CY 2013 Bid Pricing Tool (BPT) for Medicare Advantage (MA) Plans and Prescription Drug Plans (PDP)-CMS-10142

OMB Approved # 0938-0944

INSTRUCTIONS FOR COMPLETING
THE MEDICARE ADVANTAGE
BID PRICING TOOLS
FOR CONTRACT YEAR 2014

September 12, 2012

CMS-10142 (04/30/2013)

TABLE OF CONTENTS
Table of Contents ............................................................................................................................................... 2
I. Introduction.................................................................................................................................................... 4
Background ................................................................................................................................................. 4
Document Overview ................................................................................................................................... 4
New for Contract Year 2014 (CY2014) ...................................................................................................... 5
Bidding Resources....................................................................................................................................... 5
II. Pricing Considerations................................................................................................................................... 6
Bidding/Pricing Approach........................................................................................................................... 6
Specific Topics ............................................................................................................................................ 6
III. Data Entry and Formulas ........................................................................................................................... 37
Medicare Advantage ................................................................................................................................. 37
Medical Savings Account.......................................................................................................................... 37
ESRD-SNP ................................................................................................................................................ 37
Data Entry ................................................................................................................................................. 37
MA Worksheet 1 – MA Base Period Experience and Projection Assumptions ............................................... 38
Section I – General Information ................................................................................................................ 38
Section II – Base Period Background Information.................................................................................... 41
Section III – Base Period Data (at Plan’s Risk Factor) for 1/1/2012 – 12/31/2012 .................................. 42
Section IV – Projection Assumptions ....................................................................................................... 44
Section V – Description of Other Utilization Adjustment Factor, Other Unit Cost Adjustment
Factor, and Additive Adjustments ...................................................................................................... 45
Section VI – Base Period Summary for 1/1/2012 – 12/31/2012 (excludes Optional Supplemental) ........ 45
MA Worksheet 2 – MA Projected Allowed Costs PMPM .............................................................................. 48
Section I – General Information ................................................................................................................ 48
Section II – Projected Allowed Costs........................................................................................................ 48
MA Worksheet 3 – MA Projected Cost Sharing PMPM ................................................................................. 51
Section I – General Information ................................................................................................................ 51
Section II – Maximum Cost Sharing Per Member Per Year ..................................................................... 51
Section III – Development of Contract Year Cost Sharing PMPM (Plan’s Risk Factor) ......................... 52
Section IV – Mapping of PBP Service Categories to BPT........................................................................ 58
MA Worksheet 4 – MA Projected Revenue Requirement PMPM................................................................... 59
Section I – General Information ................................................................................................................ 59
Section II – Development of Projected Revenue Requirement ................................................................. 59
Section III – Development of Projected Contract Year ESRD “Subsidy” ................................................ 66
Section IV – For Employer Bid Use Only (“800-series”) ......................................................................... 66
Section V – Projected Medicaid Data for DE# Beneficiaries ................................................................... 67
MA Worksheet 5 – MA Benchmark PMPM .................................................................................................... 68
Section I – General Information ................................................................................................................ 68
Section II – Benchmark and Bid Development ......................................................................................... 68
Section III – Savings/Basic Member Premium Development ................................................................... 69
Section IV – Standardized A/B Benchmark – Regional Plans Only ......................................................... 70
Section V – Quality Rating ....................................................................................................................... 70
Section VI – County-Level Detail and Service Area Summary ................................................................ 71
Section VII – Other Medicare Information ............................................................................................... 73
Section VIII – Projected CY Member Months .......................................................................................... 74
MA Worksheet 6 – MA Bid Summary ............................................................................................................ 75
Section I – General Information ................................................................................................................ 75
Section II – Other Information .................................................................................................................. 75

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Section III – Plan A/B Bid Summary ........................................................................................................ 75
Section IV – Contact Information and Date Prepared ............................................................................... 79
Section V – Working Model Text Box...................................................................................................... 80
MA Worksheet 7 – Optional Supplemental Benefits ....................................................................................... 81
Section I – General Information ................................................................................................................ 81
Section II – Optional Supplemental Packages........................................................................................... 81
Section III – Comments............................................................................................................................. 83
IV. Appendices................................................................................................................................................ 84
Appendix A – Actuarial Certification .............................................................................................................. 84
Appendix B – Supporting Documentation ....................................................................................................... 87
General ...................................................................................................................................................... 87
Submitting Supporting Documentation ..................................................................................................... 88
MA Checklist for Required Supporting Documentation ........................................................................... 95
SAMPLE Cover Sheet – Submitted with initial bid upload in June.......................................................... 97
SAMPLE Cover Sheet – Submitted as a subsequent substantiation upload ............................................. 98
SAMPLE Format for Reliance on Information Supplied by Others ......................................................... 98
SAMPLE Format for Summary of the Projected Risk Score Development – Preferred Methodology .... 99
SAMPLE Format for Summary of the Projected Risk Score Development – Alternate Methodology .... 99
Appendix C – Part B-Only Enrollees ............................................................................................................. 101
Appendix D – Medicare Advantage Products Available to Groups............................................................... 102
Appendix E – Rebate Reallocation and Premium Rounding ......................................................................... 105
I. Rebate Reallocation Permissibility by Plan Type ................................................................................ 105
II. Rebate Reallocation Rules and Examples .......................................................................................... 106
III. Additional Rebate Reallocation Guidance ........................................................................................ 113
IV. Rules for Rounding Premiums .......................................................................................................... 116
V. Summary of Considerations for Rebate Reallocation Resubmissions................................................ 120
Appendix F – Suggested Mapping of MA PBP Categories to BPT Categories ............................................. 121
Appendix G – DE# Summary ........................................................................................................................ 123
Appendix H – Medical Savings Account BPT............................................................................................... 126
Worksheet 1 – MSA Base Period Experience and Projection Assumptions (Corresponding to MA
Worksheet 1) .................................................................................................................................... 126
Worksheet 2 – MSA Total Projected Allowed Costs PMPM (Corresponding to MA Worksheet 2)...... 126
Worksheet 3 – MSA Benchmark PMPM (Corresponding to MA Worksheet 5) .................................... 126
Worksheet 4 – Enrollee Deposit and Plan Payment (No corresponding MA Worksheet) ...................... 127
Worksheet 5 – Optional Supplemental Benefits (Corresponding to MA Worksheet 7) ......................... 128
Appendix I – End–Stage Renal Disease–Only Special Needs Plans BPT ..................................................... 129
Worksheet 1 – Enrollment and PMPM revenue Projection .................................................................... 129
Worksheet 2 – Projection of benefit cost, non-benefit expenses, and gain/loss margin PMPM ............. 131
Worksheet 3 – Program Experience for Calendar Years 2011 and 2012 ................................................ 132
Worksheet 4 – Optional Supplemental Benefits ..................................................................................... 132
Supporting Documentation for ESRD-SNP BPTs .................................................................................. 132

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INTRODUCTION

I. INTRODUCTION
BACKGROUND
Medicare Advantage (MA) organizations must submit a separate bid to the Centers for
Medicare & Medicaid Services (CMS) for each plan that they intend to offer under the
Medicare Advantage program, including MA plans, Medical Savings Account (MSA) plans
and End-Stage Renal Disease (ESRD)-only special needs plans (SNPs). For plans with service
area segments, a separate bid must be submitted for each segment.
Organizations must submit the information via the CMS Health Plan Management System
(HPMS) in the CMS-approved electronic format—the MA Bid Pricing Tool (BPT), the MSA
BPT or the ESRD-SNP BPT. The MA BPT is not to be completed for Section 1876 Cost plans,
Section 1833 Cost plans, or Programs of All-Inclusive Care for the Elderly (PACE) plans. 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 and negotiation by CMS or by any person or
organization that CMS designates. As part of the review/negotiation process, CMS or its
representative may request additional documentation supporting the information contained in
the BPT. Organizations must be prepared to provide this information in a timely manner.
If the MA plan includes prescription drug benefits under the Medicare Part D program (that is,
an MA-PD plan), then an additional Part D BPT must also be completed and submitted to
CMS. Prescription drug benefits under the Medicare Part D program are not allowed to be
offered with an MSA plan.

