual costs that are comparable with
those experienced by unrelated organizations of similar size and market position.
To satisfy proprietary concerns, CMS can initiate separate contact with the sponsor and the
subcontracted related party when addressing related-party issues in the bid. Plan sponsors
interested in this level of discussion must request it and identify a point of contact at the
related party at the time of bid submission.
These requirements for related-party agreements apply to a Plan sponsor that enters into an
administrative service agreement involving a parent company and subsidiary, or between
subsidiaries of a common parent. A plan that meets these criteria must provide the following
supporting documentation at the time of bid submission for each related-party agreement:
•
•
•
•
•
The identity of the related-party organization.
A description of the business arrangement and services provided.
The financial terms.
A point of contact at the related party (when the sponsor is requesting that CMS
enter into a separate discussion with a subcontracted related party).
A demonstration that the operating and financial results of the participating
organizations are not significantly different from those that would have been
achieved by the plan in the absence of the related party relationships, outlined as
follows:
A Plan sponsor in a related party agreement with an organization that is providing services to
unrelated parties must directly or indirectly, or through agreement with the subcontracted
party, provide the following:
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Worksheet 1
•
•
•
A written summary outlining the terms of actual contracts between the subcontractor
and the comparable, unrelated parties for similar services. The support must
demonstrate that the financial arrangements between related parties are not
significantly different from those that would have been achieved by the Plan sponsor
in the absence of the related-party relationships.
An explanation of the disparities in the financial arrangements between related
parties and unrelated parties. The explanation must fully address the advantaged or
disadvantaged positions and, overall, must demonstrate that the financial
arrangements are not significantly different from those that would have been
achieved by the Plan sponsor in the absence of the related party relationships.
The actual copies of agreements to CMS upon request.
A Plan sponsor in a related-party agreement with an organization that supports only the
Part D sponsor must directly or indirectly, or through agreement with the subcontracted party
do the following:
•
•
•
•
Prepare the bid pricing tool in a manner that does not recognize the independence of
the subcontracted related party. For purposes of completing the bid pricing tool, the
Plan sponsor must consider the gain/ (loss) and non-benefit expense of the relatedparty to be those of the sponsor. The sponsor cannot allocate all administrative
costs in the related party agreement to non-benefit expense.
Develop the gain/(loss) and non-benefit expense of the related-party subcontractor in
accord with the instructions for completing the bid pricing tool.
Support the development of the gain/ (loss) and the actual costs associated with the
non-benefit expense as required by these instructions.
Subcontracted related party related party agreements for all parties represented in
the bid must be disclosed in accord with the instructions for completing the bid
pricing tool.
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 the 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 Part D experience, CMS has established a
guideline for full credibility for Part D plans of 12,000 base period member months. The
formula for partial credibility is the square root of the result of actual base period member
months divided by 12,000. Actuaries must 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
Brand drugs consist of single source drugs with no generic equivalent that were FDAapproved 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 that are 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 must be allocated to the non-preferred brand category for purposes of completing
the bid tool.
Generic Drugs
Non-Innovator Multi-source Drugs are generic drugs.
Specialty Drugs
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 be designated a specialty tier,
(ii) cost sharing associated with that tier be limited to 25% in the initial coverage range, and
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Worksheet 2
(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 that tier must be reported by place of
service, on Lines 4 and 8, under both Section II and Section III of Worksheet 2. The drugs in
the specialty tier are not to be sorted by brand or generic status, and must 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 must 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 are not 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 must be adjusted to include rebates
credited at the point-of-sale but must 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.
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.
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Worksheet 2
Lines 1 through 8, Column j - Risk Change
For each line, enter the factor that represents the impact on utilization of the covered
population’s change in risk between the base period and the contract period. This change
may include the effect of 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
For each line, enter the factor representing the expected change in cost per script due to
changes in the formulary structure.
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Worksheet 2
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 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 1 through 8).
Lines 1 through 8, Column o – Credibility
Enter the credibility percentage that is applied to the actual experience used to blend with
manual experience to produce contract period projections. The credibility must be greater
than or equal to 0%, and less than or equal to 100%.
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.
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Worksheet 2
Section V – PMPM Non-Benefit Expense
This section summarizes the PMPM value of the Part D non-benefit expenses by
component.
Any administrative expense that may be offset through direct or indirect
remuneration is expected to be reported here.
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
manual rate non-benefit expenses are blended 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. The
supporting data and written narrative must be uploaded into HPMS at the time of bid
submission.
