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INSTRUCTIONS FOR COMPLETING
THE PRESCRIPTION DRUG PLAN
BID PRICING TOOL
FOR CONTRACT YEAR 2012
December 16, 2010
CMS-10142 (05/31/2011)
TABLE OF CONTENTS
I. Introduction.................................................................................................................................................... 4
Background .................................................................................................................................................... 4
Document Overview ...................................................................................................................................... 4
New for Contract Year 2012 (CY2012) ......................................................................................................... 4
Bidding Resources ......................................................................................................................................... 5
II. Pricing Considerations.................................................................................................................................. 6
Bidding/Pricing Approach ............................................................................................................................. 6
Specific Topics............................................................................................................................................... 6
III. Data Entry and Formulas .......................................................................................................................... 21
PD Worksheet 1 – Rx Base Period Experience................................................................................................ 24
Section I – General Information................................................................................................................... 24
Section II – Base Period Background Information ...................................................................................... 26
Section III – Part D Claims Experience ....................................................................................................... 27
Section IV – PMPM Non-Benefit Expenses ................................................................................................ 30
Section V – PMPM Premium Revenue ........................................................................................................ 30
Section VI – PMPM Income Statement Summary....................................................................................... 31
PD Worksheet 2 – PDP Projection of Allowed/Non-Benefit........................................................................... 32
Section I – General Information................................................................................................................... 32
Section II – Utilization for Covered Part D Drugs ....................................................................................... 32
Section III – Cost for Covered Part D Drugs ............................................................................................... 33
Section IV – Projected Allowed PMPM ...................................................................................................... 34
Section V – PMPM Non-Benefit Expense ................................................................................................... 35
Section VI – Development of Manual Rate ................................................................................................. 36
PD Worksheet 3 – Contract Period Projection for Defined Standard Coverage .............................................. 37
Section I – General Information................................................................................................................... 37
Section II – Projection Data ......................................................................................................................... 37
Section III – Part D Covered Drug Claims .................................................................................................. 37
Section IV – PMPM Non-Benefit Expense and Gain/Loss ......................................................................... 40
Section V – Defined Standard Coverage Bid Development ........................................................................ 40
PD Worksheet 4 – Standard Coverage with Actuarially Equivalent Cost Sharing .......................................... 42
Section I – General Information................................................................................................................... 42
Section II – Projection Data ......................................................................................................................... 42
Section III – Development of Bid for Defined Standard Coverage ............................................................. 42
Section IV – Development of Bid Components and Tests for Actuarial Equivalence................................. 42
Section V – Standard Coverage Bid Development with Actuarially Equivalent Cost Sharing ................... 43
PD Worksheet 5 – Alternative Coverage ......................................................................................................... 44
Section I – General Information................................................................................................................... 45
Section II – Projection Data ......................................................................................................................... 45
Section III – Development of Bid for Defined Standard Coverage ............................................................. 45
Section IV – Development of Bid Components ........................................................................................... 45
Section V – Development of Actuarial Equivalent Test .............................................................................. 46
Section VI – Tests for Alternative Coverage ............................................................................................... 46
Section VII – Development of Supplemental Premium ............................................................................... 47
Section VIII – Development of Induced Utilization Adjustment................................................................. 47
PD Worksheet 6 – Script Projections for Defined Standard, Actuarially Equivalent or Alternative
Coverage .................................................................................................................................................. 48
Section I – General Information................................................................................................................... 48
Section II – Projections for Equivalence Tests ............................................................................................ 48
PD Worksheet 7 – Summary of Key Bid Elements ......................................................................................... 55
CY2012 PRA PD BPT Instructions
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Section I – General Information................................................................................................................... 55
Section II – 2012 Defined Standard Benefit Parameters.............................................................................. 55
Section III – Summary of Key Bid Elements ............................................................................................... 55
Section IV – Part D Bid Pricing Tool Contacts and Date Prepared ............................................................. 56
Section V – Working Model Text Box ........................................................................................................ 57
IV. Appendices................................................................................................................................................ 58
Appendix A – Actuarial Certification .............................................................................................................. 58
Appendix B – Supporting Documentation ....................................................................................................... 61
General ......................................................................................................................................................... 61
Submitting Supporting Documentation........................................................................................................ 62
Part D Checklist for Required Supporting Documentation .......................................................................... 67
Sample Cover Sheet – Submitted with Initial Bid Upload........................................................................... 68
Sample Cover Sheet – Submitted as a Subsequent Substantiation Upload ................................................. 69
Sample Format for Reliance on Information Supplied by Others ................................................................ 69
Appendix C – Employer/Union-Only Group (EGWP) Requirements ............................................................. 70
Appendix D – Calculation of National Average Monthly Bid Amount ........................................................... 71
Appendix E – Calculation of Low-Income Benchmark Premium Amounts .................................................... 72
Appendix F – Impact of Health Care Reform on CY2012 Bids ...................................................................... 74
Provisions..................................................................................................................................................... 74
Pricing Considerations ................................................................................................................................. 74
Changes to the BPT...................................................................................................................................... 75
CY2012 PRA PD BPT Instructions
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INTRODUCTION
I. INTRODUCTION
BACKGROUND
Prescription Drug Plans (PDPs) and Medicare Advantage Prescription Drug Plans (MA-PDs)
must submit a separate bid to the Centers for Medicare & Medicaid Services (CMS) for each
prescription drug plan they intend to offer Medicare beneficiaries.
Organizations must submit the information via the CMS Health Plan Management System
(HPMS) in the CMS-approved electronic format–the Prescription Drug Bid Pricing Tool
(BPT). An actuarial certification and supporting documentation must be submitted for each bid
as described in Appendix A and Appendix B, respectively.
The submitted bids will be subject to review, negotiation, and audit by CMS. As part of the
negotiation process, CMS or its representative may request additional documentation
supporting the information in the BPT. Organizations must be prepared to provide this
information in a timely manner. All data submitted as part of the bid process are subject to
audit by CMS or by any person or organization that CMS designates.
DOCUMENT OVERVIEW
This document contains general pricing considerations and detailed instructions for completing
the BPT. Following are the contents of each section:
•
•
•
•
Section I, ―Introduction‖: contains a list of key changes from the CY2011 BPT and
Instructions and provides sources of information that can be accessed for assistance
during the bid submission process.
Section II, ―Pricing Considerations‖: contains guidance for preparing bids and
presenting pricing results in the BPT.
Section III, ―Data Entry and Formulas‖: contains directions for completing the seven
worksheets in the BPT and explains the formulas for calculated cells.
Section IV, Appendices A through F: contain requirements for Actuarial Certification,
Supporting Documentation, Employer/Union-Only Group Waiver Plans, Calculation of
the National Average Monthly Bid Amount, Calculation of the Low-Income
Benchmark Premium Amounts and Impact of Health Care Reform on CY2012 Bids,
respectively.
NEW FOR CONTRACT YEAR 2012 (CY2012)
The key changes between the CY2012 BPT and CY2011 BPT are highlighted below. The
changes improve the usability and functionality of the BPT and reflect updated regulatory
guidance.
See Appendix F – Impact of Health Care Reform on CY2012 Bids for the changes required to
accommodate the provisions of the Patient Protection and Affordable Care Act (PPACA) and
Health Care and Education Reconciliation Act of 2010 that apply to Part D bids.
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INTRODUCTION
BIDDING RESOURCES
•
•
•
•
•
•
The CY2012 Advance Notice may be found at
http://www.cms.gov/MedicareAdvtgSpecRateStats/Downloads/Advance2012.pdf
The CY2012 Call Letter and CY2012 Rate Announcement may be found at
http://www.cms.gov/MedicareAdvtgSpecRateStats/Downloads/Announcement2012.pdf
The CY2012 Actuarial Bid Training is offered as a web-based conference. The
conference materials, including slides and streaming video downloads, are available at
http://www.cms.gov/MedicareAdvtgSpecRateStats/09a_BidTrainingIntro.asp and
http://www.cms.gov/MedicareAdvtgSpecRateStats/09b_BidTraining2012.asp
For questions about the bid form, e-mail the CMS Office of the Actuary (OACT) at
[email protected].
OACT will host weekly technical user group calls regarding actuarial aspects of the
CY2012 bidding process. The conference calls will include live Question and Answer
sessions with CMS actuaries. The call-in information is as follows:
◦ Every Thursday from April 14 through June 2, 2011
◦ 11:00am – 12:30pm ET
For technical questions about the BPT, HPMS, or the upload process, refer to the
following resources:
◦ The Technical Instructions are located in HPMS, under HPMS Home > Plan
Bids > Bid Submission > CY2012 > Documentation > BPT Technical
Instructions
◦ The Bid Submission User’s Manual, also available in HPMS
◦ HPMS Help Desk: 1-800-220-2028 or [email protected]
CY2012 PRA PD BPT Instructions
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PRICING CONSIDERATIONS
II. PRICING CONSIDERATIONS
BIDDING/PRICING APPROACH
By statute, the bid must represent the revenue requirement of the expected population.
Therefore, in most circumstances, Part D sponsors must use credible bid-specific experience in
the development of projected allowed costs. This approach does not preclude Part D sponsors
from reaching specific benefit and premium goals; the gain/loss margin guidance allows
sufficient flexibility to achieve pricing targets provided that the overall margin meets the
requirements in the guidance and that anti-competitive practices are not used.
It is important to note the distinction between reporting base period experience data in
Worksheet 1 and projecting credible data for pricing. Base period experience must be reported
at the plan level if the plan existed in CY2010, regardless of the level of enrollment. This
experience must also be projected in Worksheet 2 and assigned an appropriate level of
credibility by the certifying actuary. Data may be aggregated for determining manual rates to
blend with partially credible projected experience rates or to account for significant changes in
enrollment from the base period to the contract year.
SPECIFIC TOPICS
Actuarial Equivalence
Actuarial equivalence must be demonstrated for plan benefit types other than Defined Standard
(DS).
When the plan benefit type is Actuarially Equivalent (AE), two tests must be satisfied on
Worksheet 4, Section IV, lines 16 and 17 to demonstrate actuarial equivalence:
•
•
The average coinsurance percentage for amounts between the deductible and the initial
coverage limit (ICL) must be actuarially equivalent to 25 percent.
The average coinsurance percentage above the catastrophic limit must be actuarially
equivalent to the percentage for DS coverage.
When the plan benefit type is Basic Alternative (BA) or Enhanced Alternative (EA), five tests
must be satisfied to demonstrate actuarial equivalence on Worksheet 5, Section VI, lines 1
through 5:
•
•
•
•
•
The value of total coverage is at least actuarially equivalent to DS coverage.
The alternative unsubsidized value of coverage is no less than the DS unsubsidized
value of coverage.
The average alternative benefits for beneficiaries with allowed drug costs at the ICL are
not less than the average DS benefits at the ICL.
The deductible is not greater than the DS deductible.
The average alternative catastrophic cost sharing is not greater than the average DS
catastrophic cost sharing.
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PRICING CONSIDERATIONS
Base Period Experience
The experience data must be based on a calendar year 2010 incurred period with at least 30
days of paid claim run-out; 2-3 months of paid claim run-out is preferable.
Worksheet 1 must be completed with data for the plan ID. Note that these data–
•
•
•
•
•
•
•
•
Must be submitted in Worksheet 1 for all plans with experience data for 2010,
regardless of the level of enrollment.
Must reconcile in an auditable manner to the plan-level Prescription Drug Event (PDE)
data submitted to CMS for payment and reconciliation and the Plan sponsor’s audited
financial statements. Some values may be estimated to account for unresolved events in
the effort to estimate the final PDEs used in the reconciliation.
Must be reported without adjustment. Adjustments may be made in Worksheet 2,
Sections II and III to accommodate population, benefit design or other changes from the
base period to the contract period.
May be reported in aggregate for a number of plans only when there are enrollment
changes associated with the dissolution of a plan and the retained members are crosswalked into existing plans in the same contract or across contracts. Each contract-plan
ID must be identified in Section II, line 6.
Must be provided for plans acquired by the Part D sponsor.
May not be used to aggregate data from a number of plans in order to achieve
credibility.
Must be reported in total at the plan level for every contract-plan ID when plans are
aggregated; do not include partial plan experience on Worksheet 1.
May be reported on more than one bid when plans are aggregated, depending upon the
mapping of enrollment.
Plan Terminations and Enrollment Shifts
The requirements for reporting base period data for plan terminations and enrollment
shifts are described below.
✓ Rule 1 – Plan Termination
When a plan is terminated and the members are retained and cross-walked into an
existing or new plan, the terminated plan’s base period experience must be reported in
Worksheet 1 of each plan into which the members are cross-walked. CMS allows data
for more than one plan to be aggregated in Worksheet 1 only in this circumstance. Note
that this rule applies when members are cross-walked within the same contract and
when members are cross-walked between contracts.
✓ Rule 2 – Shifts in Enrollment
When enrollment shifts among plans and the base period plan is offered in the contract
year, then the base period experience of the base period plan must only be reported in
Worksheet 1 of the base period plan.
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PRICING CONSIDERATIONS
✓ Rule 3 – Partial Experience
Base period experience must be reported in total at the plan level for every contract-plan
ID; do not include partial plan experience on Worksheet 1.
Example 1
A PDP offers plans 001 and 002 in CY2010 and plans 002 and 003 in CY2012.
Plan 001 terminates and the membership is cross-walked into plans 002 and 003 for
CY2012. Base period experience must be reported on Worksheet 1 of the CY2012
BPT as follows:
•
•
For plan 002, report aggregate base period experience for plans 001 and 002.
(Rule 1 and Rule 3)
For plan 003, report base period experience for plan 001. (Rule 1 and Rule 3)
Example 2
A PDP offers plans 001 and 002 in CY2010 and plans 002 and 003 in CY2012.
Plan 001 terminates and the membership is cross-walked into plan 003 for CY2012.
The current membership in plan 002 is expected to enroll in plan 003 in CY2012;
however, plan 002 is still offered in CY2012. Base period experience must be
reported on Worksheet 1 of the CY2012 BPT as follows:
•
•
For plan 002, report base period experience for plan 002. (Rule 2 and Rule 3)
For plan 003, report base period experience for plan 001. (Rule 1)
CY2012 PRA PD BPT Instructions
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PRICING CONSIDERATIONS
PDE Mapping
A mapping of PDE fields to required BPT inputs is provided in the following table.
Column
(f)
(g)
(i)
(j)
(k)
(l)
(m)
Mapping of Prescription Drug Events to Part D Claims Experience
in Worksheet 1, Section III
Field Name
PDE Reference Information
Count # of PDEs where (Ingredient
Cost + Dispensing Fee + Sales Tax +
Total Number of Scripts
Vaccine Administrative Fee) > Zero
Σ (Ingredient Cost + Dispensing Fee +
Sales Tax + Vaccine Administrative
Total Allowed Dollars
Fee)
Σ [Covered Plan Paid Amount (CPP)
+
Non-Covered Plan Paid Amount
(NPP) + Low-Income Cost Sharing
Average Paid Amount per Member
(LICS)] / Members
Σ [Patient Pay Amount + Other
TrOOP Amount + Patient Liability
Reduction due to other Payer Amount
Average Cost Sharing per Member
(PLRO)] / Members
Supplemental Cost-Share Reduction per
Σ [Non-Covered Plan Paid Amount
Member
(NPP)] / Members
Σ [Low-Income Cost Share (LICS)] /
Reimbursement for LIS per Member
Members
Σ {[Gross Drug Cost above Out-ofPocket Threshold (GDCA) with
Reimbursement for Federal Reinsurance per
Catastrophic Coverage Codes A or
Member
C]* 0.8} / Members
When using PDE data, actuaries must be familiar with the process by which the PDE
transactions are developed from claims data and with the timing of the adjustment and
deletion processes to ensure that the final transaction is accurately summarized. This
includes, but is not limited to, consideration of rejected PDEs that are expected to be
accepted by CMS upon resubmission, adjustments to Plan-to-Plan (P2P) transactions
and, if appropriate, transfer of over-the-counter (OTC) drug data from the base period
experience to the non-benefit expense component. It is important to note that a PDE
maps to one script throughout the BPT regardless of the number of days for which the
prescription is dispensed.