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 background information and a list of key changes
from CY2013, and provides sources of additional information regarding the bidding
process.
Section II, “Pricing Considerations”: includes guidance for the overall approach to
pricing in the BPT and topic-specific issues for bidders to consider. The section topics
are arranged alphabetically.
Section III, “Data Entry and Formulas”: contains line-by-line instructions on each data
entry field and describes the formulas for calculated cells.
Section IV, Appendices: contain information on Actuarial Certification, Supporting
Documentation, Part B-Only Enrollees, MA Products Available to Groups, Rebate
Reallocation and Premium Rounding, Suggested Mapping of MA Plan Benefit Package
(PBP) Categories to BPT Categories, DE#, the MSA BPT, and the ESRD-SNP BPT.

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INTRODUCTION

NEW FOR CONTRACT YEAR 2014 (CY2014)
Some of the key features that are new or changed for the CY2014 BPTs are listed below. The
changes improve the usability and functionality of the BPT and reflect current guidance.

BIDDING RESOURCES
In addition to these instructions, the following resources provide information on CY2014
bidding:
•
•
•

•
•

•

•

The CY2014 Advance Notice and draft CY2014 Call Letter may be found at
http://www.cms.gov/Medicare/Health-Plans/MedicareAdvtgSpecRateStats/Downloads/
Advance2014.pdf.
The CY2014 Rate Announcement and CY2014 Call Letter may be found at
http://www.cms.gov/Medicare/Health-Plans/MedicareAdvtgSpecRateStats/Downloads/
Announcement2014.pdf
The CY2014 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/Medicare/Health-Plans/MedicareAdvtgSpecRateStats/
BidTraining2014.html and http://www.cms.gov/Medicare/Health-Plans/
MedicareAdvtgSpecRateStats/BidTrainingIntro.html.
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
CY2014 bidding process. The conference calls will include live Question and Answer
sessions with CMS actuaries. The call-in information is as follows:
◦ Every Thursday
◦ 11:00am – 12:30pm ET
◦ See HPMS announcement for call details
For technical questions about the BPT, HPMS, or the upload process, refer to the
following resources:
◦ The Technical BPT Instructions are located in HPMS, under HPMS Home >
Plan Bids > Bid Submission > CY2014 > Documentation > BPT Technical
Instructions
◦ The Bid Submission User’s Manual, also available in HPMS
◦ HPMS Help Desk: 1-800-220-2028 or [email protected]
For information about benefits and service categories, see Chapter 4 of the Medicare
Managed Care Manual at http://www.cms.gov/Regulations-and-Guidance/Guidance/
Manuals/downloads/mc86c04.pdf

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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, Plan sponsors must use credible bid-specific experience in
the development of projected allowed costs. This approach does not preclude Plan 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 bid level if the plan existed in CY2012, 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
Topic

Adjusted Medical Loss Ratio (MLR)
Affordable Care Act and Quality Bonus
Payment Demonstration

Medicare Secondary Payor (MSP)
Adjustment
Non-Benefit Expenses

Bad Debt

Non-Covered Limited Benefits

Base Period Experience
Benefits and Service Categories

Cost Sharing

Part B Premium and Buydown
Plan Premiums, Rebate Reallocation, and
Premium Rounding
Plan Intention for Target Part D Basic
Premium

Claims Credibility

Point-of-Service (POS)

Disease Management

Preventive Services Incentives

Dual-Eligible Beneficiaries

Rebate Allocations

Employer-only or union-only group Waiver
plans (EGWPs)
End-Stage Renal Disease (ESRD)

Regional Preferred Provider Organizations
(RPPO)

Enrollment

Risk Score Development for CY2014

Gain/Loss Margin

Service Area Changes

Hospice Enrollees
Inpatient Hospital Non-Covered Days

Skilled Nursing Facility

Coordination of Benefits (COB)/
Subrogation

Related Party (Medical and Non-Benefit)

Supporting Documentation

Manual Rating

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PRICING CONSIDERATIONS

Adjusted Medical Loss Ratio (MLR)

The Adjusted MLR is included on Worksheet 4 to prepare Plan sponsors and assist CMS in
developing guidance for the implementation of the Medicare MLR calculation and data
collection required by the Affordable Care Act (ACA).
The Adjusted MLR is based on the projected revenue requirement for Medicare-covered and
A/B mandatory supplemental benefits. It is calculated in Worksheet 4, Section IIC (line y4) as
the ratio of projected:
•
•

Medical expenses (line u) plus quality initiatives (line z1), to
Total revenue requirement (line x) less taxes and fees (line z2).

The cost of quality initiatives is the certifying actuary’s best estimate of non-benefit expenses
(PMPM) for activities that are designed to improve healthcare quality. Quality initiatives are
added to the medical expense (numerator) in the calculation of the Adjusted MLR. This
includes activities that are designed to—
•
•
•
•
•

Improve health outcomes.
Prevent hospital readmissions.
Improve patient safety and reduce medical errors, lower infection and mortality rates.
Increase wellness and promote health activities.
Enhance the use of health care data to improve quality, transparency, and outcomes.

Accordingly, this cost is a subset of projected non-benefit expenses (line v).
Similarly, the cost of taxes and fees (PMPM) is the certifying actuary’s best estimate of federal
and state taxes and licensing or regulatory fees, which the Plan sponsor believes should be
included in this category. Taxes and fees are subtracted from the revenue (denominator) in the
calculation of the Adjusted MLR. This cost is a subset of projected non-benefit expenses
(line v) and/or gain/loss margin (line w).
Worksheet 4 contains a text box to list the specific items included in the quality initiatives and
taxes and fees categories and the filename of the substantiation uploaded to HPMS, which
describes these items in more detail.
Example: Quality initiatives: care coordination, chronic disease management, hospital

discharge program, . . . Taxes and fees: ACA annual fee on health insurance providers,
Federal income taxes excluding taxes on investment income and capital gains. . .
. . . See the “H1234_MLR.pdf” file.
Worksheet 1 collects the costs (in total dollars) of quality initiatives and taxes and fees incurred
in the base period (Section VI, lines 10a and 10b). These items are defined in the same manner
as for the projection period. Supporting documentation for base period quality initiatives and
taxes and fees is to be included in the substantiation file identified in the quality initiatives and
taxes and fees text box in Worksheet 4.
Affordable Care Act and Quality Bonus Payment Demonstration

The Affordable Care Act introduced quality bonus payments (QBPs) to MA organizations
based on a five-star quality rating system. The Affordable Care Act also changed the share of

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PRICING CONSIDERATIONS

savings that MA organizations must provide to enrollees as the beneficiary rebate, mandating
that the level of rebate is tied to the level of the plan’s QBP rating. The law mandates one
exception for determining the CY2014 level of rebate for new contracts under a new parent
organization (PO).
The contract-level ratings for the CY2014 QBP can be found at the following path in HPMS:
HPMS Home > Quality and Performance > Part C Performance Metrics > Quality Bonus
Payment Rating > 2014.
Low-Enrollment Contract