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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 their 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 must be provided on a perclaim basis. The discount assumptions must 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 are 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 1 through 5, Column d - Number of Members
Enter the number of members who are expected to have allowed Part D Rx expenses falling
in the range applicable to the line. For example, when modeling 6,500 members with
allowed expenses falling in the range between $295 and $2,700, enter 6,500 on Line 3,
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Worksheet 3
Column d. For purposes of Lines 1 through 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
The cost-sharing amounts are calculated automatically.
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 $2,700 and $6,153.75 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
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.
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Worksheet 3
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, the total projected rebates to be generated in
the contract period. The PMPM value in Column h is calculated automatically, and is
allocated to Columns m and n based on the relative amount of reinsurance compared to all
allowable costs.
Line 8, Columns g, h, m, and n – Minus Other Insurance
As positive amounts in Columns g and m, enter the total reduction due to the presence of
other Rx insurance. Columns h and n are calculated automatically.
Line 9, Columns g, h, m and n – Plus Part D as Secondary
Enter in Columns g and m the total liability of the plan for which Part D coverage is
secondary. Columns h and n are 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)
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
he 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 to be completed only for standard coverage with actuarially equivalent cost
sharing plan benefit types. The two tests that must be met to demonstrate actuarial
equivalence are as follows:
•
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 Actuarially Equivalent Coverage
Although defined standard plans have 25% cost sharing for all classes of drugs, it is
expected that actuarially 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 generally have higher use in the generic and possibly preferred brands, and lower use
in non-preferred brands; AE plans generally have higher mail use. Due to favorable shifts,
AE bids 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 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.
Line 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.
Line 15, Column k - Rebates
Enter in Column k the total rebate amount for the plan.
reinsurance.
Rebates will be prorated for
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 used only 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 initial coverage limit (ICL) and are likely to restructure to
provide incentive for beneficiaries to increase the efficiency of their drug use. These plans
generally have higher use in the generic and possibly preferred brands and lower use in nonpreferred brands, as well as higher mail utilization. Due to these favorable shifts, these bids
have lower costs under the 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 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 expected generic use under 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 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 $4,350 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, cause induced utilization, and 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 therefore may not opt for these plans.
Section I – General Information
The information in this section is automatically populated from Section I of Worksheet 1.
Section II – Projection Data
The information in this section is automatically populated from Section II of Worksheet 3.
Attachment E-2, CY2010 PD BPT Instructions PRA.doc
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Worksheet 5
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. This entry must be consistent with the deductible that is
described in the Plan Benefit Package for this plan.
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: and partial – limited monetary
amount.
Columns d through o – Part D-Covered Drugs
These amounts represent Part D covered drugs.
Column q – Non-Part D-Covered Drugs
These amounts represent Non-Part D-covered drugs.
Line 5, Columns k and m – Allowed PMPM in Gap and Above Catastrophic
Enter the amounts that represent the allocation of the total PMPM of the gap and
catastrophic coverage for the alternative benefit.
Line 6, Column d - Proposed Deductible
Enter the deductible to be used in the development of alternative coverage.
Line 8, Column f – Value of Proposed Deductible
Plans must adequately demonstrate the impacts of different approaches for pricing various
deductibles as well as the impact on the initial coverage limit. Please review the information
under “Special Considerations” for more information on first dollar generic coverage.
Enter the value of the proposed deductible for members not meeting the initial coverage limit.
Line 12, Column k - Coinsurance Percentage in Gap
Enter the effective coinsurance percentage for alternative coverage provided in the gap.
This amount must take into account the benefit structure for these benefits, including any
variations made to the initial coverage limit.
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Worksheet 5
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
enhanced alternative plan with supplemental benefits, and will be used to adjust allowable
costs for risk corridor payments.
Attachment E-2, CY2010 PD BPT Instructions PRA.doc
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Worksheet 5
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 $295 deductible and the $2,700 initial coverage limit,
plus 15% of costs in excess of the basic catastrophic limit or $6,153.75. Calculate this
adjustment only for enhanced alternative plans. The adjustment must be a positive number.
Attachment E-2, CY2010 PD BPT Instructions PRA.doc
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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.
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 spending
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 required 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 be designated a specialty tier,
(ii) cost sharing associated with that tier be 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 that tier must be reported by place of
service, on the appropriate lines in Section II of Worksheet 6. Further, the drugs in the
specialty tier must be reported only in the specialty line items and not in any other category.
In this situation, the specialty drugs are not to be sorted by preferred brand, non-preferred
brand or generic status, and must not be 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 must be identified by preferred brand, non-preferred brand or generic
status, and must be reported in these categories according to status and place of service. In
this situation, the specialty categories in Section II of Worksheet 6 are not be completed.
Data Required for Levels of Allowed Spend
Data are 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 $2,700
with Standard Coverage.” All of the utilization for the population with total allowed costs that
do not exceed $2,700 must be reported in this section.