Coverage in the Gap
Under EA coverage, a Part D sponsor may reduce member cost sharing and/or provide
coverage for drugs that are statutorily excluded from the definition of a Part D covered drug.
One way for the Part D sponsor to reduce cost sharing is to provide partial or full coverage in
the gap–that portion of DS coverage between the ICL and true out-of-pocket (TrOOP)
threshold in which the cost sharing is 93 percent. While enhanced coverage in the gap is not
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PRICING CONSIDERATIONS
permitted to change the TrOOP threshold of $4,550 in CY2012, it will affect the point at which
the member reaches the TrOOP threshold for catastrophic coverage. This impact must be
modeled in Worksheets 5 and 6.
Credibility
Based on an application of classical credibility theory to Medicare Part D experience, CMS has
established a guideline for full credibility 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. This formula is a guideline; actuaries must consider the quality of the base
period experience when calculating credibility. Part D sponsors may use a different credibility
methodology only if the alternate method is consistently applied among all plans in the contract
and is deemed acceptable by CMS.
The certifying actuary must adhere to the following rules of overriding the CMS formula for
partial credibility:
•
If the CMS formula for partial credibility is applied to base period member months and
the resulting credibility is–
◦ Less than or equal to 20 percent (that is, 480 or fewer Part D member months),
then the actuary may override the computed credibility with 0 percent.
◦ Greater than or equal to 90 percent (that is, 9,720 or more Part D member
months), than the actuary may override the computed credibility with
100 percent.
The override is applicable only to the CMS credibility formula; it is not applicable to any
alternative credibility formula. If the certifying actuary overrides the CMS credibility, then the
override option must be applied consistently among all bids and cannot be applied selectively
to certain bids. If the certifying actuary proposes a variation to the override, then the alternate
credibility method proposal and documentation requirements apply.
When considering the credibility of plan experience, actuaries must consider ASOP No. 8,
Regulatory Filings for Health Plan Entities.
Decreased Initial Coverage Limit
Part D sponsors that are decreasing the ICL must modify the pricing of the benefit in the BPT.
Specifically:
✓ Worksheet 6, column k, lines 1 through 8 and 19 through 27
Enter the total cost sharing for allowed costs up to the DS ICL of $2,840 by point-ofsale and type of drug for each line. Total cost sharing is the sum of (i) the amounts
calculated based on the cost sharing structure of the alternative coverage up to the
decreased ICL and (ii) 100 percent of the allowed costs between the decreased ICL and
standard ICL.
Direct and Indirect Remuneration (DIR)
Part D sponsors must include all expected amounts that will be reported as DIR under ―Rebate‖
in the BPT. The DIR reported under ―Rebate‖ represents the Part D sponsor’s best estimate of
CY2012 PRA PD BPT Instructions
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PRICING CONSIDERATIONS
all DIR categories and amounts that they expect to report under the Part D payment
reconciliation process for the respective contract year.
Definition of Direct and Indirect Remuneration
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 pharmacy benefit managers (PBM), even if the price concessions
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 PBM receives from the sponsor for its services will be less,
since the sponsor will have received a price concession from the PBM. This price
concession is a retained rebate and thus must be reported as DIR for payment purposes.
In accordance with CMS guidance, Part D 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
experience as a result of these risk-sharing arrangements also constitute DIR that must
be reported to CMS. As with other types of DIR, the value can be negative.
Generic dispensing incentive payments, and any adjustments to generic dispensing
incentive payments made to pharmacies after the point-of-sale dispensing event, are
also considered DIR. Please note that generic dispensing incentive payments made to
the pharmacy at the point-of-sale are part of the dispensing fee reported on the PDE
record and therefore are not included in the DIR Report for Payment Reconciliation.
Gain/Loss Margin
Gain/loss margin refers to the additional revenue requirements beyond allowed prescription
drug costs and non-benefit expenses.
When Medicare benefits are funded by an outside source such as a state Medicaid program, the
gain/loss margin must be consistent for Medicare and the other funding source.
General Enrollment Plans and Institutional/Chronic Care SNPs:
Overall Medicare margin levels for general enrollment and institutional/chronic care
SNP plans are to be consistent with the Part D sponsor’s corporate requirement.
Overall Medicare margin levels may be determined either at the contract level or at a
more aggregated level.
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PRICING CONSIDERATIONS
The sponsor’s Medicare margin requirement, as measured by percentage of revenue, is
to be within a reasonable range, not to exceed plus or minus 1.5 percent 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 surplus requirements of the business.
The overall margin level expectations are 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, 3 to 5 years).
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, not to exceed plus or minus 1.5
percent, with any variation reflecting the different levels of financial risk for the two
components. The individual Part D margin of an MA-PD bid can either be the same for
all plans or vary by plan in relation to the MA margin.
There is flexibility in setting gain/loss margin at the plan level provided that the overall
margin meets CMS requirements, anti-competitive practices are not used, the plan
offers benefit value in relation to the margin level and negative margin satisfies the
requirements in this subsection.
For plans with negative margins, the Part D sponsor must develop and follow a business
plan to achieve profitability. CMS expects that in subsequent years the gain/loss margin
for the plan will meet or exceed the year-by-year gain/loss margin contained in the
original business plan. Exceptions to the business plan requirement are cases in which
multiple Part D products are offered in a given service area and the pricing reflects
implicit ―subsidies‖ across benefit or service area offerings–for example, a low benefit
plan with a positive margin is paired with a rich benefit plan with a negative margin
such that the combined gain/loss margin is positive and satisfies the guidance in this
subsection.
Note that exceptions to the business plan requirement do not include a positive margin
at the contract level or at a more aggregated level.
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.
Relationship of Margin Requirements and Non-Benefit Expenses:
The gain/loss margin may reflect revenue offsets not captured in non-benefit expenses
(such as investment expenses, income taxes and changes in statutory surplus) and may
also include investment income.
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PRICING CONSIDERATIONS
Impact of Health Care Reform on CY2012 Bids
See Appendix F for information concerning the provisions of the PPACA and Health Care and
Education Reconciliation Act of 2010, pricing considerations and changes to the BPT for
CY2012.
Non-Benefit Expenses
Non-benefit expenses are all administrative costs of operating the Medicare Prescription Drug
Plan.
The non-benefit expenses must be entered separately on the BPT for the following categories:
•
•
•
•
Marketing & Sales (for example, the cost of marketing materials, commissions,
enrollment packages, identification cards, and salaries of sales and marketing staff).
Direct Administration (for example, functions that are directly related to the
administration of the Medicare Prescription Drug Plan). Examples of Direct
Administration functions are as follows:
◦ Customer service.
◦ Billing and enrollment.
◦ Claims administration.
◦ True out-of-pocket (TrOOP) administration.
◦ Pharmacy benefit management administration, which includes all of the costs
for performing call center, claims, formulary management, network
development and rebate management functions incurred by the plan or through a
subcontractor.
◦ Crossover fees, which are paid to obtain information from other payers to
calculate TrOOP expenses.
◦ Medicare Part D user fees, which are $1.17 per-member per-year or $0.10 permember-per-month (pmpm) on a national basis for CY2012.
◦ Uncollected enrollee premium.
◦ Uncollected cost sharing, which includes plan liability resulting from cost
sharing not recovered in state-to-plan or plan-to-plan transactions.
◦ Medication therapy management programs.
◦ Disease management functions (such as patient education and disease
monitoring).
◦ Over-the-counter drugs.
Indirect Administration (for example, functions that may be considered ―corporate
services,‖ such as CEO, 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 appropriate, generally accepted accounting
principles (GAAP). For example, acquisition expenses and capital expenditures must be
deferred and amortized according to the relevant GAAP standards (to the extent that is
consistent with the organization’s standard accounting practices, if not subject to GAAP).
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PRICING CONSIDERATIONS
Also, acquisition expenses (marketing and sales) must be deferred and amortized in a manner
consistent with the revenue stream anticipated on behalf of the newly enrolled members.
Guidance on GAAP standards are promulgated by the Financial Accounting Standards Board
(FASB). Of particular applicability is FASB’s Statement of Financial Accounting No. 60,
Accounting and Reporting by Insurance Enterprises.
Costs not pertaining to administrative activities must be excluded from non-benefit expenses.
Such costs include goodwill amortization, income taxes, changes in statutory surplus,
investment expenses and the cost of lobbying activities. Similarly, non-insurance revenues
pertaining to investments and fee-based activities cannot be reflected in the bid. See the
announcement concerning lobbying activities released via an HPMS memorandum dated
October 16, 2009.
Start-up costs that are not considered capital expenditures under GAAP are reported as follows:
•
•
Expenditures for tangible assets (for example, a new computer system must be
capitalized and amortized according to relevant GAAP principles).
Expenditures for non-tangible assets (for example, salaries and benefits must be
reported in a manner consistent with the organization’s internal accounting practices
and the reporting of similar expenditures in other lines of business).
Non-benefit expenses that are common to offering an MA-PD must be allocated
proportionately between the Medicare Advantage and Part D BPTs.
When Medicare benefits are funded by an outside source such as by a state Medicaid program,
non-benefit expenses must be allocated proportionately between the Medicare revenue and the
other revenue source.
Related-Party Agreements
The level of disclosure of related-party agreements must demonstrate 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.
These requirements for related-party agreements apply to a Part D sponsor that enters
into any type of service agreement involving a parent company and subsidiary or
between subsidiaries of a common parent. CMS requires Part D sponsors to disclose all
related-party agreements at the time of bid submission and to prepare the bid in accord
with the guidance below for each related-party agreement identified.
A Part D sponsor in a related-party agreement with an organization that does not have
an agreement with an unrelated party must prepare the BPT in a manner that does not
recognize the independence of the subcontracted related party. A Part D sponsor in this
type of agreement must–
•
•
Disclose the related-party agreement to CMS at the time of bid submission.
Prepare the BPT in a manner that does not recognize the independence of the
subcontracted related party. For purposes of completing the BPT, the Part D
sponsor must consider the gain/loss and non-benefit expense of the related party
CY2012 PRA PD BPT Instructions
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PRICING CONSIDERATIONS
•
•
to be those of the sponsor. The Part D 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 these Instructions.
Support the development of the gain/loss and the actual costs associated with the
non-benefit expense as required by these Instructions.
A Part D sponsor in a related-party agreement with an organization that has an
agreement with an unrelated party must either (i) demonstrate that fees associated with
the sponsor’s related-party transaction are comparable to the fees between the relatedparty organization and other related parties of similar size and market position to the
Part D sponsor, or (ii) prepare the BPT in a manner that does not recognize the
independence of the subcontracted related party.
To demonstrate that fees associated with a related-party transaction are comparable to
the fees between the related-party organization and other unrelated parties of similar
size and market position, a Part D sponsor must–
•
•
•
Disclose the related-party agreement to CMS at the time of bid submission.
Provide a written document at the time of bid submission fully explaining the
manner in which the terms of one or more of the agreements between the
related-party organization and other unrelated parties and the associated fees are
comparable.
Prepare the BPT in a manner that recognizes the independence of the
subcontracted related party by allocating all administrative costs in the relatedparty agreement to non-benefit expense.
A Part D sponsor in a related-party agreement with an organization that has an
agreement with an unrelated party and chooses to prepare the BPT in a manner that
does not recognize the independence of the subcontracted related party must–
•
•
•
•
Disclose the related-party agreement to CMS at the time of bid submission.
Prepare the BPT in a manner that does not recognize the independence of the
subcontracted related party. For purposes of completing the BPT, the Part D
sponsor must consider the gain/loss and non-benefit expense of the related party
to be those of the sponsor. The Part D 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 these Instructions.
Support the development of the gain/loss and the actual costs associated with the
non-benefit expense as required by these Instructions.
To satisfy proprietary concerns, CMS can initiate separate contact with the Part D
sponsor and subcontracted related party when addressing related-party issues in the bid.
Part D 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.
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PRICING CONSIDERATIONS
Regardless of the bidding approach, Part D sponsors must substantiate all information
presented in the BPT pertaining to related-party agreements even when that information
is held by the related party.
Non-Uniform Deductible
Part D sponsors that are implementing a deductible that is not applied consistently among all
formulary tiers (for example, $0 deductible for Tier 1 – Generics and $310 deductible for all
other tiers) must modify the pricing of the benefit in the BPT. Specifically:
✓ Worksheet 5
Enter ―$0‖ in cell D39 and F41.
✓ Worksheet 6
Reflect the impact of the non-uniform deductible in addition to the cost sharing required
after the deductible is met in the applicable cost-sharing categories by point-of-sale and
type of drug.
PBM Pricing
For CY2012, Part D sponsors must develop their Part D bids using the pass-through price or
negotiated amount paid to the dispensing provider at the point-of-sale as the basis for drug
costs. For Part D sponsors that are contracted with a PBM, the following provisions apply: (i)
when contracted under a lock-in pricing approach, the administrative expense component of the
bid must reflect the expected difference between the lock-in price, or amount negotiated with
the PBM, and pass-through price (this difference is referred to as the risk premium or PBM
spread) and (ii) when the PBM retains a portion of the rebates, the administrative expense
component of the bid must include these costs.
Risk Score Development for CY2012
The projected CY2012 risk score must–
•
•
•
•
•
•
Be based on the Part D RxHCC model used in payment year 2012.
Reflect plan-specific coding trend.
Reflect population changes.
Reflect diagnoses missing from data.
Be adjusted for normalization.
Be consistent with the development of the projected pharmacy expenses.
Risk Score Definitions and Information Sources
Part D RxHCC Risk Model
The Part D RxHCC risk model was updated for CY2012. Diagnosis data from CY2008
was used to predict CY2009 expenditures; the denominator year is CY2009. Additional
information on the Part D RxHCC model, including the 2012 normalization factor, is
contained in the CY2012 Payment Notice.
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PRICING CONSIDERATIONS
Missing Diagnosis Adjustment Factor
The updated Part D RxHCC risk model reflects a clinical revision of the diagnoses
included in Rx hierarchical condition categories (RxHCCs). The risk scores provided
by CMS exclude diagnoses mapped in the new risk model to RxHCCs for which ICD-9
codes have not been collected from Plan sponsors. CMS will provide an adjustment
factor for Plan sponsors to account for this missing data in the technical notes that
accompany the beneficiary level files
Normalization Factor
At time of payment, the risk scores for each plan enrollee will be adjusted by the Part D
normalization factor, which is 1.029 for CY2012. This adjustment accounts for the
actual program risk score experience and the expected increase in coding reflected in
the risk scores for the contract year versus the model calibration year. Accordingly, the
projected risk scores for CY2012 bids must reflect the 1.029 normalization factor.