A low-enrollment contract is a contract that could not undertake Healthcare
Effectiveness Data and Information Set (HEDIS) and Health Outcome Survey (HOS)
data collections because it lacked a sufficient number of enrollees to reliably measure
the performance of the health plan. For 2014, a “low” enrollment contract received
three stars for QBP purposes.
New Contract under New Parent Organization

A new MA contract offered by a parent organization that has not had any MA
contract(s) with CMS in the previous three years is treated as a qualifying contract, per
statute, until the contract has enough data to calculate a star rating. For 2014, a “new
contract under new parent org” received three stars for QBP purposes.
New Contract under Existing Parent Organization

For a parent organization that has had MA contract(s) with CMS in the previous three
years, any new MA contract under that parent organization received a weighted average
of the QBP star ratings earned by the parent organization’s existing MA contracts
(weighted by enrollment).
CMS announced a demonstration based on scaled bonuses; the higher a contract’s star rating,
the greater the QBP percentage. The following table outlines the QBP percentage, rebate
factor, and rebate percentage for various QBP star ratings in CY2014.
QBP
star
rating
5.0
4.5
4.0
3.5
3.0

CY2014
QBP %
5.0%
4.0%
4.0%
3.5%
3.0%

< 3.0

0.0%

CY2014
rebate factor
70%
70%
65%
65%
50%, except for:
65% new contract under new PO
65% Employer/Union Direct
Contract PFFS (ED PFFS) contract
50%

CY2014 MA BPT Instructions

CY2014 Rebate % =
⅓ pre-ACA level (75%) + ⅔ postACA level (rebate factor)
71⅔%
71⅔%
68⅓%
68⅓%
58⅓%, except for:
68⅓% new contract under new PO
68⅓% ED PFFS contract
58⅓%

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PRICING CONSIDERATIONS

The CY2014 Advance Notice and Rate Announcement contain additional information
regarding the ACA provisions and the Quality Bonus Payment demonstration.
Bad Debt

Bad debt for uncollected enrollee cost sharing for inpatient hospital and skilled nursing facility
care is to be included in medical costs when paid for by the Plan sponsor in limited situations,
such as when private fee-for-service (PFFS) plans have chosen to match this aspect of
Medicare fee-for-service payment rules or when necessary for a plan to maintain access to a
sole provider of a service.
Base Period Experience

The base experience must be based on claims incurred in calendar year 2012 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 at the bid level, that is, with a contract number,
Plan ID, and segment combination for each bid. Note that these data must—
•
•
•
•
•
•

Be submitted in Worksheet 1 at the bid level for all plans with experience data in 2012,
regardless of the level of enrollment.
Be provided for plans acquired by the Plan sponsor.
Reconcile in an auditable manner to the Plan sponsor’s audited financial statements.
Be reported without adjustment in Section III. Adjustments may be made in Section IV
to accommodate population, benefit design, or other changes between the base period
and the projection period.
Not be used to aggregate data from multiple plans in order to achieve credibility.
Credibility is addressed on Worksheet 2.
Include any provider incentive payments.

The medical expenses in Section III must—
•
•
•

•
•
•

Reflect the current best estimate of incurred claims on an experience basis, including
estimates of unpaid claims, but excluding margin for adverse deviation (which must be
included as part of the gain/loss margin on Worksheet 4).
Be reported on an allowable basis (before any reduction for reinsurance recoveries or
cost sharing) and on a net basis.
For Employer-only or union-only group waiver plans (EGWPs), reflect the actual cost
sharing provided to groups enrolled. For other plans, reflect the full level of plan cost
sharing in the plan benefit package (PBP) for all enrollees including the DE#
beneficiaries. See the pricing consideration for dual-eligible beneficiaries for more
information about DE# beneficiaries.
Include or exclude claim experience for hospice enrollees for the time period that an
enrollee is in hospice status consistent with the development of projected allowed costs.
See the pricing consideration for hospice enrollees.
Exclude end-stage renal disease (ESRD) claim experience for the time period that an
enrollee is in ESRD status based on CMS eligibility records.
Exclude claims experience for optional supplemental benefits.

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PRICING CONSIDERATIONS

The net medical and non-benefit expenses and CMS and premium revenue in Section VI must
include all enrollees (that is, include ESRD and hospice and out-of-area). Section VI excludes
optional supplemental benefits. Section VI is completed in total dollars (not PMPMs).
Capitated Arrangements for Medical Services

If medical services are provided under a capitated arrangement, then the utilization rates
entered on Worksheet 1 must be based on claims or encounter data for the plan whether
or not a related party is involved.
The requirements for the “Net PMPM” and “Allowed PMPM” entered on Worksheet 1
depend on whether or not a related party is involved.
•

If a non-related party provides medical services under a capitated arrangement, the
allowed cost is the capitation amount for medical services plus any related cost
sharing.

•

If a related party provides medical services under a capitated agreement, the allowed
cost and net medical cost may need to be adjusted.
◦

If the capitation paid to a related party is greater (or less) than the average cost
that the related party would charge a non-related party for such services, only
the average cost is included in the allowed cost. The excess (or deficiency) is
considered gain/loss margin.

◦

If the related party does not have credible data on which to base the average
cost, such as data for a similar arrangement with a non-related party, FFS data
may be used to estimate this amount.

Plan Consolidations and Enrollment Shifts

The requirements for reporting base period data for plan consolidations and enrollment
shifts are described below.
✔ Rule 1 – Plan Consolidations (that is, Consolidated Renewals)

When two or more plans are consolidated and the members are cross-walked
into an existing or new plan, the two or more plans’ base period experience must
be reported on Worksheet 1 of the plan into which the members are
cross-walked. CMS allows data for more than one plan to be aggregated only in
this circumstance. Note the following:
•

•

•

The term “cross-walked” refers to the formal cross-walk process in HPMS
whereby members are moved from one plan to another. Without an HPMS
cross-walk in place, members are dis-enrolled from the terminating plan and
must actively select to enroll in a new plan of their choosing.
Plans can be cross-walked each contract year. For BPT reporting purposes,
the actuary must consider the cross-walks from the base period to the
contract period (that is, two years of crosswalks, from CY2012 to CY2013,
and then from CY2013 to CY2014).
This rule applies when members are cross-walked within the same contract
and when members are cross-walked between contracts.

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PRICING CONSIDERATIONS
✔ Rule 2 – Shifts in Enrollment

When enrollment shifts among plans and the base period plan is offered in the
contract period, then the base period experience must be reported only in
Worksheet 1 of the base period plan.
✔ Rule 3 – Partial Experience

Base period experience must be reported in total at the bid level for every
contract-plan ID-segment ID; do not include partial plan experience on
Worksheet 1.
Example 1:

An MA organization offers plans 001-00 and 002-00 in CY2012 and plans
002-00 and 003-00 in CY2014. Plan 001-00 is consolidated and the
membership is cross-walked into plan 003-00 for CY2014. Base period
experience must be reported on Worksheet 1 of the CY2014 BPT as follows:
•
•

For plan 002-00 BPT, report aggregate base period experience for plan
002-00 (Rule 1 and Rule 3).
For plan 003-00 BPT, report base period experience for plan 001-00 (Rule 1
and Rule 3).

Example 2:

An MA organization offers plans 001-00 and 002-00 in CY2012 and plans
002-00 and 003-00 in CY2014. Plan 001-00 is consolidated and the
membership is cross-walked to plan 003-00 for CY2014. The certifying actuary
expects most of the current membership in plan 002-00 to enroll in plan 003-00
for CY2014; however, plan 002-00 is still offered. Base period experience must
be reported on Worksheet 1 of the CY2014 BPT as follows:
•
•

For plan 002-00 BPT, report base period experience for plan 002-00 (Rule 2
and Rule 3).
For plan 003-00 BPT, report base period experience for plan 001-00
(Rule 1).