Attachment E-2, CY2010 PD BPT Instructions PRA.doc
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Worksheet 6
Lines 10 through 17 collect data on all allowed costs for the “Population Exceeding $2,700
with Standard Coverage.” All of the utilization for the population with total allowed costs that
exceed $2,700 must be reported in this section.
Lines 19 through 26 collect data on all allowed costs up to $2,700 for the “Population
Exceeding $2,700 with Standard Coverage.” All of the utilization for allowed costs allocated
up to $2,700, for the population with allowed costs that exceed $2,700, is reported in this
section.
Lines 28 through 35 collect data on all allowed costs over the catastrophic coverage limit for
the “Population Exceeding $2,700 with Standard Coverage.” All of the utilization for allowed
costs allocated over catastrophic coverage, for the population with allowed costs that exceed
$2,700, 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 must 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 the
worksheet 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 for defined standard
coverage, then Columns i through k are 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 are 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 $2,700 in annual drug claims and Lines 10 through 18 capturing the claims for
individuals with $2,700 or more in annual drug claims. Lines 19 through 27 capture the
claims or amounts allocated up to ICL for individuals with $2,700 or more in allowed costs.
Lines 28 through 36 capture the claims for individuals expected to reach catastrophic
coverage, which is $6,153.75 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 in lines 28
through 36 are subsets of the amounts summarized in Lines 10 through 18; amounts in the
gap are intentionally excluded.
Plans must 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
Attachment E-2, CY2010 PD BPT Instructions PRA.doc
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Worksheet 6
cost-sharing elements for the proposed defined standard benefit. In 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; 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 are to 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 Lines 28 through 36 of Column h using cost sharing
applicable beyond the catastrophic threshold. For defined standard coverage, this amount is
the 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, Columns i, j,
and k. Plans must appropriately model the impact of the alternative benefit compared to the
defined standard by making 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 must be
based on the splits as outlined in the defined standard coverage. For example, Lines 1
through 9 must reflect the utilization for the actuarial equivalent or alternative plan for
individuals expected to have less than $2,700 in annual coverage based on the defined
standard coverage. In other words, the amounts summarized in Columns i, j and k are to be
based on the same population summarized in Columns f, g, and h.
Plans must 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. Plans are to calculate Lines 28 through 36 assuming
the cost sharing applicable beyond the catastrophic threshold for the actuarially equivalent or
alternative coverage.
Plans must be aware of the situations outlined in the “Special Considerations” section of
these instructions 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 are 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.
Attachment E-2, CY2010 PD BPT Instructions PRA.doc
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Worksheet 6
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 between the deductible and the ICL.
These amounts must include changes to utilization patterns that could be expected
based upon the difference between defined standard coverage and the coverage
being proposed.
Line 27
The value is automatically calculated as the sum of Lines 19 through 26.
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Worksheet 6
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 are to 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
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
$10,000.00
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
8.55
29. Retail Preferred Brand
6.41
30. Retail Non-Preferred Brand
3.42
31. Retail Specialty (2)
0.85
32. Mail Order Generic
4.27
33. Mail Order Preferred Brand
4.27
34. Mail Order Non-Preferred Brand
2.14
35. Mail Order Specialty (2)
29.92
36. Total
$ 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
Attachment E-2, CY2010 PD BPT Instructions PRA.doc
5.02
3.77
2.01
0.50
2.51
2.51
1.26
Beneficiary A
Allowed
Cost-sharing
$ 500.00
$ 1,500.00
$ 1,200.00
$ 2,000.00
$ 550.00
$ 2,250.00
$ 2,000.00
Page 53 of 84
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
Utilization
18
12
10
5
8
3
56
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
7.03
4.69
3.91
1.95
3.13
1.17
21.88
Amounts Allocated over Catastrophic Coverage
28. Retail Generic
1.96
29. Retail Preferred Brand
1.31
30. Retail Non-Preferred Brand
1.09
31. Retail Specialty (2)
32. Mail Order Generic
0.54
33. Mail Order Preferred Brand
0.87
34. Mail Order Non-Preferred Brand
0.33
35. Mail Order Specialty (2)
36. Total
6.09
Attachment E-2, CY2010 PD BPT Instructions PRA.doc
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 54 of 84
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
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
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
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
10.51
29. Retail Preferred Brand
7.72
30. Retail Non-Preferred Brand
4.51
31. Retail Specialty (2)
0.85
32. Mail Order Generic
4.82
33. Mail Order Preferred Brand
5.14
34. Mail Order Non-Preferred Brand
2.46
35. Mail Order Specialty (2)
36. Total
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.