Risk Adjustment Information Sources
The following materials can be found under the ―Medicare Advantage Rates and
Statistics‖ page of the CMS website at
http://www.cms.gov/MedicareAdvtgSpecRateStats/:
•
•
―Advance Notice of Methodological Changes for Calendar Year (CY) 2012 for
Medicare Advantage (MA) Capitation Rates, Part C and Part D Payment Policies and
2012 Call Letter‖
―Announcement of Calendar Year (CY) 2012 Medicare Advantage Capitation Rates
and Medicare Advantage and Part D Payment Policies‖
See the links under ―Risk Adjustment‖, ―Announcements & Documents‖, and
―Ratebooks & Supporting Data‖.
Additional information on the risk adjustment process can be found under
http://www.csscoperations.com/new/usergroup/traininginfo.html
Risk Score Calculation Approaches
Preferred Methodology
The preferred method for projecting the 2012 risk scores is use of the Part D RxHCC
risk scores for the risk model provided by CMS in—
•
•
The plan-level data for the July 2010 enrollee cohort with retroactive enrollment and
status adjustments, or
The beneficiary-level file with twelve months of 2010 membership with retroactive
enrollment adjustments and status adjustments.
These data are 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
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PRICING CONSIDERATIONS
score data posted in HPMS are accompanied by technical notes to assist actuaries with
understanding the material presented.
There are several advantages to using the 2010 Part D RxHCC risk scores in the
projection of the CY2012 risk score:
•
•
•
•
They are consistent with the base-period prescription drug expenses.
They require no adjustment for seasonality.
They reflect the most complete MA diagnosis data for 2009 dates of service submitted
through January 31, 2011, which is the final reporting deadline for this period.
They are based on the latest risk model.
Please note that since the HPMS reported scores are based on a mid-year cohort or a full
calendar year data with nearly complete run-out, they do not require explicit adjustment
for (i) transition from lagged to non-lagged diagnosis data, (ii) incomplete reporting of
diagnosis data, and (iii) seasonality. However, the starting risk score is to be projected
from 2010 to 2012 with explicit adjustment for the following factors, as appropriate:
•
•
•
•
Plan-specific coding trend.
Changes in plan population.
Missing diagnosis data.
Other appropriate factors.
Finally, the projected risk scores must be normalized by dividing by the 2012 Part D
normalization factor.
Alternate Approaches
An alternate method for the development of risk scores may be appropriate if the plan
was first offered in 2011, if there was limited enrollment in 2010, or if there were
significant changes in plan or enrollment characteristics between 2010 and 2011.
If a Plan sponsor chooses to develop its risk score by using a methodology different
from that preferred by CMS, then depending on the starting point, the following
adjustments must be considered:
•
•
•
Conversion to a raw risk score.
◦ If the starting risk score is normalized, as it is when beginning with MMR
data, then the certifying actuary may consider converting the starting risk
score to a raw (un-normalized) risk score before making other adjustments.
Impact of lagged versus non-lagged diagnosis data.
◦ If the starting risk score is based on lagged diagnosis data, as it is when the
starting point is the March 2011 MMR data (which has risk scores based on
the July 2009 to June 2010 diagnosis data), then an adjustment is required to
transition the scores from lagged to non-lagged.
Run-out of diagnosis data.
◦ If the starting risk score is based on incomplete diagnosis data, as it may be
when the starting point is MMR data or diagnosis data, then an adjustment
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PRICING CONSIDERATIONS
•
•
•
•
•
factor is required to transition the scores from incomplete to complete
diagnosis data.
Seasonality.
◦ If the starting risk score is based on membership that is other than the July
cohort or a full calendar year cohort, then an adjustment for enrollment
seasonality must be made.
Risk model change.
◦ If the starting risk scores are calculated using a risk model other than the risk
model to be used for CY2012 payments, then an adjustment for the risk
model change must be made. The adjustment must include accounting for
diagnoses that are missing from older risk models.
Plan-specific coding trend.
Population changes.
Other appropriate factors.
Once projected to CY2012, the scores must be normalized by dividing by the 2012 Part
D normalization factor. Note that, if you are normalizing a nominal or actual risk score
associated with a different model calibration year, the CY 2012 Part D normalization
factor is not the appropriate normalization factor.
Supporting documentation that clearly demonstrates consistency with the preferred
approach is required.
Manual Rating Approach
For plans that are priced using a manual rating approach, risk scores must be estimated
based on the expected pharmacy expenses for their projected enrollees. Further, the risk
scores for new plans must be developed in a manner consistent with the latest Part D
RxHCC model.
Supporting Documentation
In addition to the BPT and actuarial certification, organizations must submit supporting
documentation for every bid. See Appendix B for a description of the supporting
documentation requirements, including content, quality and timing.
Types of Part D-Covered Drugs
Brand Drugs
Brand drugs consist of (i) single-source drugs with no generic equivalent that were
FDA-approved under an original new drug application (NDA) and (ii) innovator multisource drugs that were originally marketed under an original NDA and that now have
generic equivalents.
Preferred/Non-Preferred Brand Drugs
Brand 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
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PRICING CONSIDERATIONS
category. Brand drugs that are positioned in a less favorable position on the formulary
should be allocated to the non-preferred brand category in the BPT.
Generic Drugs
Non-innovator multi-source drugs are generic drugs.
Specialty Drugs
Specialty drugs are reported separately only when a plan utilizes a designated Specialty
tier in the formulary and PBP in accord with CMS guidelines. The CMS guidelines
require that (i) only one tier be designated a Specialty tier, (ii) only Part D-covered
drugs with plan-negotiated prices greater than $600 per month be placed in the tier, and
(iii) cost sharing associated with that tier be limited to 25 percent in the initial coverage
range when the plan has the standard deductible, which is $310 for CY2012. When the
plan has a decreased or no deductible, then an actuarially equivalent coinsurance is
permitted.
When a designated Specialty tier is used, all drugs in that tier must be reported by pointof-sale in Worksheet 2 and Worksheet 6 of the BPT. The drugs in the Specialty tier
must not be sorted by type of drug status and must not be reported as a component of
the generic, preferred brand and non-preferred brand drugs in the non-Specialty tiers.
When a designated Specialty drug tier is not used in the formulary and PBP, Specialty
drugs must be sorted by generic, preferred brand and non-preferred brand status and
must be reported in these categories by point-of-sale. In this situation, the Specialty
categories in Worksheet 2 and Worksheet 6 are not completed.
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DATA ENTRY & FORMULAS
III. DATA ENTRY AND FORMULAS
This section includes line-by-line instructions for completing the Part D BPT. It also describes
the formulas for calculated cells.
Prescription Drug
To complete the Part D bid form, Part D sponsors must provide a series of data entries on the
appropriate BPT worksheets. The number of inputs depends on the type of plan being offered
and the length of time it has had a contract with CMS, among other factors.
The Part D bid form is organized as outlined below:
Worksheet 1 – Rx Base Period Experience
Worksheet 2 – PDP Projection of Allowed/Non-Benefit
Worksheet 3 – Rx Contract Period Projection for Defined Standard Coverage
Worksheet 4 – Rx Standard Coverage with Actuarially Equivalent Cost Sharing
Worksheet 5 – Rx Alternative Coverage
Worksheet 6 – Rx Script Projections for Defined Standard, Actuarially Equivalent or
Alternative Coverage
Worksheet 7 – Summary of Key Bid Elements
All Part D sponsors must complete Section I of Worksheet 1; completion of subsequent
sections of the BPT is based on the plan benefit type being offered. The worksheets and
sections that must be completed for each plan benefit type are defined below.
Defined Standard Coverage
✓ Worksheet 1
For plans with claims experience in CY2010, complete all sections; for new plans in
CY2012, complete Section I.
✓ Worksheet 2
For plans with fully credible claims experience in CY2010, complete Sections II, III
and V; for plans with partially credible claims experience in CY2010, complete all
sections. For new plans in CY2012, complete Section IV.
✓ Worksheet 3
Complete all sections for all plans.
✓ Worksheet 6
Complete columns f, g, and h of Section II for all plans.
✓ Worksheet 7
Complete all sections for all plans.
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DATA ENTRY & FORMULAS
Actuarially Equivalent Coverage
✓ Worksheet 1
For plans with claims experience in CY2010, complete all sections; for new plans in
CY2012, complete Section I.
✓ Worksheet 2
For plans with fully credible claims experience in CY2010, complete Sections II, III
and V; for plans with partially credible claims experience in CY2010, complete all
sections. For new plans in CY2012, complete Section IV.
✓ Worksheet 3
Complete all sections for all plans.
✓ Worksheet 4
Complete all sections for all plans.
✓ Worksheet 6
Complete all columns of Section II for all plans.
✓ Worksheet 7
Complete all sections for all plans.
Basic and Enhanced Alternative Coverage
✓ Worksheet 1
For plans with claims experience in CY2010, complete all sections; for new plans in
CY2012, complete Section I.
✓ Worksheet 2
For plans with fully credible claims experience in CY2010, complete Sections II, III
and V; for plans with partially credible claims experience in CY2010, complete all
sections. For new plans for CY2012, complete Section IV.
✓ Worksheet 3
Complete all sections for all plans.
✓ Worksheet 5
Complete all sections for all plans.
✓ Worksheet 6
Complete all columns of Section II for all plans.
✓ Worksheet 7
Complete all sections for all plans.
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DATA ENTRY & FORMULAS
Data Entry
Do not leave a field blank to indicate a zero amount. If zero is the intended value, then enter a
―0‖ in the cell.
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WORKSHEET 1
PD WORKSHEET 1 – RX BASE PERIOD EXPERIENCE
Worksheet 1 contains general information about the plan and summarizes the base period Rx
experience. Specifically, Section I collects general information about the plan that is displayed
on all Part D BPT worksheets. Section II collects base period background information;
Section III summarizes the base period Rx experience. Sections IV and V summarize
components of the base period non-benefit expense and premium revenue, respectively.
Section VI is an Income Statement Summary.
Section I must be fully completed for all plans. (Note that some fields may be pre-populated by
the Plan Benefit Package (PBP) software.) Sections II through VI must be completed for all
plans with experience data for 2010 regardless of the level of enrollment.
SECTION I – GENERAL INFORMATION
The fields of Section I have been formatted as the ―General‖ format in Excel to support the link
functionality to other spreadsheets. Therefore, certain numeric fields, such as Plan ID,
Segment ID and Region Number, must be entered as text–that is, using a preceding
apostrophe–and must include any leading zeros.
Line 1 – Contract Number
Enter the contract number for the plan. The designation begins with a capital letter H (local
plan), R (regional Preferred Provider Organization plan), or S (Prescription Drug Plan) and
includes four Arabic numerals (for example, H9999, R9999, S9999). Include all leading zeros
(for example, H0001).
Line 2 – Plan ID
The plan ID and corresponding contract number form a unique identifier for the PBP being
priced in the bid form. Plan IDs contain three Arabic numerals. This field must be entered as a
text input and must include any leading zeros.
Line 3 – Segment ID
If the bid is for a ―service area segment‖ of a local plan, enter the segment ID. This field must
be entered as a text input and must include any leading zeros.
Line 4 – Contract Year
The cell is pre-populated with the calendar year to which the contract applies.
Line 5 – Organization Name
Enter the organization’s legal entity name. This information also appears in HPMS and in the
PBP.
Line 6 – SNP
If the plan is a Special Needs Plan (SNP), enter ―Y‖. Otherwise, enter ―N‖.
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WORKSHEET 1
Line 7 – Plan Name
Enter the name of the PBP. This information also appears in HPMS.
Line 8 – Plan Type
Enter the type of Part D plan. The valid options are listed in the table below.
Type of Plan
Local Coordinated Care Plans:
Health Maintenance Organization (HMO)
Religious Fraternal Benefit HMO
Religious Fraternal Benefit HMO with a Point-of-Service (POS)
Option
HMO with a POS Option
Provider-Sponsored Organization (PSO) with a State License
Religious Fraternal Benefit with a State License
Preferred Provider Organization (PPO)
Religious Fraternal Benefit PPO
Regional Coordinated Care Plan:
Regional Preferred Provider Organization (RPPO)
Private Fee-for-Service Plans:
Private Fee-for-Service Plan (PFFS)
Religious Fraternal Benefit PFFS
Employer/Union-Only Direct Contract PFFS
Prescription Drug Plans:
Medicare Prescription Drug Plan (PDP)
Fallback Plan
Demonstration Plans:
Continuing Care Retirement Community (CCRC)
National PACE
End-Stage Renal Disease (ESRD) I
ESRD II
1876 Cost
1833 Cost
Plan Type Code
HMO
RFB HMO
RFB HMO POS
HMO POS
PSO State License
RFB PSO State License
LPPO
RFB LPPO
RPPO
PFFS
RFB PFFS
ED PFFS
PDP
Fallback
CCRC
PACE
ESRD I
ESRD II
1876 Cost
1833 Cost
Line 9 – Enrollee Type
If the plan covers enrollees eligible for both Part A and Part B of Medicare, enter ―A/B‖. If the
plan covers enrollees eligible for Part B only, enter ―Part B Only‖. When the plan type is
―PDP‖ or ―Fallback‖, then the enrollee type cell is white and locked; no input is required.
Line 10 – PD Region
Enter the region number of the region the plan will cover. This field must be entered as a text
input and must include any leading zeros.
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WORKSHEET 1
The valid entries are shown in the following table:
Region
01
02
03
04
05
06
07
08
09
10
11
12
13
14
15
16
17
18
Description
Maine and New Hampshire
Connecticut, Massachusetts,
Rhode Island and Vermont
New York
New Jersey
Delaware, District of Columbia
and Maryland
Pennsylvania and West Virginia
Virginia
North Carolina
South Carolina
Georgia
Florida
Alabama and Tennessee
Michigan
Ohio
Indiana and Kentucky
Wisconsin
Illinois
Missouri
Region
19
20
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
Description
Arkansas
Mississippi
Kansas
Iowa, Minnesota, Montana,
Nebraska, North Dakota, South
Dakota and Wyoming
New Mexico
Colorado
Arizona
Nevada
Oregon and Washington
Idaho and Utah
California
Hawaii
Alaska
American Samoa
Guam
Northern Mariana Islands
Puerto Rico
Virgin Islands
Line 11 – Plan Benefit Type
Enter the plan benefit type that identifies the type of coverage in the PBP. The valid options
are ―DS‖ for Defined Standard, ―AE‖ for Actuarially Equivalent, ―BA‖ for Basic Alternative
and ―EA‖ for Enhanced Alternative.
SECTION II – BASE PERIOD BACKGROUND INFORMATION
Line 1 – Time Period Definition
Enter the incurred dates of the base period data on the first two lines and the paid through date
on the third line. For example, if the data reflect claims paid through February 2011, then the
paid through date is 2/28/2011.
Line 2a – Total Member Months
Enter the total member months represented in the base period experience based on CMS
eligibility records.
Line 2b – LIS Member Months
Enter the number of low-income subsidy (LIS) member months represented in the base period
experience based on CMS eligibility records.
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WORKSHEET 1
Line 3 – Risk Score
Enter the normalized risk score, estimated to three decimal places, for the population
represented in the base period data using the Part D RxHCC risk model that was in place for the
payment year.
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
Enter the option that corresponds to the network pricing that was in effect in the base period.