Example 3:

An MA organization offers plans 001-00, 002-00, and 003-00 in CY2012 and
plans 002-00 and 003-00 in CY2014. Plan 001-00 is consolidated and the
membership is cross-walked to plan 002-00 for CY2013. Base period
experience must be reported on Worksheet 1 of the CY2014 BPT as follows:
•
•

For plan 002-00 BPT, report base period experience for plans 001-00 and
002-00 (Rule 1 and Rule 3).
For plan 003-00 BPT, report base period experience for plan 003-00.

Example 4:

An MA organization offers plans 001-00, 002-00, and 003-00 in CY2012 and
plan 003-00 in CY2014. Plan 001-00 is consolidated and the membership is

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PRICING CONSIDERATIONS

cross-walked to plan 002-00 for CY2013. Plan 002-00 is consolidated and the
membership is cross-walked to plan 003-00 for CY2014. Base period
experience must be reported on Worksheet 1 of the CY2014 BPT as follows:
•

For plan 003-00 BPT, report base period experience for plans 001-00,
002-00, and 003-00.

Benefits and Service Categories

Input items related to medical expenses must generally be entered separately for each service
category displayed in the BPT.
Following are the three types of service categories:
•
•
•

Services that can be only Medicare-covered.
Services that can be only non-covered (for example, transportation benefits in line 1,
“Transportation (Non-Covered)”).
Medicare-covered services that may be supplemented, as an A/B mandatory
supplemental benefit (for example, the cost for additional days not covered by Medicare
in line a, “Inpatient Facility”).

For the third type, values are allocated between Medicare-covered benefits and A/B mandatory
supplemental benefits in Worksheet 4 as specified by the user. This allocation must be
consistent with the benefit type classification in the PBP.
For example, out-of-network benefits:
•
•

Are always A/B mandatory supplemental benefits for HMOPOS plans.
May be Medicare-covered or A/B mandatory supplemental benefits for other plan types.

See Appendix F for a suggested mapping of BPT and PBP service categories. For more
information on benefits and service categories, see Chapter 4 of the Medicare Managed Care
Manual, “Benefits and Beneficiary Protections,” at http://www.cms.gov/Regulations-andGuidance/Guidance/Manuals/downloads/mc86c04.pdf
Coordination of Benefits (COB)/Subrogation

The COB/Subrogation service category is intended to include only those amounts that are to be
settled outside the claim system. If an MA organization pays claims for its estimated liability
only (that is, net of the amount that is the responsibility of another payer, such as an employer
plan or auto policy), the MA organization’s net liability amount (before cost-sharing
reductions) may be entered on Worksheet 1, Section III, lines a through q.
Cost Sharing

Any member premium(s) and Part D cost sharing must be excluded from MA Worksheet 3.
Consistency with PBP

The cost-sharing information entered in the BPT must tie to data in the PBP. Note that,
although there are not individual entries for each cost-sharing item listed in the PBP, the
value of all cost-sharing items must be reflected in the total per member per month
(PMPM) amount in MA Worksheet 3. The PBP line numbers in Section IV of MA

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PRICING CONSIDERATIONS

Worksheet 3 must be mapped to the BPT line numbers to identify all of the plan cost
sharing.
The cost-sharing descriptions in Worksheet 3 may be used by plan managers, marketing
staff, and plan actuaries to ensure that the benefits priced in the BPT are consistent with
those in the PBP, as part of the quality control process for bid submissions. These
descriptions will be deleted from the finalized BPT and therefore will not be uploaded
to HPMS for use by CMS or CMS reviewers.
Medicare FFS Cost Sharing

For plan cost sharing designed to match Medicare fee-for-service cost sharing (an
approach used by some employer-only or union-only group waiver Plan sponsors), the
actuary may use the actuarial equivalent cost-sharing factors shown in MA Worksheet 4
to estimate the PMPM amount for plan cost sharing. In this case, the user may enter the
entire value of cost sharing in Worksheet 3, columns i for the effective
copay/coinsurance before MOOP.
Further, the actuary may enter the effective copay/coinsurance before the MOOP
(Worksheet 3 column i) for the DE# plan cost sharing in Worksheet 4, Section IIB,
column f.
These approaches do not apply for other levels of cost sharing.
Visitor/Travel Benefits

In-network cost sharing in Worksheet 3 includes mandatory supplemental benefits
offered under the Visitor/Travel Program (that is, Medicare-covered and non-covered
services obtained outside the plan’s service area).
Claims Credibility

Based on an application of classical credibility theory to Medicare FFS experience, CMS has
established a credibility guideline for projected allowed costs of full credibility for MA plans of
24,000 base period member months. The formula for partial credibility is the square root of the
result of base period member months divided by 24,000. This formula is a guideline; actuaries
must consider the quality of the base period experience when calculating credibility. Actuaries
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 credibility
formula for partial credibility:
•

If the CMS formula for partial credibility is applied to base period members months and
the resulting credibility is—
◦ Less than or equal to 20 percent (that is, 960 or fewer MA member months),
then the actuary may override the computed credibility with 0 percent
credibility.
◦ Greater than or equal to 90 percent (that is, 19,440 or more MA member
months), then the actuary may override the computed credibility with
100 percent credibility.

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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.
The credibility assumption for projected allowed costs may vary—
•
•
•

By service category, which may be appropriate if a subset of providers is reimbursed on
a capitation basis or if manual rates are being used for newly added benefits.
By line of business within a contract—for example, special needs plans (SNPs) as
compared to other plans.
From the credibility method used for ESRD membership—which may reach full
credibility at lower levels of member months due to the high amount of claims.

Credibility factors are applied to PMPM costs in the BPT. Therefore, actuaries who use
different credibility factors for utilization than for unit costs must develop blended factors to
use in the bid form.
When the base period experience is partially credible and included in experience used to
develop the manual rate, the actuary must consider the extent to which the manual rate
development double counts the base period experience. That is, is the manual rate developed
relatively independent of the base period experience? (See “The Complement of Credibility”
by Joseph A. Boor, Proceedings of the Casualty Actuarial Society, May 1996, Volume
LXXXIII.) If the proposed manual rate lacks sufficient independence from the base period
experience, then an alternative manual rate must be developed (by removing the base period
experience from the manual rate development and/or by increasing the use of other, non-base
period experience in the manual rate development). As an equivalent alternative to removing
the base period experience from the manual rate development, CMS will allow the credibility
percentage in the BPT to be adjusted such that the experience for the plan is assigned the
appropriate credibility (based on the CMS standard formula), taking into consideration the
proportion of the manual experience that is from the subject base plan.
The manual rate used in a credibility-weighted projection must be based on a sufficient volume
of data and be an appropriate predictor of the plan’s projected experience.
When assessing the credibility of plan experience, actuaries must consider ASOP No. 25,
Credibility Procedures Applicable to Accident and Health, Group Term Life, and
Property/Casualty Coverages and ASOP No. 8, Regulatory Filings for Health Plan Entities.
Note that the CMS credibility guideline was developed as weights for blended projected
allowed costs. Use of this formula for other pricing assumptions, such as risk scores, must be
fully explained and supported.
Disease Management

Disease management (DM) expenses are to be treated as medical expenses, non-benefit
expenses, or both, depending upon the nature of the expense. For DM services furnished in a
clinical setting by approved providers, costs are to be treated as medical expenses. The cost of
durable medical equipment (DME) associated with DM activities is typically classified as a
medical expense.