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Worksheet 6
Network Pricing
Enter the average expected percentage discount off of AWP, and the average dispensing
fees for generic, brand and specialty drugs dispensed at mail or retail.
The numbers in this section must be based upon the network pricing contracts and the
weighted utilization by pharmacy of the population.
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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 – 2010 Defined Standard Benefit Parameters
Line 1 – Deductible
This pre-loaded value is the deductible for the defined standard benefit.
Line 2 - Initial Coverage Limit
This pre-loaded value is the initial coverage limit (ICL) for the defined standard benefit.
Line 3 - Out-of-Pocket Limit
This pre-loaded 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 2010 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.
Lines 4 and 5 – Basic Part D Premium (prior to A/B rebate reallocation)
The values on Lines 4 and 5 are the plan’s expected base beneficiary premium, calculated
from the plan’s manual inputs on Lines 1, 2, and 3 of this section. Line 4 reflects the value of
the basic Part D premium before application of the rounding rule, and Line 5 reflects the
value after the rounding rule selected on Line 8 of this section has been applied.
These
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Worksheet 7
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
developed only 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 in which a selection is not made.
Section IV - Part D Bid Pricing Tool Contacts and Date Prepared
Plans must to identify three persons who are readily available and are authorized to discuss
the development of the bid: 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 must be updated accordingly.
Attachment E-2, CY2010 PD BPT Instructions PRA.doc
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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 responsibility 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 following sections: “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:
“Selection of Data” (3.2), “Reliance on Data Supplied by Others” (3.3), “Reliance on
Other Information Relevant to the Use of Data” (3.4), “Review of Data” (3.5), “Use of
Data”(3.7), and “Communications and Disclosures” (Section 4).
•
ASOP No. 25, Credibility Procedures Applicable to Accident and Health, Group Term
Life, and Property/Casualty Coverages.
•
ASOP No. 31, Documentation in Health Benefit Plan Ratemaking. Particular focus is
placed on the following section: “Extent of Documentation” (3.2).
•
ASOP No. 41, Actuarial Communications. Particular focus is placed on the following
sections: “Reliance on Other Sources” (3.1.6) and “Actuarial Report” (3.3.3).
The certifying actuary must also consider whether the actuarial work supporting the bid
complies with applicable laws, rules, CY2010 bid instructions, and current CMS guidance. In
addition, he/she 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.
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Appendix A
Certification Module
The certification module contains the following features:
•
Standardized required language (the required elements are described in a
subsequent section of this appendix)
•
The ability to append free-form text language to the required standardized language.
•
A summary of key information from the submitted bids
•
Links to additional information regarding the bid package (such as the PBP, BPT,
substantiation, etc.)
•
The ability to certify multiple bids/contracts
•
The ability to print and save the submitted certification
An initial actuarial certification must be submitted via the HPMS certification module in June.
The actuary must also certify the final bid (that is pending CMS approval) via the certification
module in August following the CMS publication of the Part D National Average Monthly Bid
Amount, the Part D base beneficiary premium, the Part D regional low-income premium
subsidy amounts, and the MA regional benchmarks. Actuaries are not required to certify
every intermittent resubmission throughout the bid review process, but may do so if they
wish.
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 the CMS Office of the Actuary.
Plan sponsors may have multiple actuaries assigned to one contract to perform the
certifications. 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 plan Hxxxx-002. The instructions
contained in this appendix should be followed by all actuaries who will be doing any
certifications for CY2010 bids.
If a certification is not submitted via the HPMS certification module, the bid will not be
considered for CMS review and approval.
Every MA BPT requires a certification. Every PD BPT requires a certification. Since Part D
BPTs are not submitted for “800-series” EGWP employer bids, a Part D actuarial certification
is not required. However, a certification is still required for the MA portion of “800-series”
employer bids.
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Appendix A
Required Certification Elements
The certification module contains the following information, as part of the standardized
language:
•
The certifying actuary’s name/user ID and the date, “stamped” when the certification
is submitted,
•
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, and segment ID of the bid associated with the
certification.
•
The contract year of the bid contained in the certification.
•
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 laws, 1 rules, 2 CY2010
bid instructions, and current CMS guidance.
•
Attestation that, in accordance with Federal law, the bid 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 are
reasonable for the plan’s benefit package (PBP).
•
Attestation that the data and assumptions used in the development of the bid 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.
•
A statement that, in accordance with ASOP 23, any data and assumptions provided
by reliances were reviewed for reasonableness and consistency, and that supporting
documentation for the reliance on information provided by others is uploaded with the
bid.
Please refer to ASOP No. 23, Data Quality, and ASOP No. 41, “Actuarial Communications”,
for additional details regarding reliances. Also see Appendix B for information regarding
supporting documentation required for reliances.