The valid options are ―pass-through‖ or ―lock-in‖.
Line 6 – Mapping
Enter the contract and plan ID (in the format H9999-999) of the plan reported in Section III in
the first column. With the exception of plan ID changes and/or plan mergers, CMS expects that
the contract and plan ID for the base period experience will be the same as that shown in
Section I. Enter the corresponding number of member months in the second column.
Line 7 – Base Period Experience Description
Use the text box to briefly describe the base period data reported in Section III.
SECTION III – PART D CLAIMS EXPERIENCE
Lines 1 through 11 include experience relating to Part D-covered drugs only. Lines 12 through
14 include experience for drugs that are covered by the plan but are not Part D-covered drugs at
the time they are dispensed.
Lines 1 through 5:
✓ Column d – Number of Members
Enter the number of members with total allowed claims in the allowed claim interval
defined for each line. For example, if 7,000 members had total allowed claims between
$296 and $2,700, then enter ―7,000‖ in line 3, column d.
✓ Column e – Member Months
Enter the number of member months associated with the number of members in
column d for each line.
✓ Column f – Total Number of Scripts
Enter the number of prescriptions filled for Part D-covered drugs for the members in
column d for each line.
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WORKSHEET 1
✓ Column g – Total Allowed Dollars
Enter the total allowed dollars for the prescriptions filled for the members in column d
for each line. Total allowed dollars are defined as ingredient cost plus dispensing fee,
plus sales tax where applicable, plus the vaccine administration fees, prior to the
application of any rebates recovered after the point-of-sale.
✓ Column h – Average Allowed Amount per Member
The value is calculated automatically in the BPT as column g divided by column d for
each line.
✓ Column i – Average Paid Amount per Member
Enter the result of dividing the total dollars paid by the plan for the members in
column d by the number of members in column d. Total paid dollars are defined as
basic and supplemental payments for Part D-covered drugs and are not net of rebates,
low-income subsidy payments or federal reinsurance.
✓ Column j – Average Cost Sharing per Member
Enter the average cost sharing per member for Part D-covered drugs for the members in
column d for each line.
✓ Column k – Supplemental Cost-Sharing Reduction per Member
Enter the average value of supplemental cost sharing per member for Part D-covered
drugs for members in column d for each line.
✓ Column l – Reimbursement for Low-Income Cost-Sharing Subsidy per Member
Enter the average low-income cost-sharing subsidy amount received and receivable for
the members in column d for each line.
✓ Column m – Reimbursement for Federal Reinsurance per Member
Enter the average federal reinsurance amount received and receivable for the members
in column d for each line.
✓ Column n – Net Plan Responsibility per Member
The value is calculated automatically in the BPT as column i minus the sum of
columns j through m for each line.
Line 6, columns d through n – Subtotal
The values are calculated automatically in the BPT as the sum of lines 1 through 5 for
columns d through g and as the weighted average based on the number of members in column d
of lines 1 through 5 for columns h through n.
Line 7 – Percentage OON
✓ Column g
Enter the percentage of total allowed dollars in line 6 for prescriptions filled at out-ofnetwork (OON) pharmacies.
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WORKSHEET 1
✓ Column i
Enter the percentage of average paid dollars in line 6 for prescriptions filled at OON
pharmacies.
✓ Column j
Enter the percentage of average cost sharing per member in line 6 for prescriptions
filled at OON pharmacies.
Line 8, column i and columns k through n – PMPM Values
They are calculated automatically by the BPT as the result of the subtotal of the column in line
6 divided by the number of member months in column d.
Line 9 – Minus Rebates
✓ Column g
Enter the total amount of rebates received for the claims in lines 1 through 5. Total
rebates include all direct and indirect remuneration received after the point-of-sale
transaction and must be allocated to the plan using a methodology that represents the
manner in which the rebates were generated.
✓ Column i
The value is calculated automatically in the BPT as column g divided by line 6,
column e.
✓ Column m
Enter the amount of rebates attributable to the federal reinsurance amount in line 6.
✓ Column n
The value is calculated automatically in the BPT as column i minus the sum of
columns k through m.
Line 10 – Plus Part D as Secondary
✓ Column g
Enter the total amount of payments for Part D-covered drugs for which the Part D plan
is the secondary payer.
✓ Column i
The value is calculated automatically in the BPT as column g divided by line 6,
column e.
✓ Column n
The value is calculated automatically in the BPT as column i minus the sum of
columns k through m.
Line 11, columns i and k through n – Net Average Paid Amount PMPM
The values are calculated automatically in the BPT as line 8 minus line 9 plus line 10.
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WORKSHEET 1
Line 12 – Non-Covered Supplemental Drugs
✓ Column g
Enter the total amount of claims for prescription drugs that are covered by the plan but
are not Part D-covered drugs.
✓ Column i
The value is calculated automatically in the BPT as column g divided by line 6,
column e.
Line 13, column i – Rebates on Supplemental Drugs
Enter the total amount of rebates received for the claims in line 12. Total rebates include
all direct and indirect remuneration received after the point-of-sale transaction and must
be allocated to the plan using a methodology that represents the manner in which the
rebates were generated.
Line 14, columns I and n – Net PMPM on Supplemental Drugs
The value in column i is calculated automatically in the BPT as line 40 minus line 41 and is
carried to column n.
SECTION IV – PMPM NON-BENEFIT EXPENSES
Section IV summarizes all administrative expenses associated with the operation of the
prescription drug plan in the base period, including any expenses that were offset by direct or
indirect remuneration.
Lines 1 through 4, column e – Basic
Enter the sales and marketing, direct administration, indirect administration and net cost of
private reinsurance average pmpm amounts for basic coverage on lines 1 through 4,
respectively. Include uncollected enrollee premium, uncollected cost sharing and OTC drugs in
direct administration.
Lines 1 through 4, column f – Supplemental
Enter the sales and marketing, direct administration, indirect administration and net cost of
private reinsurance average pmpm amounts for supplemental coverage on lines 1 through 4,
respectively.
Lines 1 through 4, column g and line 5 – Total Non-Benefit Expenses
The values are calculated automatically in the BPT as the sums of columns e and f.
SECTION V – PMPM PREMIUM REVENUE
Section V summarizes the components of premium revenue of the prescription drug plan for
the base period.
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WORKSHEET 1
Lines 1 through 4, column e – Basic
Enter the CMS Part D direct subsidy payment, low-income premium subsidy, member
premium and member penalty premium average pmpm amounts for basic coverage on lines 1
through 4, respectively. The direct subsidy amount must account for the final risk-adjusted
reconciliation payment for CY2010 which will be received in mid-2011.
Line 3, column f – Supplemental
Enter the member premium average pmpm amount for supplemental coverage on line 3.
Lines 1 through 4, column g and line 5 – Total Premium
The values are calculated automatically in the BPT as the sums of columns e and f.
SECTION VI – PMPM INCOME STATEMENT SUMMARY
Section VI is a summary of the prescription drug plan’s income, including the amount of MA
rebate allocable to Part D when applicable, for the base period.
Lines 1 through 9, column m
Enter in line 4 the average pmpm amount of the MA rebate dollars used to buy down the Part D
premium in line 4. The values in lines 1 through 3 and lines 5 through 9 are carried from other
sections in Worksheet 1 or are calculated automatically in the BPT as sums or differences in
column m.
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WORKSHEET 2
PD WORKSHEET 2 – PDP PROJECTION OF ALLOWED/NONBENEFIT
Worksheet 2 projects the base period experience to the contract year, blending with a
manual rate when the base period experience is not fully credible, by point-of-sale and
type of drug. Specifically, Section I displays general information about the plan.
Sections II and III summarize the base period and contract period utilization per
1,000 members and allowed costs per script and the components of utilization and cost
trends. Section IV blends the projected allowed costs with a manual rate based on the
plan’s credibility. Section V summarizes the components of non-benefit expense in the
base and contract periods. Section VI is a text box for entering a description of the
development of the manual rate.
SECTION I – GENERAL INFORMATION
This section displays the information entered on Worksheet 1, Section I.
SECTION II – UTILIZATION FOR COVERED PART D DRUGS
Lines 1 through 8 – Base Period
✓ Column e – Number of Scripts/1000
Enter the number of prescriptions that were filled in the base period, expressed as
annual prescriptions per 1,000 members, by point-of-sale (retail or mail order)
and type of drug (generic, preferred brand, non-preferred brand or Specialty) for
each line.
✓ Column f – Allowed per Script
Enter the average allowed amount per script by type of script filled in the base
period for each line. Allowed amount is defined as the ingredient cost plus the
dispensing fee, plus state sales tax where applicable, plus the vaccine
administration fee, prior to the application of any rebates recovered after the
point-of-sale.
✓ Column g – PMPM
The value is calculated automatically in the BPT as column e times column f
divided by 12,000 for each line.
Lines 1 through 8 – Components of Utilization Change
✓ Column h – Trend in Scripts/1,000
Enter the utilization trend factor by type of script to project scripts/1,000 to the
contract period for each line.
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WORKSHEET 2
✓ Column I – Formulary Change
Enter the factor that represents the impact on utilization of changes in the
formulary, including the addition, deletion or reclassification of drugs by type of
script for each line.
✓
Column j – Risk Change
Enter the factor that represents the impact on utilization of the covered
population’s change in risk from the base period to the contract period by type of
script for each line.
✓ Column k – Induced Utilization
Enter the factor that adjusts for the utilization difference between the base period
type of benefit plan (DS, AE, BA or EA) and a DS plan by type of script for each
line.
✓ Column l – Other Change
Enter the factor that represents the impact on utilization of any differences
between the base period and contract period not included in the other components
of utilization change, columns h through k, by type of script for each line.
✓ Column m – Total Utilization Change
The value is calculated automatically in the BPT as the product of columns h
through l for each line.
Lines 1 through 8, column n – Projected Scripts/1000
The value is calculated automatically in the BPT as the product of columns e and m for
each line.
Lines 1 through 8, column o – Covariance
The value is calculated automatically in the BPT as projected allowed pmpm divided by
the product of base period allowed pmpm times total utilization change times total unit
cost change for each line.
Lines 9 through 14, columns e through o
The values are calculated automatically in the BPT using information entered on lines 1
through 8 for each column.
SECTION III – COST FOR COVERED PART D DRUGS
Lines 1 through 8 – Components of Unit Cost Change
✓ Column e – Inflation Trend
Enter the factor that represents the impact on cost between the base period and
contract period because of changes in drug prices by type of script for each line.
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WORKSHEET 2
✓ Column f – Discount Change
Enter the factor that represents the impact on cost between the base period and
contract period because of changes in point-of-sale network pricing, including
discounts off of average wholesale price (AWP) and dispensing fees, by type of
script for each line.
✓
Column g – Formulary Change
Enter the factor that represents the impact on cost because of changes in the
formulary, including the addition, deletion or reclassification of drugs by type of
script for each line.
✓ Column h – Other Change
Enter the factor that represents the impact on cost of any differences between the
base period and contract period not included in the other components of unit cost
change, columns e through j, by type of script for each line.
✓ Column I – Total Unit Cost Change
The value is calculated automatically in the BPT as the product of columns e
through h by type of script for each line.
Lines 1 through 8, column j – Projected Unit Cost
The value is calculated automatically in the BPT as the product of base period allowed
per script times total unit cost change for each line.
Lines 1 through 8, column k – Projected Allowed PMPM
The value is calculated automatically in the BPT as scripts/1,000 times projected unit cost
divided by 12,000 for each line.
Lines 9 through 14, columns e through k
The values are calculated automatically in the BPT using information entered on lines 1
through 8 for each column.
SECTION IV – PROJECTED ALLOWED PMPM
Lines 1 through 8
✓ Column l – Manual Utilization/1,000
When the base period experience is not fully credible, enter the projected
utilization per 1,000 members, based on a fully credible manual rate, by type of
script for each line.
✓ Column m – Manual Unit Cost
When the base period experience is not fully credible, enter the projected unit cost
per script, based on a fully credible manual rate, by type of script for each line.
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WORKSHEET 2
✓ Column n – Manual Rate PMPM
The value is calculated automatically in the BPT as column l times column m
divided by 12,000 by type of script for each line.
✓ Column o – Credibility
Enter the credibility percentage by point-of-sale and type of drug that is applied to
the projected pmpm allowed amount in Section IV and blended with the pmpm
manual rate to calculate the blended pmpm allowed amount for each line. The
credibility must be greater than or equal to 0 percent and less than or equal to 100
percent.
✓ Column p – Blended Allowed PMPM
The value is calculated automatically in the BPT as the sum of (column o times
column k) and [(1 minus column o) times column n] for each line.
Lines 9 through 14, columns l through p
The values are calculated automatically in the BPT using information entered on lines 1
through 8 for each column. Cell O57, CMS Guideline Credibility is calculated
automatically in the BPT as the square root of total member months from Worksheet 1
divided by 12,000, not to exceed 100 percent.
SECTION V – PMPM NON-BENEFIT EXPENSE
Section V summarizes the components of non-benefit expenses in the base period,
applies trends and blends with manual rate non-benefit expenses to project administrative
expenses in the contract period.
Lines 1 through 4
✓ Column e – Base Period
The value is carried from Worksheet 1, Section IV for each line.
✓ Column f – Trend
When the values in column e are greater than $0.00, enter the expected trend in
non-benefit expenses from the base to the contract period.
✓ Column g – Contract Period
The value is calculated automatically in the BPT as column e times column f for
each line.
✓ Column h – Manual Rate Expense
When the base period non-benefit expenses are not fully credible, enter the
projected non-benefit expense by component based on a fully credible source for
each line.
✓ Column i – Credibility
Enter the credibility percentage by non-benefit expense component that is applied
to projected pmpm non-benefit expenses and blended with pmpm manual rate
expenses to calculate blended pmpm expenses for each line. The credibility must
be greater than or equal to 0 percent and less than or equal to 100 percent.
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WORKSHEET 2
✓ Column j – Blended Non-Benefit Expense
The value is calculated automatically in the BPT as the sum of (column g times
column i) and [(1 minus column g) times column h] for each line.
Line 5, columns e, g and j – Total Non-Benefit Expenses
The values are calculated automatically in the BPT using information entered on lines 1
through 4 for each column.
SECTION VI – DEVELOPMENT OF MANUAL RATE
Provide a description of the source of the experience data used as the basis for the manual
rate, as well as other relevant information including, but not limited to, benefit design,
group size, group characteristics, utilization trends, pricing methodology, formulary
changes, induction and risk assumptions.
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WORKSHEET 3
PD WORKSHEET 3 – CONTRACT PERIOD PROJECTION FOR
DEFINED STANDARD COVERAGE
Worksheet 3 develops the defined standard bid amount. Specifically, Section I displays
general information about the plan. Section II collects contract period information;
Section III summarizes the contract period Rx experience. Sections IV and V summarize
components of the contract period non-benefit expenses and gain/loss margin and
components of the defined standard bid amount, respectively.
Sections II through V must be completed by all plans.
SECTION I – GENERAL INFORMATION
This section displays the information entered on Worksheet 1, Section I.
SECTION II – PROJECTION DATA
Line 1 – Projected Member Months
The value is carried from Section III, line 6, column e. For an MA-PD, Part D projected
member months are the sum of projected member months for MA, ESRD and hospice
members.