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For care management services provided under a SNP model of care—for example, services
provided by an interdisciplinary care team as mandated by Medicare Improvements for Patients
and Providers Act (MIPPA) and addressed in a HPMS memorandum dated
September 15, 2008—costs are treated as medical expenses. Should the team provide
additional services, any added costs may be classified by the certifying actuary as medical
expenses or as non-benefit expenses.
Absent additional CMS guidance, other DM and care coordination costs —such as those
incurred during recruitment, enrollment, and general program communications—are to be
classified as non-benefit, or administrative, expenses. In all cases, the classification of DM
expenses in the bid must be explained in the supporting documentation for projected allowed
costs and non-benefit expenses.
Dual-Eligible Beneficiaries

Dual-eligible beneficiaries are individuals who are eligible for both Medicare and Medicaid
benefits under Titles XVIII and XIX of the Social Security Act, respectively. There are several
categories of dual-eligible beneficiaries, such as qualified Medicare beneficiaries (QMBs), with
different benefits based on income and other qualifying circumstances. Some dual-eligible
beneficiaries receive benefits in the form of reduced or eliminated Medicare cost sharing.
The BPT reflects the difference in cost-sharing liability for certain dual-eligible beneficiaries in
the development of total medical costs.
Definition of DE#

In the BPT and these instructions, the term “DE#” (d-e-pound) refers to dual-eligible
beneficiaries without full Medicare cost-sharing liability. Included are dual-eligible
beneficiaries who receive benefits in the form of reduced, as well as eliminated,
Medicare cost sharing. The non-DE# population includes dual-eligible beneficiaries
with full Medicare cost-sharing liability and beneficiaries who are not eligible for
Medicaid (that is, non-dual eligible). The terms “total population” and “total
beneficiaries” refer to the combined non-DE# and DE# population and beneficiaries,
respectively.
Per federal statute, QMBs and qualified Medicare beneficiaries with full Medicaid
benefits (QMB+) are not liable for Medicare cost sharing; therefore, these individuals
are always considered to be DE# beneficiaries. The certifying actuary must determine
which additional beneficiaries are DE# based on the Medicaid cost-sharing policy for
the states or territories in the plan’s service area.
The certifying actuary may use plan-specific enrollment data available in HPMS, under
the “Risk Adjustment” link, to determine the DE# population as follows:
•

Consider the 2012 membership data posted in HPMS for the contract plan-ID
segment(s) listed in Worksheet 1 for the base period.

•

Consider the membership in the QMB and QMB+ categories to represent the entire
DE# population only if the percentage of total dual-eligible beneficiaries (who
comprise all dual-eligible categories and not just the QMB and QMB+ categories) is
less than 10 percent of total beneficiaries.

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•

If the percentage of total dual-eligible beneficiaries is greater than or equal to
10 percent of total beneficiaries, then determine which dual-eligible beneficiaries, in
addition to QMB and QMB+ beneficiaries, are DE# based on the Medicaid
cost-sharing policy for the states or territories in the plan’s service area.

To learn more about the enrollment data posted in HPMS, see the pricing consideration
for risk score definitions and information sources.
The BPT must reflect data and costs for the DE# and non-DE# populations separately,
as explained in this section and summarized in Appendix G.
✔ Worksheet 1 – Base Period Data

The user must enter distinct base period member months and risk scores
separately for the total and non-DE# populations regardless of the size of the
actual and projected DE# populations. The BPT calculates base period member
months and risk scores for the DE# population based on the user-entered values
for the total and non-DE# populations. All other data on Worksheet 1 are to be
entered for the total population.
✔ Worksheet 2 – Projected Allowed Costs (Blended Rates)

The BPT calculates blended allowed costs for the total population (column o)
based on the projected experience rate and manual rate. The CMS credibility
guideline applies to total (DE# plus non-DE#) member months.
The user must enter projected allowed costs for both the non-DE# and DE#
populations (columns p and q) as follows:
•
•
•

•

•

Enter projected allowed costs for the non-DE# beneficiaries in column p and
projected allowed costs for the DE# beneficiaries in column q.
If DE# projected member months are between 10 percent and 90 percent
inclusive of the total projected member months, then enter distinct DE# and
non-DE# projected allowed costs (columns p and q).
If DE# projected member months are less than 10 percent or greater than
90 percent of the total projected member months, then the user may, at the
discretion of the certifying actuary, enter—
◦ Non-DE# projected allowed costs (column p) equal to the projected
allowed costs for the total population (column o); and
◦ DE# projected allowed costs (column q) equal to the projected allowed
costs for the total population (column o).
If the projected member months for the DE# population or for the non-DE#
population are equal to zero, then enter projected allowed costs for the
non-DE# beneficiaries (column p) and for the DE# beneficiaries (column q)
equal to the projected allowed costs for the total population (column o). Do
not enter zero for these costs.
Complete Worksheet 2, column p on a “per non-DE# member per month”
basis, and complete column q on a “per DE# member per month” basis.

✔ Worksheet 3 – Cost Sharing

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The user must enter cost-sharing information in Worksheet 3 based on benefits
outlined in the PBP, including the case when the number of projected non-DE#
member months equals zero.
The values apply to the total population or to the non-DE# population as
follows:
•

•
•

If (i) DE# projected member months are less than 10 percent, or greater than
90 percent, but not equal to 100 percent of total projected member months,
and (ii) the projected allowed costs in Worksheet 2 for the total, DE#, and
non-DE# populations are all equal, then the utilization rates entered in
Worksheet 3, and hence the PMPM value of cost sharing, may, at the
discretion of the certifying actuary, apply to either—
◦ The non-DE# population; or
◦ The total population.
If DE# projected member months are 100 percent of total projected member
months, then the utilization rates entered in Worksheet 3, and hence the
PMPM value of cost sharing, must apply to the total population.
In all other cases, the utilization rates and PMPM value of cost sharing apply
to the non-DE# population.

✔ Worksheet 4 – Projected Required Revenue

Total medical expenses are calculated separately for non-DE#s, DE#s, and all
beneficiaries in subsections A, B, and C, respectively.
•
•

•

In subsection A (non-DE#s), net medical expenses for Medicare-covered
benefits (column o) are calculated based on FFS actuarially equivalent
cost-sharing proportions (column k).
In subsection B (DE#s), comparable medical expenses are calculated for
DE# beneficiaries, taking into account the reduced or eliminated
cost-sharing liability of dual-eligible beneficiaries, including the state or
territory Medicaid cost sharing (column k). Specifically, the
Medicare-covered net PMPM reflects—
◦ What the plan pays the provider for Medicare-covered services; plus
◦ The actual cost sharing for Medicare-covered services; less
◦ The state or territory Medicaid cost sharing for Medicare-covered
services.
In subsection C (all beneficiaries), the BPT weights the non-DE# and DE#
costs by their respective projected member months (from Worksheet 5) to
calculate costs for all beneficiaries. The user must enter total non-benefit
expenses and the gain/loss margin for all beneficiaries.

Considerations for developing data for DE# beneficiaries in subsection B
include the following:
•
•

All values must be calculated on a “per DE# member per month” basis.
In column f, plan cost sharing reflects the cost sharing that would be paid if
the beneficiary actually paid the plan cost sharing in the PBP.