If you have any questions regarding the CY2010 certification instructions, please contact the
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 A
Certification Module Access
Detailed instructions regarding how to apply for access to the CY2010 certification module
were released via HPMS on February 14, 2008.
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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, as required in these instructions for completing the bid pricing tool. Plan
sponsors must provide supporting documentation to support every bid, and additional
supporting documentation may be required when the bid is based upon a specific
assumption.
Unless otherwise noted, Plan sponsors must upload all required supporting documentation at
the time of initial bid submission. When required by the instructions, Plan sponsors must
prepare additional supporting documentation and make it readily available to CMS reviewers
upon request. Plan sponsors must follow all of the guidance on providing substantiation
contained in the INSTRUCTIONS FOR COMPLETING THE MEDICARE PRESCRIPTION
DRUG PLAN BID PRICING TOOL FOR CONTRACT YEAR 2010.
Supporting documentation requirements are the same regardless of the source of the
assumption, whether it was developed by the actuary, the Plan sponsor, 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 must be prepared to produce the
substantiation, even if it was prepared based on a reliance.
In preparing supporting documentation, the actuary must consider ASOP No. 31,
Documentation in Health Benefit Plan Ratemaking. In accord with Section 3.2 Extent of
Documentation, the materials provided must be written “with sufficient clarity that another
actuary practicing in the same field could make an objective evaluation of the
reasonableness of the work product.”
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.
Supporting documentation must:
•
•
•
•
Be clearly labeled and easily understood by CMS reviewers.
Include quantitative support and details, rather than just narrative descriptions of
assumptions.
Clearly identify if it is related to MA, Part D or both.
Include the Contract ID on the first page; however, plan and segment numbers may
be included in an attachment or a separate worksheet.
Acceptable forms of supporting documentation include, but are not limited to, the following
items:
• Meeting minutes from any discussions related to bid development.
• E-mail correspondence related to bid development.
• A complete description of data sources, for example, a 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 includes, but is not limited to, the following items:
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Appendix B
•
•
•
•
•
•
A reference to the supporting documentation for another plan such as “the same as
for Plan Hxxxx-xxx” and not the documentation itself.
The supporting
documentation for a plan must be self-contained.
General descriptions of pricing that do not include plan-specific information.
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. Upload 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 its inclusion in a bid that was 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 independent of prior bid filings.
Submitting Supporting Documentation
Supporting materials must be in electronic format (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, which compress multiple files into one file (.zip file extension). Also, one
file can be uploaded to multiple plans in HPMS by using the CTRL key when plans are
selected. However, documentation must not be uploaded to plans to which it does not
pertain. It is not acceptable to upload materials specific to PD plans, MA plans, or certain
Contract IDs to all plans.
Timing
Plan sponsors must upload all required supporting documentation into HPMS at the time of
the initial June bid submission.
Plan sponsors must also prepare additional supporting documentation so that it is readily
available to CMS reviewers upon request. The items specified are not required to be
uploaded with the initial June bid submission, but must be prepared around that time in order
to be readily available to provide. If substantiation is requested by CMS reviewers, it is
expected to be provided within 48 hours. These materials will be reviewed at audit. CMS
recommends that these materials be uploaded with the initial June bid submission.
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 with the bid form. The filename
must include the phrase “cover sheet.”
The cover sheet must include detailed information for each support item such as filename
and location within the file, if applicable. The cover sheet must clearly identify the ContractPlan IDs and whether the substantiation is related to MA, Part D or both.
Note that certain documentation requirements apply to every bid (for example, every bid
contains a risk score assumption), while other documentation requirements will apply only to
bids that contain certain assumptions (for example, manual rate documentation applies only
if a bid’s projection is based on manual rates). For documentation categories that apply to a
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Appendix B
subset of bids that contain a specified assumption, the cover sheet must not refer to a
“range” of Contract-Plan IDs (such as “Plans 001 – 030”, or “all plans under contract Hxxxx”).
For these items, the cover sheet should contain the exact Contract-Plan-Segment IDs to
which the documentation applies.
For subsequent substantiation uploads, the cover sheet must summarize the additional
documents uploaded at that time (i.e., the cover sheet should not be maintained as a
cumulative list). The subsequent cover sheets must also contain the exact Contract-Plan
IDs, rather than a “range” of Contract-Plan IDs.
Requirements
Documentation requirements that apply to all bids (as all bids contain the following
assumptions):
•
A cover sheet outlining the documentation files, as described above.
•
A product narrative that gives relevant information about plan design, the product
positioning in the market (i.e., high/low), changes in service area, type of coverage,
contractual arrangements, marketing approach and any other pertinent information
that would help expedite the bid review.