Line 2 – Projected Average Risk Score
Enter the estimated average Rx risk score for the population expected to enroll in the
contract period. Refer to the topic ―Risk Scores‖ in the ―Pricing Considerations‖ section
of the Instructions for information concerning the development of the CY2012 risk score.
Line 3 – Projected Low-Income Subsidy (LIS) Member Months
Enter the estimated number of member months for enrollees who will qualify for and
obtain LIS status in the contract period.
SECTION III – PART D COVERED DRUG CLAIMS
The projection of contract period Rx experience must reflect the risk score entered in
Section II, line 2.
Lines 1 through 5:
✓ Column d – Number of Members
Enter the number of members expected to have total allowed claims in the
allowed claim interval defined for each line. For example, if 6,500 members are
expected to have total allowed claims between $310 and $2,839, then enter
―6,500‖ on line 3, column d. Do not include estimates for claims for which the
Part D plan is the secondary payer.
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WORKSHEET 3
✓ Column e – Member Months
Enter the number of member months expected in the contract period associated
with the number of members in column d for each line.
✓ Column h – Average Amount Allowed PMPM
The value is calculated automatically in the BPT as column g divided by
column d for each line.
✓ Column n – Plan Liability PMPM
The value is calculated automatically in the BPT as column h minus the sum of
columns j through m for each line.
Lines 2 through 5
✓ Column f – Number of Scripts
Enter the estimated total number of prescriptions expected to be filled for Part Dcovered drugs for the members in column d for each line.
✓ Column g – Projected Allowed Amount
Enter the estimated total allowed dollars for prescriptions expected to be filled for
Part D-covered drugs for the members in column d for each line. Total allowed
dollars must reflect the price paid to the dispensing provider at the point-of-sale
and must be net of point-of-sale rebates and price concessions.
✓ Column i – Cost Sharing
The value is calculated automatically in the BPT as the sum of columns j through
l for each line.
✓ Column k – PMPM Deductible
Enter the projected pmpm value of the deductible for the members in column d
for each line.
✓ Column l – Other Cost Sharing PMPM
Enter the projected pmpm value of the 25 percent cost sharing between the
deductible and ICL and the catastrophic coinsurance above the catastrophic limit
for the members in column d for each line.
✓ Column o – Federal LIS Cost Sharing PMPM
Enter the projected amount of low-income cost sharing subsidy that will be
received for the members in column d who are LIS-eligible divided by the total
projected member months entered in Section II, line 1 for each line. Reflect the
impact of generic gap coverage in these amounts.
Lines 4 through 5, column j – GAP PMPM
Enter the projected pmpm value corresponding to amounts between the ICL and
catastrophic limit for members in column d for each line.
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WORKSHEET 3
Line 5, column m – Federal Reinsurance PMPM
Enter the projected amount of federal reinsurance that will be received for the members
in column d divided by the total projected member months entered in Section II, line 1
for each line. Reflect the impact of generic gap coverage in this amount.
Line 6 – Subtotal
The value is calculated automatically in the BPT as the sum of lines 1 through 5 for each
column.
Generics in Gap PMPM
Enter the projected pmpm amount of the Gap PMPM from line 6, column j attributable to
generic coverage in the gap in cell J26.
Line 7 – Minus Rebates
✓ Column g
Enter the estimated total amount of rebates expected to be received for the claims
in lines 1 through 5. Total rebates include all direct and indirect remuneration
received after the point-of-sale transaction and must be allocated to the plan using
a methodology that represents the manner in which the rebates were generated.
Point-of-sale rebates reported in ―Column g – Projected Allowed Amount‖ are not
reported here.
✓ Column h
The value is calculated automatically in the BPT as column g divided by line 6,
column e.
✓ Columns m and n
The value in column h is allocated automatically to columns m and n in the BPT
based on the relative amount of federal reinsurance to the total allowed amount.
Line 8 – Minus Other Insurance
✓ Column g
Enter, as a positive value, the projected total reduction to the total allowed amount
attributable to other Rx insurance.
✓ Column h
The value is calculated automatically in the BPT as column g divided by line 6,
column e.
✓ Column m
Enter, as a positive value, the projected pmpm reduction to federal reinsurance
attributable to other Rx insurance.
✓ Column n
The value is calculated automatically in the BPT as column h minus column m.
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WORKSHEET 3
Line 9 – Plus Part D as Secondary
✓ Column g
Enter, as a positive value, the projected total plan liability for Part D-covered
drugs for which the Part D plan is the secondary payer.
✓ Column h
The value is calculated automatically in the BPT as column g divided by line 6,
column e.
✓ Column m
Enter, as a positive value, the projected pmpm plan liability for Part D-covered
drugs attributable to federal reinsurance for which the Part D plan is the
secondary payer.
✓ Column n
The value is calculated automatically in the BPT as column h minus column m.
Line 10 – Projected Percentage Out-of-Network (OON) Allowed
Enter the percentage of line 6, column g of projected allowed dollars for prescriptions
that will be filled OON.
Line 11 – Projected Percentage Out-of-Network (OON) Plan Liability
Enter the percentage of line 6, column n of projected Part D plan liability for
prescriptions that will be filled OON.
Line 12, columns g through o – Total
The values are automatically calculated in the BPT as line 6 minus line 7 minus line 8
plus line 9 for each column.
SECTION IV – PMPM NON-BENEFIT EXPENSE AND GAIN/LOSS
Section IV summarizes components of the contract period non-benefit expenses and
gain/loss margin.
Lines 1 through 5
The values are carried from other worksheets or are calculated automatically in the BPT.
Line 6 – Total Gain/loss
Enter the estimated pmpm amount of gain or loss projected during the contract period.
SECTION V – DEFINED STANDARD COVERAGE BID DEVELOPMENT
Section V summarizes the components of the defined standard bid amount.
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WORKSHEET 3
Lines 1 through 5, columns i and j
The values are carried from other sections in Worksheet 3 or are calculated automatically
in the BPT as sums or quotients.
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WORKSHEET 4
PD WORKSHEET 4 – STANDARD COVERAGE WITH
ACTUARIALLY EQUIVALENT COST SHARING
Worksheet 4 must be completed when the plan benefit type is actuarially equivalent. The
two tests that must be satisfied to demonstrate actuarial equivalence are as follows:
•
•
The average coinsurance percentage for amounts between the deductible and the
ICL must be actuarially equivalent to 25 percent; and
The average coinsurance percentage above the catastrophic limit must be
actuarially equivalent to the percentage for DS coverage.
Considerations for Actuarially Equivalent Coverage
Although the average cost sharing between the deductible and ICL must be 25 percent for
an AE plan, it is expected that the cost sharing will be restructured to encourage more
efficient drug use through tiered copays and/or coinsurance. As compared to DS plans,
AE plans generally have higher generic, preferred brand and mail service utilization and
lower non-preferred brand utilization. As a result of these favorable shifts, AE bids have
lower costs under the ICL and in the catastrophic phase of the benefit than do DS bids.
Part D sponsors must model the differences between the AE benefit and the DS by
making adjustments in utilization and average allowed amounts by type of drug and
point-of-sale in Worksheet 6. The distribution of utilization between generic and brand,
and between 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 DS bid. For example, it is reasonable to expect a noticeable increase in
the utilization of generic drugs in an AE plan with a zero-dollar generic cost share.
SECTION I – GENERAL INFORMATION
This section displays the information entered on Worksheet 1, Section I.
SECTION II – PROJECTION DATA
This section displays the information entered on Worksheet 3, Section II.
SECTION III – DEVELOPMENT OF BID FOR DEFINED STANDARD COVERAGE
This section displays the information entered on Worksheet 3, Section V.
SECTION IV – DEVELOPMENT OF BID COMPONENTS AND TESTS FOR
ACTUARIAL EQUIVALENCE
Lines 1 through 3 and 5 through 14, columns e, h, and k
The values are carried from other worksheets in the BPT.
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WORKSHEET 4
Line 4 – Allowed PMPM
✓ Column e – Amounts below the Initial Coverage Limit
Enter the projected average allowed amount pmpm below the ICL.
✓ Column h – Amounts above Catastrophic Threshold
Enter the projected average allowed amount pmpm above the catastrophic
threshold.
Line 15 – Rebates
✓ Column k
Enter the estimated total amount of rebates expected to be received by the plan.
✓ Column h
The value is calculated automatically in the BPT and is prorated for reinsurance.
Lines 16 and 17 – Tests for Actuarial Equivalence
The two actuarial equivalence tests are applied to certain values in Section IV to
determine whether the proposed benefit plan qualifies as standard coverage with
actuarially equivalent cost sharing.
SECTION V – STANDARD COVERAGE BID DEVELOPMENT WITH ACTUARIALLY
EQUIVALENT COST SHARING
Lines 1 through 5
The values are calculated automatically in the BPT from values in Section IV. The
amounts in the first column are calculated based on the plan’s risk score, while the
amounts in the second column are based on a 1.000 risk score.
Line 6 – LIS
Enter the projected average low-income cost-sharing pmpm subsidy for the risk score of
the expected population.
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WORKSHEET 5
PD WORKSHEET 5 – ALTERNATIVE COVERAGE
Worksheet 5 must be completed when the plan benefit type is basic alternative or
enhanced alternative. The five tests that must be satisfied to demonstrate actuarial
equivalence are as follows:
•
•
•
•
•
The value of total coverage is at least actuarially equivalent to DS coverage;
The alternative unsubsidized value of coverage is no less than the DS
unsubsidized value of coverage;
The average alternative benefits for beneficiaries with allowed drug costs at the
ICL are not less than the average DS benefits at the ICL;
The deductible is not greater than the DS deductible; and
The average alternative catastrophic cost sharing is not greater than the average
DS catastrophic cost sharing.
Considerations for Basic Alternative and Enhanced Alternative Coverage
Although the average cost sharing between the deductible and ICL must be 25 percent for
a BA or EA plan, it is expected that the cost sharing will be restructured to encourage
more efficient drug use through tiered copays and/or coinsurance. As compared to DS
plans, BA and EA plans generally have higher generic, preferred brand and mail service
utilization and lower non-preferred brand utilization. As a result of these favorable shifts,
BA and EA bids have lower costs under the ICL and in the catastrophic phase of the
benefit than do DS bids.
Part D sponsors must model the differences between the BA or EA benefit and the DS by
making adjustments in utilization and average allowed amounts by type of drug and
point-of-sale 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 DS bid. For example, it is reasonable to expect a noticeable increase in
the utilization of generic drugs in a BA or EA plan with a zero-dollar generic cost share.
BA and EA plans may reduce the value of the deductible. This action may in turn reduce
the risk profile of the group and cause induced utilization.
BA and EA plans may provide additional coverage in the gap. Since the value of
coverage up to the ICL must remain the same relative to the DS, a supplemental premium
will result unless the cost of the additional coverage is offset by savings in catastrophic
coverage.
Additional coverage in the gap can delay the point at which a beneficiary achieves $4,550
of true out-of-pocket (TrOOP) costs and reaches 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. Members with extremely high spending will not
benefit as much as those with moderate amounts of spending.
CY2012 PRA PD BPT Instructions
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WORKSHEET 5
SECTION I – GENERAL INFORMATION
This section displays the information entered on Worksheet 1, Section I.
SECTION II – PROJECTION DATA
This section displays the information entered on Worksheet 3, Section II.
SECTION III – DEVELOPMENT OF BID FOR DEFINED STANDARD COVERAGE
This section displays the information entered on Worksheet 3, Section V.
SECTION IV – DEVELOPMENT OF BID COMPONENTS
Lines 1 through 3
✓ Columns f, g and m
The values are carried from Worksheet 3 in the BPT.
✓ Columns i and o
The values are calculated automatically in the BPT as column f plus column g.
Type of Deductible
Enter the type of deductible consistent with the description in the PBP for the alternative
coverage. The valid options are ―no deductible‖, ―applies to all tiers‖ or ―applies to some
tiers‖.
Alternative Coverage ICL
Enter the ICL consistent with the description in the PBP for the alternative coverage.
Type of Gap Coverage
Enter the type of gap coverage consistent with the description in the PBP for the
alternative coverage. The valid options are ―no coverage‖, ―full coverage‖, ―partial –
generics only‖, ―partial – increased ICL‖, or ―partial – other‖.
Lines 4 through 24
The values in columns d through o include Part D-covered drugs only; the values in
column q include non-Part D-covered drugs only. The values are carried from other
worksheets or are calculated automatically in the BPT, with the exception of the
following, which must be entered:
✓ Line 5, column k – Amounts in Gap
Enter the projected average allowed amount pmpm in the coverage gap.
✓ Line 5, column m – Amounts above Catastrophic
Enter the projected average allowed amount pmpm above the catastrophic limit.
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WORKSHEET 5
✓ Line 6, column d – Proposed Deductible
Enter the dollar value of the deductible consistent with the description in the PBP.
✓ Line 8, column f – Value of Proposed Deductible
Enter the projected pmpm value of the deductible for members with total allowed
amount less than the ICL. Refer to the topic ―Non-Uniform Deductible‖ in the
―Pricing Considerations‖ section of the Instructions for more information.
✓ Line 12, column k – Coinsurance Percentage in Gap
Enter the effective coinsurance percentage for any coverage provided in the gap,
including coverage because of variations in the ICL.
✓ Line 18, column o – Minus Rebates
Enter the estimated total rebates pmpm expected to be received for Part Dcovered drugs.
✓ Line 18, column q – Minus Rebates
Enter the estimated total rebates pmpm expected to be received for non-Part Dcovered drugs.
✓ Line 20, columns m, o and q – Minus Other Insurance
Enter, as a positive value, the projected reduction to average allowed amount
pmpm attributable to other Rx insurance for Part D-covered drugs, reinsuranceeligible Part D-covered drugs and non-Part D-covered drugs in columns m, o and
q, respectively.
✓ Line 22, columns m, o, and q – Plus Part D as Secondary
Enter, as a positive value, the projected plan liability pmpm for which the Part D
plan is the secondary payer for Part D-covered drugs, reinsurance-eligible Part Dcovered drugs and non-Part D-covered drugs in columns m, o and q, respectively.
SECTION V – DEVELOPMENT OF ACTUARIAL EQUIVALENT TEST
Lines 1 through 8
The values are calculated automatically in the BPT from values in Section IV. The
amounts in the first column are calculated based on the plan’s risk score, while the
amounts in the second column are based on a 1.000 risk score.
Line 9 – LIS
Enter the projected average low-income cost-sharing pmpm subsidy for the risk score of
the expected population.
SECTION VI – TESTS FOR ALTERNATIVE COVERAGE
This section applies the five actuarial equivalence tests to certain values in Sections III
through V to determine whether the proposed benefit plan qualifies as alternative
coverage.
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WORKSHEET 5
SECTION VII – DEVELOPMENT OF SUPPLEMENTAL PREMIUM
Lines 1 through 5 and 8
The values are calculated automatically by the BPT from values in Worksheet 5.
Line 6 – Additional Non-Benefit Expenses
The value is carried from Worksheet 3.
Line 7 – Additional Gain/loss
The value is carried from Worksheet 3.
SECTION VIII – DEVELOPMENT OF INDUCED UTILIZATION ADJUSTMENT
This section summarizes the additional costs of DS coverage with respect to the enhanced
alternative plan with supplemental benefits and is used to adjust allowable costs for risk
corridor payments.