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◦

•

•

This amount is calculated automatically based on DE# allowed costs in
Worksheet 2 and the ratio of non-DE# plan cost sharing and allowed
costs in subsection A.
◦ However, the default formulas may be overwritten at the discretion of
the certifying actuary.
Also in column f, plan cost sharing must reflect the following:
◦ If projected DE# member months is greater than zero, and non-DE# cost
sharing (Worksheet 4 Section IIA col. f) is greater than zero, then DE#
cost sharing (Worksheet 4 Section IIB col. f) must be greater than zero.
◦ If projected DE# member months equal total member months (that is,
100% DE# plan), then DE# cost sharing (Worksheet 4 Section IIB col. f)
must equal the cost sharing entered on Worksheet 3.
In column k, the “Medicaid Cost Sharing” reflects the cost sharing that the
beneficiary is liable to pay.
◦ The “Medicaid Cost Sharing” includes the following:
‣ Cost-sharing amounts required by state or territory Medicaid
programs based on the eligibility rules for subsidized cost sharing for
DE# beneficiaries in the plan’s service area.
‣ Plan cost sharing for non-covered, non-Medicaid benefits.
◦ The user must—
‣ Calculate the “Medicaid Cost Sharing” as a weighted average of the
PMPM cost sharing for all DE# members.
‣ Enter data in all cases. The cells must not be left blank.
◦ If (i) DE# projected member months are less than 10 percent of total
projected member months, and (ii) the projected allowed costs in
Worksheet 2 for the total, DE#, and non-DE# populations are all equal,
then the user may, at the discretion of the certifying actuary, enter—
‣ A zero amount; or
‣ The state or territory Medicaid required level of beneficiary cost
sharing, if any.

In Section V, if the Plan sponsor has a separate contract with a state or territory
for Medicaid services, then enter projected Medicaid revenue and cost for
members of the MA plan.
•

•

The projected Medicaid cost—
◦ Includes those benefits, not reflected elsewhere in the bid, that the Plan
sponsor has contracted to provide under the state or territory Medicaid
program.
◦ Reflects the full cost, which includes benefit expenses and non-benefit
expenses.
◦ May include prescription drug benefits that the Commonwealth of Puerto
Rico requires to be offered in order to participate in the Platino Program
beyond what is submitted in the Part D bid.
The projected Medicaid revenue is the corresponding revenue not reflected
elsewhere in the bid.

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•

The values must be on a “per-DE#-member-per-month” basis.

The PMPM equivalent of the net projected Medicaid revenue less projected
Medicaid cost per-DE#-member-per-month values will be taken into account in
satisfying the gain/loss margin requirements.
✔ Worksheet 5 – Benchmark

The user must enter—
•
•

County-specific projected member months and projected risk factors for the
total (DE# plus non-DE#) population in Section VI (columns e and f).
Distinct projected member months and projected risk factor for the non-DE#
population in Section II (lines 1 and 4).

In Section II, the BPT displays the total member months and average risk factor
for the total population based on the county-level information. Values for the
DE# population are calculated automatically from the values for the total and the
non-DE# populations.
Considerations for developing projected member months include the following:
•
•

The user must not round projected non-DE# member months to 0 percent or
100 percent, even if non-DE# projected member months are less than
10 percent, or greater than 90 percent, of total projected member months.
CMS expects non-zero DE# projected member months when there are DE#
members in the base period. The DE# projected member months may be
zero (that is, the user may enter non-DE# projected member months equal to
the member months for the total population) only if—
◦ All of the existing DE# members terminated and the probability of
enrolling DE# members is zero;
◦ The certifying actuary adequately explains why the DE# projected
membership is zero; and
◦ The user enters non-DE# projected member months and risk score equal
to the corresponding values for the total population.

Non-DE# and DE# projected risk scores are determined as follows:
•
•

If the projected allowed costs in Worksheet 2 for the total, DE#, and
non-DE# populations are not all equal, the user must enter a distinct
non-DE# projected risk factor.
If the projected allowed costs in Worksheet 2 for the total, DE#, and
non-DE# populations are all equal, the user must enter a projected risk factor
for the non-DE# population equal to the projected risk factor for the total
population.

Employer-Only or Union-Only Group Waiver Plans (EGWPs)

Each employer-only group bid must reflect the composite characteristics of the individuals
expected to enroll in the plan for the contract year and the expected underwriting assumptions
for all groups, in aggregate. In addition, projected enrollment within the plan’s service area
must be consistent with the location of employer groups.

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Note that the user must enter a county code in Worksheet 5 for each county in the plan’s
service area in order to generate a county-level payment rate, although the projected member
months can be zero.
See Appendix D, “MA Products Available to Groups”, for more information.
End-Stage Renal Disease (ESRD)

This subsection applies to the MA BPT. See Appendix I for ESRD-SNPs.
All information provided on Worksheets 1 through 7 must exclude the experience for enrollees
in ESRD status, for the time period that enrollees are in that status based on CMS eligibility
records, with the exception of Worksheet 1 Section VI, Worksheet 4 Section III, and
Worksheet 5 Section VIII. Note that all Plan sponsors must enter the projected CY ESRD
member months in Worksheet 5.
ESRD Subsidy

The benchmarks calculated in the MA bid form exclude enrollees in ESRD status, as
does the projection of plan expenditures. However, all individuals enrolled in the plan,
including those in ESRD status, are required to pay the same plan premium and are
offered the same benefit package. In order to account for the projected marginal costs
(or savings) of plan enrollees in ESRD status, the BPT allows for an adjustment that is
allocated across ESRD and non-ESRD plan members (including out-of-area members).
The adjustment is split into two sections, basic benefits and supplemental benefits,
although the entire subsidy is added to A/B mandatory supplemental benefits.
✔ Basic Benefits

The inputs in the Medicare-covered section are (i) projected CMS capitation
revenue, (ii) projected net medical expenses, and (iii) projected non-benefit
expenses. The projected margin requirement is calculated based on the values
for the non-ESRD bid. All fields in this section are to reflect Medicare levels of
cost sharing (for example, 20 percent cost sharing for Part B services once the
deductible has been met) and must be reported on a “per ESRD member per
month” basis.
If the organization does not have fully credible ESRD experience, it may blend
the experience with manual rates similar to what is done on Worksheet 2 for
non-ESRD enrollees.
The BPT will automatically calculate the plan’s costs for basic benefits of ESRD
enrollees and will allocate these costs across ESRD and non-ESRD members.
✔ Supplemental Benefits

The inputs in this section are (i) the projected cost-sharing reduction PMPM for
ESRD enrollees, and (ii) the projected PMPM cost of additional benefits for
ESRD enrollees. Entries must be reported on a “per ESRD member per month”
basis.

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The BPT will calculate the incremental cost of supplemental benefits for ESRD
enrollees and will allocate these costs across ESRD and non-ESRD plan
members.
If a zero incremental cost of Mandatory Supplemental (MS) is intended, then the
user may either—
•
•

Leave the MS input fields blank; or
Set these costs equal to the projected cost-sharing reduction PMPM and cost
of additional benefits PMPM for non-ESRD enrollees.

Enrollment

The projected enrollment for the MA bid must be consistent with that for the corresponding
Part D bid and must reflect the same underlying population.
ESRD and out-of-area projected member months are used in the calculation of the ESRD
subsidy on Worksheet 4.
If the projected enrollment in a particular county in the plan’s service area is zero, the user must
enter the county code with zero projected member months in order to generate a county-level
payment rate for that county.
Gain/Loss Margin

Gain/loss margin refers to the additional revenue requirement beyond medical expenses and
non-benefit expenses. It is allocated to Medicare-covered services and A/B mandatory
supplemental benefits based on the distribution of total medical expenses across these
categories (excluding the impact of the ESRD subsidy).
The gain/loss margin requirements are designed to ensure that gain/loss margins are reasonable
and that an MA organization’s MA and Part D business is not used to subsidize its other health
insurance lines of business. Margins for MA business must take into account the degree of risk
or surplus requirements. See the Part D bid instructions for margin requirements that are
specific to Part D plans.
Requirements apply at two levels—the bid (PBP) level and an aggregate level; both sets of
requirements must be met.
Bid (PBP)-Level Requirements

There is flexibility in setting the gain/loss margin at the bid level provided that—





The bid offers benefit value in relation to the margin level;
Anti-competitive practices are not used;
The bid margin is non-negative or the special rules for bids with negative
margin outlined below are followed; and
All aggregate-level margin requirements described below are met.