•
Support for non-benefit expense assumptions. The required elements include :
o
o
•
A summary of the non-benefit expenses by category of expense, or line item.
An analysis that demonstrates the development of each line item using relevant
data, assumptions, contracts, financial information, business plans and other
experience.
Justification of the gain/loss margin. The required elements include:
o
o
o
o
o
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) as applicable, other methodological illustrations. 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.
In future years, comparisons to the original business plan including details and
source of deviation from prior years’ plans.
•
Detailed support for the development of projected risk scores.
•
Detailed support for the development of credibility.
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Appendix B
The following is a checklist for required supporting documentation that Plan sponsors must
upload to HPMS with the initial June bid submission.
Part D Checklist for Required Supporting Documentation
Initial June Bid Submission - Required for all bids
Cover Sheet
Product Narrative
Part D Non-Benefit Expenses
Part D Gain/Loss Margins
Part D Risk Scores
Part D Credibility assumption
Initial June Bid Submission - Required for all bids that contain the specified
assumptions
Manual Rate Development
Part D - Disclosure of Related Party Agreements
Support for not using available PDE data in Worksheet 1
Input sheet for pricing models
Reliance Information
Part D Bid Audit Results (If applicable)
Upon Request by CMS Reviewers
Part D reconciliation of base period experience with company financial data
Part D support for projection assumptions
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Appendix B
The following is a sample cover sheet checklist for supporting documentation that Plan
sponsors must upload to HPMS with the initial June bid submission.
Supporting Documentation Cover Sheet
CY2010 Bid Submission
Organization Name: Health One
Contract(s): H1234, H9999, and S9999
Date: June 1, 2009
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Appendix B
Documentation
Requirement
Specific
Bid ID(s) or N/A
File Name
Location
within File
(if
applicable)
n/a
Applies
to: MA,
PD, or
both
both
Pages 2+
both
Sheet1
both
Cover Sheet
All bids
Product Narrative
All bids
MA and Part D NonBenefit Expenses
MA and Part D Gain/Loss
Margins
MA and Part D Risk
Scores
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)
All bids
Cover 6-108.doc
Cover 6-108.doc
AdminProfit.xls
All bids
AdminProfit.xls
Sheet2
both
All bids
Risk CY09.xls
both
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
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
MA Credibility assumption
if differs from CMS
guidelines
MA Significant NonCovered allowed costs, if
any
MA Adjustment to cost
sharing for OOP max
MA Cost sharing test, if
outside limits
MA ESRD subsidy
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
PD
N/A
N/A
N/A
N/A
Attachment E-2, CY2010 PD BPT Instructions PRA.doc
PD
Page 68 of 84
Appendix B
The following is a sample cover sheet checklist for supporting documentation that Plan
sponsors must upload to HPMS with subsequent substantiation uploads:
Supporting Documentation Cover Sheet #2
CY2010 Bid Submission
Organization Name: Health One
Contract(s): H1234, H9999, and S9999
Date: July 16, 2009
Documentation
Requirement
Cover Sheet
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
Location
within File (if
applicable)
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
H9999-001-0
H9999-001-0
S9999-001-0
Cover2 7-1608.doc
n/a
Applies
to: MA,
PD, or
both
both
E-mail1.doc
n/a
MA
Email2.doc
n/a
PD
H9999-001-0
S9999-001-0
Email3.doc
n/a
PD
File Name
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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 $295 and
$6,000;
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 CY 2006, CMS issued guidance that waives or modifies 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 apply, with the exception of those specifically waived.
For CY2010, CMS does not require a Part D bid pricing tool for employer/union only group
Plans.
For additional information on CY 2010 EGWP bidding policy, please refer to the CY 2010
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 years 2007 and 2008, 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. For contract year 2008, 40 percent of the
calculation was based on the uniform-weighting average and 60 percent was based on an
enrollment-weighted average. For contract year 2009 and beyond, the demonstration is no
longer in effect, and the 2010 benchmarks will be based on the 2009 enrollments applied to
the 2010 bids.
The following table illustrates the impact of the weighted enrollment methodology for two
enrollment periods, June 2007 and February 2008. The June 2007 enrollment shows the
basis of the actual 2008 benchmark calculation. Recall that the 2008 benchmark was
calculated as 40 percent of the uniform weighted approach, and 60 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 2008 enrollment. Since the 2010
benchmarks will be based on 2009 enrollment, these values may be useful for estimating the
2010 benchmarks. The final 2010 benchmarks will be based on the 2009 enrollments
applied to the 2010 bids. The left section of the table shows the actual 2008 benchmarks,
which were calculated based on June 2007 enrollment. The right section, titled “February
2008 Enrollment,” indicates how the 2008 benchmarks would have been calculated based on
more current enrollment data.