Line 2 – Impact of Alternative Utilization on Standard Benefit
Enter the additional costs for Part D-covered drugs under a DS plan in the first column if
the utilization of the EA plan was used to price the DS coverage in the bid. The
adjustment applies to the EA plan type and must be a positive value. For CY2012, this
amount represents 75 percent of costs between the $310 deductible and the $2,840 ICL,
plus 15 percent of costs in excess catastrophic coverage.
CY2012 PRA PD BPT Instructions
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WORKSHEET 6
PD WORKSHEET 6 – SCRIPT PROJECTIONS FOR DEFINED
STANDARD, ACTUARIALLY EQUIVALENT OR ALTERNATIVE
COVERAGE
Worksheet 6 summarizes drug utilization and costs by type of drug and in different
distributions of drug spending. In addition, Worksheet 6 illustrates the underlying assumptions
used in the demonstration of the actuarial equivalence tests in Worksheets 4 and 5. Section II
collects data in a manner that supports an actuarial comparison of the proposed AE, BA or EA
plan benefit type to DS coverage.
Considerations
Although this worksheet is not a detailed model of the cost-sharing structure of the AE, BA or
EA plan design, the impact of tiered cost sharing, non-uniform deductible, decreased ICL and
benefit management programs on utilization must be clearly demonstrated. The distribution of
utilization between generic and brand, and between retail and mail, must be reasonable given
the proposed benefit. Significant changes to the alternative benefit are expected to result in
meaningful differences in utilization when compared to the DS 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.
Part D sponsors must model the impact of the alternative benefit compared to the DS by
making adjustments in utilization and average script pricing in Worksheet 6. The distributions
must be based on the intervals defined for DS coverage. For purposes of modeling the
alternative coverage, members must be reported in the claims interval in which they were
reported under DS coverage even though their total drug spend may be different because of the
impact of the alternative benefits. For example, lines 1 through 9 must reflect the utilization for
the AE, BA or EA plan for members expected to have less than the DS ICL of $2,840 in
CY2012. In other words, the amounts summarized in columns i, j and k must be based on the
same members represented in columns f, g, and h of each line.
Refer to the ―Pricing Considerations‖ section of the Instructions for information on modeling
the impact of coverage in the gap, decreased ICL and non-uniform deductible.
SECTION I – GENERAL INFORMATION
This section displays the information entered on Worksheet 1, Section I.
SECTION II – PROJECTIONS FOR EQUIVALENCE TESTS
Data are collected for four levels of allowed costs on lines 1 through 36. The distribution of the
population and Part D covered drug claims reported on Worksheet 3 must be used in
completing this section. Columns f through h must be completed for all plans based on DS
coverage; columns i through k must be completed when the plan benefit type is AE, BA or EA
based on the alternative coverage. In developing the cost-sharing values in columns h and k, do
not model the impact of the deductible, coverage gap and LIS subsidy. To model column h,
CY2012 PRA PD BPT Instructions
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WORKSHEET 6
use the cost-sharing structure of the DS plan; to model column k, use the cost-sharing structure
of the alternative (AE, BA or EA) plan.
Lines 1 through 8 – Population Not Exceeding Allowed Costs of $2,840 with Standard
Coverage
All utilization for members with projected total allowed costs less than $2,840 must be reported
on these lines.
✓ Columns f through h – Defined Standard Coverage
Enter the projected total number of scripts, total allowed dollars, and total standard cost
sharing for the population identified in Worksheet 3, Section III, cells D21 plus D22,
using the cost-sharing structure of the DS plan by point-of-sale and type of drug in
columns f, g and h, respectively, for each line. Calculate the cost sharing as if there
were no deductible, coverage gap and LIS subsidy.
✓ Columns i through k – Actuarially Equivalent or Alternative Benefits
When the plan benefit type is AE, BA or EA, enter the projected total number of scripts,
total allowed dollars and total cost sharing for the population identified in Worksheet 3,
Section III, cells D21 plus D22, using the cost sharing structure of the AE, BA or EA
plan by point-of-sale and type of drug in columns i, j and k, respectively, for each line.
Calculate the cost sharing as if there were no deductible, coverage gap and LIS subsidy.
These values include changes to utilization patterns based on the difference between DS
coverage and the proposed alternative coverage.
Line 9, columns f through k – Total
The values are calculated automatically in the BPT as the sum of lines 1 through 8 for each
column.
Lines 10 through 17 – Population Exceeding Allowed Costs of $2,840 with Standard
Coverage
All utilization for members with projected total allowed costs greater than or equal to $2,840
must be reported on these lines.
✓ Columns f and g – Defined Standard Coverage
Enter the projected total number of scripts and total allowed dollars for the population
identified in Worksheet 3, Section III, cells D23 plus D24 by point-of-sale and type of
drug in columns f and g, respectively, for each line.
✓ Columns i and j – Actuarially Equivalent or Alternative Benefits
When the plan benefit type is AE, BA or EA, enter the projected total number of scripts
and total allowed dollars for the population identified in Worksheet 3, Section III,
cells D23 plus D24 by point-of-sale and type of drug in columns i and k, respectively,
for each line. These values include changes to utilization patterns based on the
difference between DS coverage and the proposed alternative coverage.
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WORKSHEET 6
Line 18, columns f, g, i and j – Total
The values are calculated automatically in the BPT as the sum of lines 10 through 17 for each
column.
Lines 19 through 26 – Population Exceeding $2,840 with Standard Coverage Amounts
Allocated up to ICL
All utilization for total allowed costs up to $2,840 for members with projected total allowed
costs greater than or equal to $2,840 must be reported on these lines. These amounts are a
subset of the amounts reported in lines 10 through 18; amounts in the gap are intentionally
excluded.
✓ Columns f through h – Defined Standard Coverage
Enter the projected total number of scripts, total allowed dollars, and total standard cost
sharing, for amounts allocated up to the ICL of $2,840 in CY2012, for the population
identified in Worksheet 3, Section III, cells D23 plus D24, using the cost sharing
structure of the DS plan by point-of-sale and type of drug, in columns f, g and h,
respectively, for each line. Calculate the cost sharing as if there were no deductible,
coverage gap and LIS subsidy.
✓ Columns i through k – Actuarially Equivalent or Alternative Benefits
When the plan benefit type is AE, BA or EA, enter the projected total number of scripts,
total allowed dollars and total cost sharing, for amounts allocated up to the ICL, for the
population identified in Worksheet 3, Section III, cells D23 plus D24, using the costsharing structure of the AE, BA or EA plan by point-of-sale and type of drug, in
columns i, j and k, respectively, for each line. Calculate the cost sharing as if there
were no deductible, coverage gap and LIS subsidy. These values include changes to
utilization patterns based on the difference between DS coverage and the proposed
alternative coverage.
Line 27, columns f through k – Total
The values are calculated automatically in the BPT as the sum of lines 19 through 26 for each
column.
Lines 28 through 35, columns f through k – Amounts Allocated over Catastrophic Coverage
The amounts in these lines are a subset of the amounts reported in lines 10 through 18.
✓ Columns f through h – Defined Standard Coverage
Enter the projected total number of scripts, total allowed dollars, and total standard cost
sharing, for amounts over the catastrophic limit, for the population identified in
Worksheet 3, Section III, cell D24, using the cost-sharing structure of the DS plan by
point-of-sale and type of drug, in columns f, g and h, respectively, for each line.
✓ Columns i through k – Actuarially Equivalent or Alternative Benefits
When the plan benefit type is AE, BA or EA, enter the projected total number of scripts,
total allowed dollars and total cost sharing, for amounts over the catastrophic limit, for
the population identified in Worksheet 3, Section III, cell D24, using the cost-sharing
structure of the AE, BA or EA plan by point-of-sale and type of drug, in columns i, j
CY2012 PRA PD BPT Instructions
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WORKSHEET 6
and k, respectively, for each line. These values include changes to utilization patterns
based on the difference between DS coverage and the proposed alternative coverage.
Line 36, columns f through k – Total
The values are calculated automatically in the BPT as the sum of lines 28 through 35 for each
column.
Line 37, columns i through k – Non-Part D-Covered Drugs All Spending
When the plan benefit type is EA and the plan covers non-Part D drugs, enter the projected
total number of scripts, total allowed dollars and total cost sharing, for the population identified
in Worksheet 3, Section III, using the cost-sharing structure of the EA plan by point-of-sale and
type of drug, in columns i, j and k, respectively, for each line.
Example
Below is an example of how lines 10 through 36 are to be completed. It is based on the
CY2008 defined standard benefit parameters:
•
•
•
•
Deductible:
ICL:
OOP Threshold:
Total Covered Part D Drug Spend at OOP Threshold:
$275.00
$2,510.00
$4,050.00
$5,726.25
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.
CY2012 PRA PD BPT Instructions
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WORKSHEET 6
Beneficiary A’s costs are distributed as follows:
Population Exceeding $2,510 with Standard Coverage
Utilization
20
15
8
2
10
10
5
70
$
$
$
$
$
$
$
$
$
Beneficiary A
Allowed
500.00
1,500.00
1,200.00
2,000.00
550.00
2,250.00
2,000.00
10,000.00
Amounts Allocated up to ICL $2,510
19. Retail Generic
20. Retail Preferred Brand
21. Retail Non-Preferred Brand
22. Retail Specialty (2)
23. Mail Order Generic
24. Mail Order Preferred Brand
25. Mail Order Non-Preferred Brand
26. Mail Order Specialty (2)
27. Total
5.02
3.77
2.01
0.50
2.51
2.51
1.26
17.57
$
$
$
$
$
$
$
$
$
125.50
376.50
301.20
502.00
138.05
564.75
502.00
2,510.00
$
$
$
$
$
$
$
$
$
25.10
94.13
100.40
125.50
25.10
125.50
125.50
621.23
Amounts Allocated over Catastrophic Coverage
28. Retail Generic
29. Retail Preferred Brand
30. Retail Non-Preferred Brand
31. Retail Specialty (2)
32. Mail Order Generic
33. Mail Order Preferred Brand
34. Mail Order Non-Preferred Brand
35. Mail Order Specialty (2)
36. Total
8.55
6.41
3.42
0.85
4.27
4.27
2.14
29.92
$
$
$
$
$
$
$
$
$
213.69
641.06
512.85
854.75
235.06
961.59
854.75
4,273.75
$
$
$
$
$
$
$
$
$
19.23
14.42
19.15
42.74
9.62
9.62
11.97
126.74
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
CY2012 PRA PD BPT Instructions
Cost Sharing
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WORKSHEET 6
Beneficiary B’s costs are distributed as follows:
Population Exceeding $2,510 with Standard Coverage
10. Retail Generic
11. Retail Preferred Brand
12. Retail Non-Preferred Brand
13. Retail Specialty (2)
14. Mail Order Generic
15. Mail Order Preferred Brand
16. Mail Order Non-Preferred Brand
17. Mail Order Specialty (2)
18. Total
Utilization
18
12
10
5
8
3
56
$
$
$
$
$
$
$
$
$
Beneficiary B
Allowed
450.00
1,200.00
1,500.00
275.00
1,800.00
1,200.00
6,425.00
7.03
4.69
3.91
1.95
3.13
1.17
21.88
$
$
$
$
$
$
$
$
$
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
1.96
1.31
1.09
0.54
0.87
0.33
6.09
$
$
$
$
$
$
$
$
$
48.94
130.51
163.13
29.91
195.76
130.51
698.75
$
$
$
$
$
$
$
$
$
4.40
2.94
6.09
1.22
1.96
1.83
18.44
Amounts Allocated Up to ICL $2,510
19. Retail Generic
20. Retail Preferred Brand
21. Retail Non-Preferred Brand
22. Retail Specialty (2)
23. Mail Order Generic
24. Mail Order Preferred Brand
25. Mail Order Non-Preferred Brand
26. Mail Order Specialty (2)
27. Total
Amounts Allocated over Catastrophic Coverage
28. Retail Generic
29. Retail Preferred Brand
30. Retail Non-Preferred Brand
31. Retail Specialty (2)
32. Mail Order Generic
33. Mail Order Preferred Brand
34. Mail Order Non-Preferred Brand
35. Mail Order Specialty (2)
36. Total
CY2012 PRA PD BPT Instructions
Cost Sharing
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WORKSHEET 6
The aggregate costs of Beneficiaries A and B are distributed as follows:
Population Exceeding $2,510 with Standard Coverage
38
27
18
2
15
18
8
126
$
$
$
$
$
$
$
$
$
Total A & B
Allowed
950.00
2,700.00
2,700.00
2,000.00
825.00
4,050.00
3,200.00
16,425
Amounts Allocated up to ICL $2,510
19. Retail Generic
20. Retail Preferred Brand
21. Retail Non-Preferred Brand
22. Retail Specialty (2)
23. Mail Order Generic
24. Mail Order Preferred Brand
25. Mail Order Non-Preferred Brand
26. Mail Order Specialty (2)
27. Total
12.05
8.45
5.91
0.50
4.46
5.64
2.43
39.45
$
$
$
$
$
$
$
$
$
301.30
845.29
887.19
502.00
245.48
1,267.94
970.79
5,020.00
$
$
$
$
$
$
$
$
$
60.26
211.32
295.73
125.50
44.63
281.76
242.70
1,261.91
Amounts Allocated over Catastrophic Coverage
28. Retail Generic
29. Retail Preferred Brand
30. Retail Non-Preferred Brand
31. Retail Specialty (2)
32. Mail Order Generic
33. Mail Order Preferred Brand
34. Mail Order Non-Preferred Brand
35. Mail Order Specialty (2)
36. Total
10.51
7.72
4.51
0.85
4.82
5.14
2.46
36.01
$
$
$
$
$
$
$
$
$
262.63
771.57
675.98
854.75
264.96
1,157.35
985.26
4,972.50
$
$
$
$
$
$
$
$
$
23.64
17.36
25.24
42.74
10.84
11.57
13.79
145.18
Utilization
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
Cost Sharing
(2) - The Specialty tier is used only when the Part D sponsor places Specialty drugs on a
separate tier in accord with CMS guidelines.
Network Pricing
Enter the projected average percentage discount off of AWP and the projected average
dispensing fees for generic, brand and Specialty drugs dispensed at retail and mail.
The values in this section must be based on the network pricing contracts that will be effective
in CY2012 and on the projected weighted utilization by pharmacy of the population identified
in Worksheet 3.
CY2012 PRA PD BPT Instructions
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WORKSHEET 7
PD WORKSHEET 7 – SUMMARY OF KEY BID ELEMENTS
Worksheet 7 summarizes key payment-related components of the bid and the Part D sponsor’s
estimate of the national average monthly bid amount and calculates premiums.
SECTION I – GENERAL INFORMATION
This section displays the information entered on Worksheet 1, Section I.
SECTION II – 2012 DEFINED STANDARD BENEFIT PARAMETERS
Line 1 – Deductible
The cell is pre-populated with the deductible for the DS plan benefit type.
Line 2 – Initial Coverage Limit
The cell is pre-populated with the ICL for the DS plan benefit type.
Line 3 – Out-of-Pocket Limit
The cell is pre-populated with the OOP for the DS plan benefit type.
SECTION III – SUMMARY OF KEY BID ELEMENTS
Line 1 – Standardized Part D Bid
The value is carried from other worksheets in the BPT based on the plan benefit type (DS, AE,
BA or EA).