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✔ Benefit Value

The bid must provide benefit value in relation to the margin level. For example, a
significantly high margin for a bid that is not a valid product pairing will be
rejected, absent sufficient support that it is not possible to provide additional
benefits that the expected population can utilize.
✔ Anti-competitive Practices

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.
✔ Bids with Negative Margin

If the projected gain/loss margin in the BPT is negative, the Plan sponsor must
develop, submit, and follow a business plan that achieves profitability in 3 to 5
years. CMS expects that in subsequent years, projected gain/loss margins will
meet or exceed the year-by-year gain/loss margins contained in the original
business plan or in subsequent business plans, if any.
Exceptions to the business plan requirement are cases in which MA products are
“paired” and the pricing reflects implicit “subsidies” across benefit or service area
offerings. The plans in the product pairing must—
•
•
•
•

Have identical service areas;
All be local coordinated care plans or all be RPPOs or all be PFFS plans;
All be of the same SNP type or all be non-SNPs; and
Have a positive combined gain/loss margin.

Examples include a low-benefit plan with a positive margin paired with a
rich-benefit plan with a negative margin, or an MA-only plan paired with the MA
portion of an MA-PD plan.
Aggregate-Level Requirements (Overall Margins)

The aggregate-level requirements are applied separately to each of following plan
categories—
•
•
•

General enrollment plans and institutional/chronic care special needs plans
(general enrollment plans & I/C SNPs),
Dual-eligible special needs plans (D-SNPs), and
Employer-only or union-only group waiver plans (EGWPs).

For EGWPs, the gain/loss margins entered in the BPTs must comply with the
aggregate-level margin requirements at the contract level. (That is, the projected
enrollment-weighted average margin for the contract must meet the requirements
outlined below.)
For both general enrollment plans & I/C SNPs and D-SNPs, the gain/loss margins
entered in the BPTs must comply with the aggregate-level margin requirements at one
of the following three levels: contract level, organization level (that is, the legal entity
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that contracts with CMS to provide MA benefits), or parent-organization level. The
Plan sponsor must enter the chosen level of aggregation in the BPT and it must be the
same for all general enrollment plans & I/C SNPs and D-SNPs. See the instructions for
Worksheet 4, Section IIC line z4.
The following requirements apply to general enrollment plans and I/C SNPs. If general
enrollment plans and I/C SNPs are not offered, these requirements also apply,
separately, to D-SNPs and EGWPs.





The aggregate margin must be consistent from year to year.
The aggregate margin, as measured by a percentage of revenue, must be within
1.5 percent of the Plan sponsor’s margin for all non-Medicare health insurance
lines of business.
Although actual aggregate margins may vary from year to year, CMS expects
certifying actuaries to price bids such that actual aggregate returns over the long
term are consistent with the margin assumptions used for pricing.

If general enrollment plans and I/C SNPs are offered, the following requirements apply
to D-SNPs and EGWPs.



The aggregate margin must be consistent from year to year.
The aggregate margin as a percentage of revenue must be no more
than 1 percent higher and no less than 5 percent lower than the aggregate margin
for general enrollment plans and I/C SNPs.
◦ Although actual aggregate margins will vary from year to year, CMS
expects certifying actuaries to price bids such that actual aggregate
returns over the long term are consistent with the margin assumptions
used for pricing.

MA-PD Margin Requirements

Plan sponsors have the following two options for setting the margin for the MA and
Part D components of MA-PD bids:




Set the Part D margin for a bid within 1.5 percent of the corresponding MA
margin for the same bid. This method must be applied consistently for all bids
submitted by the MA organization.
Set Part D margins equal for all bids within an aggregate-level margin plan
category (for example, general enrollment & I/C-SNPs or D-SNPs) at the level
of aggregation chosen in the BPT. The Part D margin must be within 1.5
percent of the aggregate-level MA margin.

Non-Benefit Expenses and Outside Funding Sources

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. Non-insurance revenues pertaining to investments and
fee-based activities designed to influence state or federal legislation such as the cost of
lobbying activities cannot be reflected in the bid. See the announcement about lobbying
activities released via an HPMS memorandum dated October 16, 2009.

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When Medicare benefits are funded by an outside source (such as a state Medicaid
program or an employer group), the gain/loss margin must be consistent for Medicare
and the other funding source(s).
Hospice Enrollees

When a Medicare Advantage enrollee goes into hospice status, original Medicare assumes
responsibility for Part A and Part B services, and the MA plan continues to cover supplemental
benefits. Since the Plan sponsor is not liable for Medicare-covered benefits, in this situation,
the following data must exclude enrollees for the time period that they are in that status—
•
•
•

Base period member months and base period risk scores in Worksheet 1,
Sections II and III, and
Projected member months (entered by county), and
Projected risk scores.

However, base period data in Worksheet 1, Section VI must include hospice data.
On the other hand, since hospice enrollees continue to receive mandatory supplemental benefits
from the MA plan, the projected allowed cost PMPM may reflect claim costs for these
enrollees for mandatory supplemental benefits, at the discretion of the certifying actuary—for
example, for a dental or another additional benefit. If the projected allowed costs for
mandatory supplemental benefits include claims costs for hospice enrollees, then the mandatory
supplemental medical expenses in Worksheet 1, Section III must include claims for hospice
enrollees for the time period that they are in that status.
The “Monthly membership Report” (MMR) data include hospice status.
Inpatient Hospital Non-Covered Days

CMS developed a 1.2-percent factor based on FFS data that can be used as a “safe harbor” for
determining the proportion of inpatient days that are non-covered. If the non-covered hospital
pricing is based on an assumption other than the safe harbor, support for the data and
methodology used in the development of that assumption is required.
Manual Rating
Manual Rating with FFS Data

Special considerations, and corresponding documentation, are required when using
Medicare FFS data as a manual rating source. Many of the available FFS data are not
directly applicable and/or detailed enough to be used as the sole source for projection of
medical expenses. For example, it is inappropriate to tabulate claims data using
Medicare Public Use Files (PUFs) without making adjustments for corresponding
demographic, health, and geographic profiles of the claimants and to account for the
non-claimants. Similarly, since the FFS data published in the BPT and/or the MA rate
book development files are not split by benefit type, another appropriate source must be
used to allocate the data to all of the BPT service categories. Further, as is the case with
use of all manual rating sources, adjustments must be made to account for claim
expenses that are not reflected in the FFS data, such as claim run-out, inclusion of
expenses excluded from the data, and adjustments for medical education expenses.