June 2007 Enrollment
2008
Demonstration
(40% uniform,
60% enrollment)
Uniform
Weighted
Approach
National
average
monthly bid
amount
80.52
Base
beneficiary
premium
Direct
subsidy
February 2008 Enrollment
Enrollment
Weighted
Approach
2008
Demonstration
(40% uniform,
60% enrollment)
Uniform
Weighted
Approach
Enrollment
Weighted
Approach
82.34
79.30
79.54
82.19
77.77
27.93
28.91
27.28
27.60
28.82
26.79
52.59
53.43
52.02
51.94
53.37
50.98
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Appendix D
This illustrative recalculation of the 2008 benchmarks with the revised weighting approach is
provided for the purpose of assisting plans in developing the projected 2010 national
average monthly bid amount and base beneficiary premium which will be used in the
calculation of the plan’s target premium. The final 2010 benchmarks will be based on the
2009 enrollments applied to the 2010 bids.
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Appendix E
Appendix E – Calculation of Low Income
Benchmark Premium Amounts
The Medicare Prescription Drug Improvement, and Modernization Act of 2003 (MMA) directs
CMS to use a weighted average to calculate the regional low-income benchmark premium
amounts used in the determination of the low-income premium subsidy amounts. In
determining the 2006 low-income benchmark premium amounts, PDPs were weighted
equally, MA-PD plans were assigned a weight based on prior enrollment as of March 31,
2005, and new MA-PD plans were assigned a zero weight. In 2007, under the “Medicare
Demonstration to Transition Enrollment of Low-Income Subsidy Beneficiaries,” CMS
calculated the regional low-income benchmark premium amounts using the same weighting
methodology applied in 2006, i.e., all PDP bids were weighted equally, and MA-PD bids
received weights based on plan enrollments in the reference month (June 2006).
For contract year 2008, CMS implemented a transition to the statutorily required weighting
such that the regional low-income benchmark premiums would experience a smaller
decrease. CMS calculated the 2008 regional benchmarks using a composite of the 2006
weighting approach (simple average) and the statutory weighting formula (weighted
average).
•
The first component, the simple average, was the same as the 2006 weighting
methodology for the regional low-income benchmark premium amount. The PDP
organization premium amounts for basic prescription drug coverage in each region
would be weighted equally and the MA-PD plan premiums, after the application of
Part A/B rebates, would be weighted based upon prior enrollment.
•
The second component was a weighted average of the premium amounts for each
PDP and MA-PD with a weighting based on each plan’s prior enrollment as a
percentage of all beneficiaries enrolled in those plans.
In 2008, 50% of the regional low-income benchmark amount was based on the first
component, the simple average, and 50% was based on the second component, the
enrollment weighted average.
In 2010, the “Medicare Demonstration to Transition Enrollment of Low-Income Subsidy
Beneficiaries,” and the de minimus policy will not be in effect. The regional low-income
benchmark amounts will be calculated based on the approach outlined in the recently
released final LIS rule, using a calculation that will be based on 100% of the weighted LIS
enrollments.
The following table illustrates the impact of calculating the regional low-income benchmark
amounts based on 100% of the weighted LIS enrollments for two enrollment periods, June
2007 and February, 2008.