Line 2 – National Average Monthly Bid Amount (NAMBA)
Enter the Part D sponsor’s estimate of the national average monthly bid amount at the time of
bid submission. The final national average monthly bid amount for CY2012 will be calculated
and published by CMS in early August 2011.
Line 3 – Base Beneficiary Premium (BBP)
Enter the Part D sponsor’s estimate of the base beneficiary premium amount. The national
average monthly bid amount, basic Part D A/B rebate allocation reported on the MA BPT for
MA plans and base beneficiary premium will determine the plan’s basic Part D target premium.
Lines 4 and 5 – Basic Part D Premium (prior to A/B Rebate Reallocation)
The values are calculated automatically in the BPT. Line 4 is calculated as line 1 minus line 2
plus line 3. Line 5 reflects the value of the basic Part D premium from line 4 after the rounding
rule selected on line 8 of this section has been applied. If the basic Part D premium is negative
and the plan benefit type is DS, AE or BA, then the Part D sponsor is permitted to lower its
estimate of the NAMBA and BBP. If the plan benefit type is EA, then the Part D sponsor is
permitted to lower its estimate of the NAMBA and BBP or fully offset the negative basic
CY2012 PRA PD BPT Instructions
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WORKSHEET 7
premium with a supplemental Part D premium. The basic Part D premium, before and after the
rounding rule is applied, will be updated based on the actual national average monthly bid
amount and base beneficiary premium that are calculated and published by CMS in early
August.
Lines 6 and 7 – Supplemental Part D Premium (prior to A/B Rebate Reallocation)
The values are calculated automatically in the BPT when supplemental benefits are offered.
Line 6 is carried from Worksheet 5 of the BPT. Line 7 reflects the value of the supplemental
Part D premium from line 6 after the rounding rule selected on line 8 of this section has been
applied.
Line 8 – Prospective Federal Reinsurance (Non-Standardized)
The value is carried from other worksheets in the BPT based on the plan benefit type (DS, AE,
BA or EA).
Line 9 – Prospective Low-income Cost-Sharing Subsidy (Non-Standardized)
The value is carried from other worksheets in the BPT based on the plan benefit type (DS, AE,
BA or EA).
Line 10 – Target Adjustment (Allowed Costs as a Ratio of Bid)
The target adjustment is the administrative cost percentage of the bid and it is used in
calculating the target amount for risk corridor payments. The value is calculated as–
[(1.00 – administration cost percentage) X (total direct subsidy payments + total beneficiary
premiums related to the standardized bid amount)]
Line 11 – Rounding Rule
Select the option from the drop-down box that corresponds to the preferred method for
rounding the Part D premium. The valid options are $0.10 and $0.50; the default is $0.10.
MA-PD plans are required to round to the nearest $0.10; Part D plans are permitted to round to
either the nearest $0.10 or nearest $0.50.
SECTION IV – PART D BID PRICING TOOL CONTACTS AND DATE PREPARED
Part D sponsors must identify three persons as plan bid contact, Part D certifying actuary and
additional Part D BPT contact. The Part D certifying actuary and additional Part D BPT
contact must be readily available and authorized to discuss the development of the pricing of
the bid.
In this section, enter the name, phone number and e-mail information for all three contacts;
credentials are a required input for the certifying actuary. For the phone number, enter all ten
digits consecutively without parentheses or dashes. Do not leave any part of this section blank.
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 desk review
process, then this date field must be updated accordingly.
CY2012 PRA PD BPT Instructions
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WORKSHEET 7
SECTION V – WORKING MODEL TEXT BOX
This section contains multiple cells that may be used by bid preparers to enter internal notes–
for example, to facilitate communication between BPT and PBP preparers or to track internal
version schemes.
Section V will be deleted from the finalized file and therefore will not be uploaded to HPMS.
Bid preparers must not enter information in this section meant to be communicated to CMS or
to CMS reviewers, as CMS will not have access to it. Section V will not be deleted from the
working file or the backup file during finalization.
CY2012 PRA PD BPT Instructions
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APPENDIX A
IV. APPENDICES
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.
ASOP No. 23, Data Quality.
ASOP No. 25, Credibility Procedures Applicable to Accident and Health, Group Term
Life, and Property/Casualty Coverages.
ASOP No. 41, Actuarial Communications.
The certifying actuary must also consider whether the actuarial work supporting the bid
complies with applicable laws, rules, ―Instructions for Completing the Medicare Prescription
Drug Plan Bid Pricing Tool for Contract Year 2012‖ and current CMS guidance. In addition,
he/she must consider whether the actuarial work supporting the bid is consistent and reasonable
with respect to the plan benefit package and the organization’s current business plan.
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 and
supporting documentation.
•
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
CY2012 PRA PD BPT Instructions
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APPENDIX A
intermittent resubmission throughout the bid review process, but they may do so if they wish.
Note that in the event that the PBP changes after the ―final‖ bid is certified, the bid that is
uploaded into HPMS with the revised PBP must be recertified whether or not the BPT changes.
As was instructed in previous contract years, material changes to the certification language
after the initial June certification submission are not allowed without prior written permission
from the CMS Office of the Actuary.
Part D 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 must be followed by all actuaries who will be certifying
CY2012 bids.
If a certification is not submitted via the HPMS certification module, the bid will not be
considered for CMS review and approval.
Every Part D BPT requires a certification.
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 MA and Part D bid submissions and meets the Academy’s qualification
standards for doing so.
The specific contract-plan-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 MA bid, the Part D bid or both.
Attestation that the certification complies with the applicable laws,1 rules,2 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/Part D enrollee
with a national average risk profile.‖
Attestation that the data and assumptions used in the development of the bid are
reasonable for the PBP.
Attestation that the data and assumptions used in the development of the bid are
consistent with the organization’s current business plan.
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
CY2012 PRA PD BPT Instructions
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APPENDIX A
•
•
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 No. 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 CY2012 certification instructions, please contact the
CMS Office of the Actuary at [email protected].
Certification Module Access
Detailed instructions regarding how to apply for access to the CY2012 certification module
were released via an HPMS memorandum dated March 3, 2010.
CY2012 PRA PD BPT Instructions
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APPENDIX B
APPENDIX B – SUPPORTING DOCUMENTATION
GENERAL
In addition to the BPT and actuarial certification, Part D sponsors must provide CMS with
supporting documentation for every bid, as described in these Instructions.
Unless otherwise noted, Part D sponsors must upload all required supporting documentation at
the time of the initial June bid submission. Additional supporting documentation must be made
available to CMS reviewers upon request, and within 48 hours of the request, as required by
these Instructions.
Supporting documentation requirements apply regardless of the source of the assumption,
whether it was developed by the actuary, the Part D sponsor or a third party. If the actuary
relied upon others for certain bid data and/or assumptions, those individuals are subject to the
same documentation requirements. The actuary must be prepared to produce all substantiation
pertaining to the bid, even if it was prepared by others or is based on a reliance.
In preparing supporting documentation, the actuary must consider ASOP No. 41, Actuarial
Communications. In accordance with Section 3.3.3, ―Actuarial Report,‖ the materials provided
must be written ―with sufficient clarity that another actuary qualified in the same practice area
could make an objective appraisal of the reasonableness of the actuary’s work.‖
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.
Explain the rationale for the assumptions, including quantitative support and details,
rather than just narrative descriptions of assumptions.
Describe plan-specific variations in addition to the overall pricing assumption or
methodology.
Tie to the values entered in the current BPT and the PBP.
Include Excel spreadsheets with working formulas, rather than pdf files.
Clearly identify if it is related to MA, Part D or both.
Clearly identify the bid(s) relating to the support. At a minimum, the contract number
must appear on the first page. Specific plan numbers must be included where
appropriate, such as on the first page, in a separate chart or as an attachment.
Acceptable forms of supporting documentation include, but are not limited to, the following
items:
•
•
•
Meeting minutes from discussions related to bid development.
E-mail correspondence related to bid development.
A complete description of data sources–for example, a report’s official name/title, file
name, date obtained, source file, etc.
CY2012 PRA PD BPT Instructions
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APPENDIX B
•
•
•
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:
•
•
•
•
•
•
•
Materials that are accessed only through a secure server link that requires a password.
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 of the data points underlying the assumptions–for example,
supporting factors, studies or public information.
―Living worksheets‖ that are overwritten with current data. Supporting documentation
must include the version of the worksheet that was 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 (.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 to multiple plans materials specific to a Part D plan, MA plan or certain
contract ID.
Cover Sheet
To expedite the bid review process, Part D sponsors 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.‖ A cover sheet is required for each upload of
substantiation.
The cover sheet must include detailed information for each support item–such as the filename
and the location within the file, if applicable–and must clearly identify the bid IDs and whether
the substantiation is related to MA, Part D or both.
Note that some documentation requirements apply to every bid (for example, every bid
contains a risk score assumption), while other documentation requirements apply only to bids
that contain certain assumptions (for example, manual rate documentation applies only if a
CY2012 PRA PD BPT Instructions
Page 62 of 76
APPENDIX B
bid’s projection is based on manual rates). For documentation categories that apply to a subset
of bids that contain a specified assumption, the cover sheet must not refer to a ―range‖ of bid
IDs (such as ―plans 001 – 030‖ or ―all plans under contract Hxxxx‖). For these items, the cover
sheet must contain the exact bid IDs (contract/plan/segment) to which the documentation
applies.
For subsequent substantiation uploads, the cover sheet must summarize the additional
documents uploaded at that time (that is, the cover sheet must not be maintained as a
cumulative list). The subsequent cover sheets must also contain the exact bid IDs rather than a
―range‖ of bid IDs.
Sample check lists and cover sheets for the initial June bid submission, and for subsequent
substantiation uploads, are provided at the end of this appendix.
Timing
Part D sponsors and certifying actuaries must prepare all supporting documentation and upload
required documentation into HPMS at the time of the initial June bid submission. These items
are described in the ―Initial June Bid Submission‖ section below.
Moreover, CMS recommends that other supporting documentation materials be uploaded with
the initial June bid submission, though this is not required. These items are described in the
―Upon Request by CMS Reviewers‖ section of this appendix. However, these materials must
be prepared at that time in order to be readily available to CMS reviewers upon request. When
additional substantiation is requested by CMS reviewers, it must be provided within 48 hours
and be uploaded into HPMS prior to bid approval. The CMS bid reviewer will determine
whether the Part D sponsor or the CMS bid reviewer will upload additional substantiation
provided in e-mail correspondence and will communicate this requirement to the Part D
sponsor during bid review.
Initial June Bid Submission
The following documentation requirements apply to all bids (as all bids contain these
assumptions):
•
•
•
•
A cover sheet outlining the documentation files, as described above.
A product narrative that offers relevant information about plan design, the product
positioning in the market (such as high/low), enrollment shifts, 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 the credibility assumptions (Worksheet 2), including–
◦ A statement of the credibility methodology used–for example, the CMS
guideline or the CMS override.
◦ A description of the credibility methodology used if it varies from the CMS
guideline or the CMS override.
◦ The method for blending differences in the credibility for utilization and unit
cost into a composite pmpm credibility factor.
A mapping of allowed costs, effective cost sharing and script counts from the formulary
tiers to type-of-drug and point-of-sale categories used in pricing (Worksheets 2 and 6).
CY2012 PRA PD BPT Instructions
Page 63 of 76
APPENDIX B
•
•
•
Support for non-benefit expense assumptions (Worksheet 2). The required elements
include–
◦ A summary of the non-benefit expenses by category of expense or by line item.
◦ An analysis that demonstrates the development of each line item using relevant
data, assumptions, contracts, financial information, business plans and other
experience.
◦ A description of the relationship between the non-benefit expense line items
reported in the BPT and auditable material such as corporate financials and planlevel operational data.
Justification of the gain/loss margin (Worksheet 2). The required elements include–
◦ 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.
◦ A demonstration of year-by-year consistency between the expected overall
margin level and the Part D sponsor’s corporate margin requirement over time
(for example, 3 to 5 years) including any change in the Part D sponsor’s
corporate margin requirement in the prior 2 years.
◦ Support for bids with negative margins–that is, a year-by-year numeric business
plan that illustrates profitability within a few years.
◦ A numerical comparison of the gain/loss margin to the original business plan for
plans with negative margins in prior years. This comparison includes details
and sources of deviation from the original business plan.
◦ 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) and/or (ii) demonstration of corporate return
requirement(s). 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 and ongoing organizational gain/loss.
Detailed support for the development of projected risk scores (Worksheet 3). The
required elements include–
◦ A detailed description and corresponding numerical demonstration of the
methodology used to develop projected CY2012 Part D risk scores.
◦ A description of the source data for the development of the projected CY2012
Part D risk scores.
◦ A description of all projection factors and the basis for the factors.
◦ A statement about the consistency between the development of the projected
risk scores for the plan population and the development of projected prescription
drug expenses, if the plan pricing is based on manual rates.
CY2012 PRA PD BPT Instructions
Page 64 of 76
APPENDIX B
The following documentation requirements apply to all bids that contain these specified
assumptions:
•
•
•
•
Detailed support for the base period experience (Worksheet 1).
Detailed support for the trend projection factors (Worksheet 2).
Detailed support for the manual rate development (Worksheet 2), including a
description/illustration of the underlying data source(s) and data/methodology used in
the development of the manual rates, if manual rates are used. The required elements
include–
◦ A description of the source data, including the data’s relevance to the Part D
plan.
◦ Credibility standards applied to the data and corresponding adjustments, if
applicable.
◦ Consideration of any adjustments made for annual volatility of the source data.
◦ Any applicable adjustments to the source data, such as–
‣ Approach and factors applied to account for incomplete claim run-out,
formulary differences and/or expenditures that are not reflected in the source
data;
‣ Techniques and factors used to reflect differences between the underlying
population and that expected of the Part D plan; and
‣ Techniques and factors used to adjust for differences in plan design between
the source data and the Part D plan.
◦ Data and methodology used to project the data from base period to CY2012.
◦ A description of the source of data for the development of corresponding
CY2012 risk scores and how that source compares to the risk profiles of the
population underlying the manual rate source data.
◦ All other applicable factors and/or adjustments.
Disclosure of related-party service agreements (Worksheet 2).
◦ A Part D sponsor in a related-party agreement with an organization and prepares
the BPT in a manner that does not recognize the independence of the
subcontracted related party must provide the following:
‣ 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 Part D sponsor in a related-party agreement with an organization that is
providing services to unrelated parties and chooses to demonstrate that the terms
and fees associated with their agreement are comparable to those obtained by
unrelated parties of the organization must provide the following:
‣ The identity of the related-party organization.
‣ A description of the business arrangement and services provided.
‣ The financial terms.
CY2012 PRA PD BPT Instructions
Page 65 of 76
APPENDIX B
‣
•
•
•
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 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 Part D sponsor in the absence of the related-party
relationships.
The input sheet(s) for the pricing model used in the development of the bid.
An explanation of how CY2011 bid audit findings and observations were addressed in
the current bid for the same plan. To the extent that an issue applies to other plans in
the same contract or parent organization, the documentation for the audited plan must
describe how the bids for all plans are treated consistently regarding that issue.
Support for reliance on information supplied by others that–
◦ Identifies the source(s) of the information–for example, name, position,
company, date;
◦ Identifies the information relied upon;
◦ States the extent of the reliance–for example, whether or not checks as to
reasonableness have been applied; and
◦ Indicates to which plan(s) the reliance information applies.
See the sample format at the end of this appendix.
Upon Request by CMS Reviewers
It is not required that the items below be uploaded with the initial June bid submission, but they
must be prepared at that time in order to be readily available for CMS reviewers upon request.
If substantiation is requested by CMS reviewers, it must be provided within 48 hours. These
materials will be reviewed at audit:
•
•
•
•
Reconciliation of base period experience with company financial data (Worksheet 1).
The data are to be reported on an incurred, rather than an accounting or GAAP, basis,
including both claims paid and unloaded claim reserves. Because the results reflect an
experience period versus accounting period, the data need not be based on an audited
GAAP financial basis.
Copies of related-party agreements for a Part D sponsor who has entered into a relatedparty agreement with an organization that is providing services to unrelated parties.
A letter supporting any information upon which the certifying actuary relied, if
applicable. This letter must be signed by the person (source) who provided the
information.
Communication between CMS reviewers and the Part D sponsor throughout the bid
review process (that is, e-mail communication).
Additional information not specified in this list may be requested by CMS reviewers, as
needed, at any point during the bid desk review process.
CY2012 PRA PD BPT Instructions
Page 66 of 76
APPENDIX B
PART D CHECKLIST FOR REQUIRED SUPPORTING DOCUMENTATION
Initial June Bid Submission – Required for All Bids
Cover sheet
Product narrative
Credibility assumption
Mapping of allowed costs, script counts and cost sharing in formulary tiers to type-of-drug and
point-of-sale categories
Non-benefit expenses
Gain/loss margin
Projected risk scores
Initial June Bid Submission – Required for All Bids with Specified Assumptions
Base period experience and projections
Manual rate development
Trend projection factor development
Disclosure of related-party agreements
Input sheet(s) for pricing model
Bid audit results
Reliance information
Upon Request by CMS Reviewers
Reconciliation of base period experience with company financial data
Related-party agreements
Reliance letter
Bid review communications
Other
CY2012 PRA PD BPT Instructions
Page 67 of 76
APPENDIX B
SAMPLE COVER SHEET – SUBMITTED WITH INITIAL BID UPLOAD
Supporting Documentation Cover Sheet
CY2012 Bid Submission
Organization Name: Health One
Contract(s): H1234, H9999 and S9999
Date: June 7, 2011
Documentation
Requirement
Cover sheet
Specific
Bid ID(s) or N/A
All bids
Product narrative
All bids
Credibility
assumption
Cost sharing
mapping
Non-benefit
expenses
Gain/loss margins
Risk scores
All bids
Manual rates
ESRD subsidy
Location
within File (if
Applicable)
Page 1
Applies to: MA,
PD, or Both
both
Pages 2-4
both
Page 5
both
Page 6
both
Sheet1
both
both
both
MA
All bids
File Name
Cover Sheet 6-710.pdf
Cover Sheet 6-710.pdf
Cover Sheet 6-710.pdf
Cover Sheet 6-710.pdf
AdminProfit.xls
All bids
All bids
AdminProfit.xls
Risk CY11.xls
H1234-003-0
S9999-001-0
H1234-001-0
H1234-004-0
Manual.xls
Sheet2
MA-Sheet 1
PD-Sheet 2
Section II
Manual.xls
Section I
All bids
CY2012 PRA PD BPT Instructions
PD
Page 68 of 76
APPENDIX B
SAMPLE COVER SHEET – SUBMITTED AS A SUBSEQUENT SUBSTANTIATION UPLOAD
Supporting Documentation Cover Sheet #2
CY2012 Bid Submission
Organization Name: Health One
Contract(s): H1234, H9999, and S9999
Date: July 16, 2011
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
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
H9999-001-0
S9999-001-0
File Name
Cover Sheet 7-16-10.doc
Location
within File (if
Applicable)
n/a
Applies to:
MA, PD,
or Both
both
E-mail1.doc
n/a
MA
Email2.doc
n/a
PD
Email3.doc
n/a
PD
SAMPLE FORMAT FOR RELIANCE ON INFORMATION SUPPLIED BY OTHERS
Bid ID
H1234-002-00
MA or PD
or Both
MA and PD
Source
(Name, Position, Company)
Joe Smith, Director of Finance,
ABC Health Plan
H1234-002-00
MA and PD
Jane Doe, Medicare Analyst,
ABC Health Plan
CY2012 PRA PD BPT Instructions
Type of
Information
Administrative
expenses,
gain/loss margin
Claim modeling,
risk score
Comments
I have not performed any
independent audit or
otherwise verified the
accuracy of these data or
information.
Page 69 of 76
APPENDIX C
APPENDIX C – EMPLOYER/UNION-ONLY GROUP (EGWP)
REQUIREMENTS
The Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (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 DS benefit and receive a taxfree retiree subsidy of 28 percent of a retiree’s drug costs between $310 and $6,300;
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 to employer/union-only groups that contract directly with
CMS to become a PDP.
For CY2006, CMS issued guidance that waives or modifies many of the requirements for these
entities. CMS waiver guidance is located at http://cms.gov/EmpGrpWaivers. All of the
standard Part D bidding guidelines apply, with the exception of those specifically waived.
For CY2012, CMS does not require a Part D BPT for employer/union-only group plans.
For additional information on CY2012 EGWP bidding policy, please refer to the CY2012 Call
Letter.
CY2012 PRA PD BPT Instructions
Page 70 of 76
APPENDIX D
APPENDIX D – CALCULATION OF NATIONAL AVERAGE MONTHLY
BID AMOUNT
For CY2006, the national average monthly bid amount was calculated using equal weighting
applied to all PDP sponsors, and MA-PD plans were assigned 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 CY2007 and CY2008, 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 CY2007 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 CY2008, 40 percent of the calculation was based on the uniform-weighting
average and 60 percent was based on an enrollment-weighted average. The demonstration was
no longer in effect for CY2009 and the benchmarks were based on the 2008 enrollments
applied to the 2009 bids. The CY2012 benchmarks will be based on the 2011 enrollments
applied to the 2012 bids.
The following table illustrates the impact of the weighted enrollment methodology for two
enrollment periods, June 2010 and February 2011. Recall that the 2011 benchmark was
calculated as 100 percent of the enrollment-weighted approach.
The same values are presented based on the February 2011 enrollment. Since the 2012
benchmarks will be based on 2011 enrollment, these values may be useful for estimating the
2012 benchmarks. The left section of the table shows the actual 2011 benchmarks, which were
calculated based on June 2010 enrollment. The right section, titled ―February 2011
Enrollment,‖ indicates how the 2011 benchmarks would have been calculated based on more
current enrollment data.
Enrollment Weighted Approach
June 2010
Enrollment
February 2011
Enrollment
National average monthly bid amount
$88.33
$86.96
Base beneficiary premium
$31.94
$31.34
Direct subsidy
$56.39
$55.62
This illustrative recalculation of the 2011 benchmarks is provided for the purpose of assisting
Part D sponsors in developing the projected 2012 national average monthly bid amount and
base beneficiary premium, which will be used in the calculation of the plan’s target premium.
The final 2012 benchmarks will be based on the 2011 enrollments applied to the 2012 bids.
CY2012 PRA PD BPT Instructions
Page 71 of 76
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-PDs were assigned a weight based on prior enrollment as of March 31, 2005, and new
MA-PDs were assigned a zero weight. For CY2007, 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.
For CY2008, 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), as described below:
•
•
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 were
weighted equally and the MA-PD plan premiums, after the application of Part A/B
rebates, were 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.
For CY2008, the regional low-income benchmark amount was based on 50 percent of the first
component and 50 percent on the second component, as described above.
For CY2009, the ―Medicare Demonstration to Transition Enrollment of Low-Income Subsidy
Beneficiaries‖ and the de minimus policy were not in effect. The regional low-income
benchmark amounts were calculated based on 100 percent of the weighted LIS enrollments.
For CY2010, the ―Medicare Demonstration to Revise Part D Low-Income Benchmark
Calculation‖ established that the regional low-income benchmark amounts, based on 100
percent of the weighted LIS enrollments, would be calculated using the Part D premiums for
MA-PD plans before they were reduced by any applicable MA A/B rebates.
For CY2011 and subsequent years, in accord with the codification of the ―Medicare
Demonstration to Revise Part D Low-Income Benchmark Calculation‖, the weighted average
premium amounts will be calculated using the Part D premiums for MA-PD plans before they
have been reduced by any applicable Part A/B rebates.
The following table illustrates the impact of calculating the regional low-income benchmark
amounts based on 100 percent of the weighted LIS enrollments for two enrollment periods,
June 2010 and February 2011.
CY2012 PRA PD BPT Instructions
Page 72 of 76
APPENDIX E
Enrollment Weighted Approach
PD Region
State(s)
June 2010
Enrollment
February 2011
Enrollment
01
NH, ME
$26.96
$26.09
02
CT, MA, RI, VT
$34.57
$33.76
03
NY
$33.32
$32.38
04
NJ
$35.01
$33.12
05
DE, DC, MD
$33.71
$33.02
06
PA, WV
$32.09
$30.88
07
VA
$34.15
$32.87
08
NC
$34.90
$33.43
09
SC
$35.02
$33.98
10
GA
$29.62
$28.78
11
FL
$27.45
$25.56
12
AL, TN
$30.73
$30.06
13
MI
$34.92
$33.55
14
OH
$30.47
$28.32
15
IN, KY
$35.75
$34.15
16
WI
$38.20
$37.15
17
IL
$31.59
$29.76
18
MO
$40.01
$36.76
19
AR
$28.48
$27.48
20
MS
$33.02
$30.75
21
LA
$31.32
$32.02
22
TX
$27.53
$26.96
23
OK
$32.31
$31.86
24
KS
$35.77
$35.20
25
IA, MN, MT, ND, NE, SD, WY
$37.55
$36.41
26
NM
$21.42
$21.32
27
CO
$30.99
$30.38
28
AZ
$24.75
$24.91
29
NV
$27.31
$20.20
30
OR, WA
$35.60
$34.88
31
ID, UT
$40.89
$39.37
32
CA
$28.99
$28.86
33
HI
$25.55
$24.29
34
AK
$38.00
$35.37
CY2012 PRA PD BPT Instructions
Page 73 of 76
APPENDIX F
APPENDIX F – IMPACT OF HEALTH CARE REFORM ON CY2012
BIDS
PROVISIONS
The following provisions of the Patient Protection and Affordable Care Act (PPACA) and
Health Care and Education and Reconciliation Act of 2010 apply to Part D bids for CY2012.
Coverage in the Gap
A phase-in approach will be implemented to reduce beneficiary cost sharing in the coverage
gap from 100 percent to 25 percent in CY2020. In CY2012, beneficiary cost sharing is reduced
from 100 percent to 93 percent for generic drugs; the Plan sponsor’s liability for DS coverage is
increased to 7 percent. Beneficiary cost sharing is reduced from 100 percent to 50 percent.
Pharmaceutical manufacturers will provide a 50 percent discount off of the plan sponsor’s
negotiated price of the brand-name drug at the point-of-sale. The total negotiated price of the
drug will count toward the beneficiary’s TrOOP; the Plan sponsor’s liability remains at 0
percent.
Low-Income Premium Subsidy Amounts
The approach to determine the low-income premium subsidy amounts that was established in
the ―Medicare Demonstration to Revise Part D Low-Income Benchmark Calculation‖ and
approved on August 11, 2009 was codified. Therefore, the weighted average premium amounts
will be calculated using the Part D premiums for MA-PD plans before they have been reduced
by any applicable MA A/B rebates.
Income-Related Part D Premium
Similar to Medicare Part B, an income-related premium is established. The income thresholds
for CY2012 through CY2019 are $85,000 per individual and $170,000 per couple. The direct
subsidy will be reduced by the amount of the increased income-related premium.
PRICING CONSIDERATIONS
Part D sponsors must model the impact of the addition of coverage in the gap on the DS
benefit. The following guidelines apply to all Part D bids.
•
•
The changes to projected average allowed amounts from the base period to the contract
year that are expected to occur as a result of reduced beneficiary cost sharing in the
coverage gap must be reflected in the ―Other Change‖ components of utilization and
unit cost trend factors on Worksheet 2.
The CMS guideline concerning Specialty drugs is not changed. When a designated
Specialty tier is used, all drugs in that tier must be reported by point-of-sale in
Worksheet 2 and Worksheet 6 of the BPT. The drugs in the Specialty tier must not be
sorted by type of drug status and must not be reported as a component of the generic,
preferred brand and non-preferred brand drugs in the non-Specialty tiers. When a
designated Specialty drug tier is not used in the formulary and PBP, Specialty drugs
CY2012 PRA PD BPT Instructions
Page 74 of 76
APPENDIX F
•
•
•
must be sorted by generic, preferred brand and non-preferred brand status and must be
reported in these categories by point-of-sale. In this situation, the Specialty categories
in Worksheet 2 and Worksheet 6 are not completed.
While coverage in the gap will not change the TrOOP threshold of $4,550, it will affect
the point at which the beneficiary reaches the TrOOP threshold for catastrophic
coverage.
The impact on the LIS Cost Sharing PMPM must be reflected in lines 4-5, column o of
Worksheet 3.
The impact on the Federal Reinsurance PMPM must be reflected in line 5, column m of
Worksheet 3.
The following guideline applies when the type of coverage is AE, BA or EA.
•
When modeling an alternative coverage, members must be reported in the claims
interval in which they were reported under DS coverage even though their total drug
spend may be different because of the impact of the alternative benefits.
The following guideline applies when the type of coverage is EA.
•
When an EA plan offers coverage in the gap that exceeds the DS coverage, the
―Amounts in Gap PMPM‖ and ―Coinsurance Percentage in Gap‖ on Worksheet 5, cells
K37 and K47, respectively, must reflect the projected allowed amount pmpm for DS
coverage and the additional partial of full coverage.
CHANGES TO THE BPT
The following changes were made to the BPT to accommodate the provisions.
•
•
•
In Worksheet 3 –
◦ The headings, ―Generics in Gap PMPM‖ and ―Generic Gap Coverage‖, were
added to cells I26 and M31, respectively.
◦ The headings in cells C23 and C24 were changed to ―$2,840-Catastrophic‖ and
―Above Catastrophic‖, respectively.
◦ An input field was added to cell J26 for ―Generics in Gap PMPM‖.
◦ A formula was added to cell N31 to calculate the 7% Plan sponsor liability for
―Generic Gap Coverage‖.
◦ The formulas in cells I33, J33 and N33 were updated to reflect the impact of
―Generic Gap Coverage‖.
In Worksheet 4 –
◦ The heading in cell H28 referencing the dollar amount at which catastrophic
coverage begins was removed.
In Worksheet 5 –
◦ A formula was added to cell K46 to calculate the percentage coinsurance
amount in the gap for DS coverage.
◦ The formula in cell K49 was updated to reflect the PMPM impact on the amount
in the gap for DS coverage.
CY2012 PRA PD BPT Instructions
Page 75 of 76
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 12 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, Mail Stop C4-26-05, Baltimore, Maryland
21244-1850.
CY2012 PRA PD BPT Instructions
Page 76 of 76
| File Type | application/pdf |
| File Title | INSTRUCTIONS FOR COMPLETING THE PRESCRIPTION DRUG PLAN BID PRICING TOOL FOR CONTRACT YEAR 2010 |
| Author | HHS/CMS |
| File Modified | 2010-12-16 |
| File Created | 2010-12-16 |