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Appendix E
June 2007 Enrollment
February 2008 Enrollment
LIS
Uniform
Weighted
Enrollment
Enrollment
Weighted
Weighted
LIS
Uniform
Weighted
Enrollment
Weighted
Enrollment
Region
State(s)
1
NH, ME
$31.20
$30.08
$28.50
$31.77
$29.84
Weighted
$28.12
2
CT, MA, RI, VT
$30.34
$28.00
$28.77
$30.56
$26.37
$26.57
3
NY
$27.02
$21.33
$23.78
$27.48
$20.65
$23.58
4
NJ
$30.92
$31.53
$31.64
$31.35
$27.59
$27.05
5
DE, DC, MD
$31.12
$30.44
$28.25
$31.61
$30.03
$27.88
6
PA, WV
$28.19
$24.98
$27.15
$28.55
$24.50
$26.88
7
VA
$31.71
$30.34
$28.82
$32.29
$29.95
$28.11
8
NC
$33.63
$33.22
$30.93
$34.08
$32.62
$30.17
9
SC
$31.79
$30.44
$29.26
$32.23
$29.65
$27.96
10
GA
$31.31
$28.76
$27.13
$31.43
$28.01
$27.13
11
FL
$22.29
$16.03
$17.99
$22.29
$14.83
$19.57
12
AL, TN
$30.23
$26.35
$26.81
$30.66
$25.96
$26.20
13
MI
$31.15
$29.82
$29.66
$31.67
$28.71
$27.49
14
OH
$28.53
$25.11
$27.20
$28.87
$23.90
$25.57
15
IN, KY
$34.41
$32.58
$31.32
$34.80
$31.89
$30.46
16
WI
$32.35
$29.70
$31.02
$32.75
$26.78
$29.18
17
IL
$31.77
$28.74
$27.82
$32.17
$28.36
$27.08
18
MO
$29.58
$23.84
$25.82
$29.77
$22.73
$25.34
19
AR
$29.65
$25.73
$25.78
$30.17
$25.12
$24.74
20
MS
$32.68
$30.02
$29.40
$33.23
$29.22
$27.59
21
LA
$27.66
$21.58
$23.84
$27.76
$20.54
$25.12
22
TX
$26.85
$23.17
$23.77
$27.05
$22.14
$23.15
23
OK
$30.64
$25.44
$27.04
$31.03
$24.33
$25.49
24
KS
$32.57
$28.66
$29.45
$33.08
$27.16
$28.34
IA, MN, MT, ND,
NE, SD, WY
$32.00
$29.21
$28.08
$32.36
$25.61
$28.65
26
NM
$22.82
$15.73
$17.85
$23.43
$15.87
$17.39
27
CO
$27.51
$21.66
$26.78
$27.78
$20.31
$25.02
28
AZ
$20.43
$11.40
$17.10
$20.74
$11.51
$19.44
29
NV
$20.96
$12.31
$17.27
$21.37
$11.56
$18.76
30
OR, WA
$31.99
$28.38
$29.10
$32.51
$27.15
$28.74
31
ID, UT
$34.87
$32.18
$32.01
$35.06
$29.67
$30.50
32
CA
$23.18
$16.42
$21.21
$23.47
$15.47
$19.64
33
HI
$27.91
$20.72
$25.42
$28.31
$18.23
$22.02
34
AK
$34.86
$37.97
$37.87
$35.49
$35.17
$33.65
25
Footnote: All columns reflect the 2008 monthly National Average Bid Amount and Base Beneficiary Premium
Attachment E-2, CY2010 PD BPT Instructions PRA.doc
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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 CY2010 bid tools.
The CY2010 BPT Technical Instructions are located in HPMS under:
HPMS Home > Plan Bids > Bid Submission > CY2010 > 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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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 beneficiary premium amounts up to 25.5% of the
Basic Premium Calculation.
national average bid amount adjusted for reinsurance. Plan-specific premiums will equal the
basic beneficiary premium adjusted for 100% of the variation between the plan’s
standardized bid and the national average bid amount.
Catastrophic Threshold. Catastrophic coverage is triggered when the beneficiaries true
out-of-pocket (TrOOP) expenses equals the following:
1) For 2006 - $3600. For defined standard this amount will be reached when the
beneficiary true out-of-pocket (TrOOP) expenses equal $5100 in allowed costs.
2) For years subsequent to 2006 - The amount specified for the previous year,
increased by the annual percentage increase specified in the CFR and rounded to
the nearest multiple of $50.
Coinsurance and Co-payments. The standard drug coverage has beneficiary coinsurance
of 25% for spending above the deductible and up to the initial coverage limit ($250 to $2,250
in 2006). Plans providing basic coverage may require different coinsurance or copayments
that are actuarially consistent with an average cost sharing of 25%. Once the annual out-ofpocket (OOP) threshold is reached ($3600 in 2006), enrollees will pay the greater of (i) $2 for
generics/$5 for brand name drugs, or (i) 5% coinsurance.
Completion Factor. Adjusts for incurred but not reported expenses (IBNR).
Credibility. The determination of the appropriateness of a plans experience must include
the evaluation of whether the group included in the experience is consistent with the group
that the plan expects to cover. In addition, the experience must be representative of the
benefits that will be offered in the contract period. For example, a plan that will be offering
defined standard Part D coverage must have experience for a benefit with a gap in benefits
and catastrophic coverage for a population similar to the population they expect to be
covering.
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:
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)
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)
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
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
FPL & Assets
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 79 of 84
Glossary
(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.
Attachment E-2, CY2010 PD BPT Instructions PRA.doc
Page 84 of 84
| File Type | application/pdf |
| File Title | INSTRUCTIONS FOR COMPLETING THE MEDICARE PRESCRIPTION DRUG PLAN BID PRICING TOOL FOR CONTRACT YEAR 2009 |
| Author | CMS/OACT |
| File Modified | 2008-12-18 |
| File Created | 2008-10-03 |