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FFS Costs Used for the Actuarial Equivalent Cost-Sharing Factors

Please note that the FFS costs used for the actuarial equivalent cost sharing do not
include home health care costs since there is no cost sharing for home health services in
Medicare FFS. Experience for ESRD enrollees is excluded, as are the costs for hospice
services, since MA enrollees do not receive Medicare-covered hospice services through
the MA plan. However, hospice enrollees have not been excluded in calculating the
PMPM FFS costs. Further details on the development of the cost-sharing factors, such
as the handling of Indirect Medical Education (IME), Graduate Medical Education
(GME), and other costs, may be found at www.cms.gov under Medicare > Medicare
Advantage Rates & Statistics > Ratebooks & Supporting Data.
Medicare Secondary Payer (MSP) Adjustment

The Medicare Secondary Payer (MSP) adjustment is used in the BPT to reflect the reduced
payments to MA plans for enrollees whose primary coverage is not Medicare (that is, enrollees
with MSP status of aged/disabled MSP or ESRD MSP). Although CMS reduces payments for
MSP status at the beneficiary level, the BPT applies the MSP adjustment at the bid level.
The projected MSP adjustment must be bid specific consistent with the development of
projected allowed costs. Any reduction in these projected allowed costs must reflect only the
additional MSP savings from the base period to the contract year.
MSP data provided by CMS serve as the basis for projecting the MSP adjustment. This
includes—
•

•

•

Data described in the following sections of Medicare Advantage and Prescription Drug
Plan Communications User Guide (PCUG) and Appendices, which is available at
http://www.cms.gov/Research-Statistics-Data-and-Systems/CMS-InformationTechnology/mapdhelpdesk/Plan_Communications_User_Guide.html:
◦ 5.1 Part C Payments: describes the calculation of MA payments.
◦ 5.1.5 Part C Payments When Medicare Secondary Payer (MSP) Status Applies:
describes the payment reduction based on MSP status.
◦ F.29 “Monthly MSP Information Data File”: provides specific information
regarding the primary coverage for beneficiaries enrolled in the plan, whose
payments were adjusted for MSP that month. It allows Plan sponsors to
reconcile beneficiary payments.
The following data in the Monthly Membership Detail Report (MMR):
o MSP adjustment factor (field 82).
o Related fields that provide the payment MSP reduction amount due to MSP for
Part A (field 83) and Part B (field 84).
Rolled-up MSP member counts for the month in the Monthly Membership Summary
Data File.

The MSP adjustment is combined with the projected risk score to produce the conversion factor
that is used in the BPT as an intermediate step between the standardized and risk-adjusted bid
and benchmark. The method to calculate the MSP adjustment is described below.
•

MSP adjustment = 1 – X/Y, where
X = Bid portion of payment reflecting reduced payments for MSP beneficiaries, and

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Y = Bid portion of payment that would be paid if no beneficiaries had a payer that
was primary to Medicare. This is determined by (i) grossing up the payments for
MSP beneficiaries to the amount that would be paid if they did not have a payer that
was primary to Medicare and (ii) adding these payments to the payments for
non-MSP beneficiaries. The resulting value of Y explicitly takes into account the
distinct risk characteristics of MSP beneficiaries as compared to non-MSP
beneficiaries.
•

The bid portion of payment used to calculate the MSP adjustment excludes MA rebates
and basic MA premium, if any.
Example:
Step 1: Calculate the bid portion of payment reflecting reduced payments for MSP
beneficiaries (X).
$12,000,000 = “Total MA Payment” for the plan from a 2013 MMR file, which
includes all rebates except rebates for reduction of Part B premium and Part D basic
premium and excludes part C basic premium , if any.
$2,253,665 = Sum of rebates for cost-sharing reduction, other mandatory
supplemental benefits, and Part D supplemental benefits for the plan. See the
PCUG for the applicable field names.
X = $12,000,000 – $2,253,665 = $9,746,335.
Step 2: Separate the bid portion of payment reflecting reduced payments for MSP
beneficiaries (X) into payments for non-MSP enrollees and MSP enrollees based on
MSP status.
$9,692,899 = Bid portion of payment for non-MSP enrollees
$53,436 = Bid portion of payment for MSP enrollees
X = $9,746,335 = $9,692,899 + $53,436
Step 3: Calculate the bid portion of payment that would be paid if no beneficiaries had a
payer that was primary to Medicare (Y).
.174 = CY2013 “MSP factor” for working aged and working disabled
Y = $9,692,899 + ($53,436 / .174) = $9,692,899 + $307, 103 = $10,000,002.
Step 4: Calculate the MSP adjustment to enter into the BPT.
MSP adjustment = 1 – $9,746, 335 / $10,000,002 = 0.0254 = 2.54%.
Manually Rated Bids

If the following conditions are met, the actuary does not need to estimate an explicit
MSP adjustment for 100% manually rated plans and must enter “0” in the MSP
adjustment field in Worksheet 5:
•

The basis for projected allowed costs and projected risk scores is FFS data that
are reduced for MSP.

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•

The projected proportion of MSP members is the same as the proportion of MSP
enrollees in the FFS data.

Examples of FFS data located on the CMS website that are reduced for MSP include—
•

Rate calculation data zip files (for example, “risk_scores 2003-2010 NonPACE.csv” from the CY2013 MA Ratebook).

•

Limited Data Sets (or “CMS 5% sample”).

•

FFS Data zip files (for example “FFS data 20XX”).

Non-Benefit Expenses

Non-benefit expenses are all of the bid-level administrative and other non-medical costs
incurred in the operation of the MA plan.
Worksheet 4 distributes the non-benefit expenses proportionately between Medicare-covered
benefits and A/B mandatory supplemental benefits (excluding the PMPM impact of the ESRD
subsidy). Non-benefit expenses are further distributed within A/B mandatory supplemental
benefits between “Additional Services” and “Reduction of A/B Cost Sharing.”
The non-benefit expenses must be entered separately on the BPT for the following categories:
•

•

Sales & Marketing
◦ This category includes all direct and indirect sales and marketing expenses for
the MA plan.
◦ Examples include, but are not limited to the costs of—
‣ Marketing materials;
‣ Commissions;
‣ Enrollment packages;
‣ Identification cards; and
‣ Salaries of sales and marketing staff.
Direct Administration
◦ This category includes all expenses for all functions that are directly related to
the administration of the MA program.
◦ Examples include, but are not limited to—
‣ Customer service.
‣ Billing and enrollment.
‣ Medical management.
‣ Claims administration.
‣ Part C National Medicare Education Campaign (NMEC) user fees. Plan
sponsors may use the CMS estimate, which amounts to $0.30 PMPM on
a national basis for CY2014, or develop an alternative estimate that is
consistently applied to all plans in the contract—for example, the Plan
sponsor’s historical amount relative to the CMS annual national estimate.
‣ Uncollected enrollee premium.
‣ Certain disease management functions. See the “Disease Management”
pricing consideration.

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•

•

Indirect Administration
◦ This category includes expenses for functions that may be considered “corporate
services,” such as the position of 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).
Also, acquisition expenses (sales and marketing) 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, and
investment expenses. See the gain/loss pricing consideration. Also see the gain/loss pricing
consideration for costs excluded from both non-benefit expenses and gain/loss margin.
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 the MA and Part D components of MA-PD plans
must be allocated proportionately between the Medicare Advantage and Part D BPTs.
When Medicare benefits are funded by an outside source (such as a state Medicaid program or
an employer group), the non-benefit expenses must be allocated proportionately between
Medicare and the other revenue source.
Non-Covered Limited Benefits

For non-covered limited benefits with no cost sharing, the amounts over the limit must not be
included as allowed costs in the bid form.
Example: The PBP contains a hearing aid benefit with a $500 annual cost limit and no

cost sharing. If the average cost of a hearing aid is $2,500, the allowed PMPM must be
based on the $500 maximum benefit, not on a $2,500 cost offset by a cost-sharing entry
in Worksheet 3 for the $2,000 paid by the beneficiary.
Part B Premium and Buydown

MA enrollees are required to pay the Part B premium, but it may be reduced by the MA
organization through the use of MA rebate dollars.

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Note that the Part B premium charged by CMS is not the same for all Medicare beneficiaries.
•

•
•
•

Section 1839 of the Social Security Act, as amended by section 811 of the Medicare
Prescription Drug, Improvement, and Modernization Act of 2003 (MMA) and section
5111 of the Deficit Reduction Act of 2005, provides for an income-related reduction in
the government subsidy of the Medicare Part B premium. Under this provision, for
those beneficiaries meeting specified income thresholds, a monthly adjustment amount
is added to the Part B premium. The addition of monthly adjustment amounts to the
Part B premium obligation of higher-income beneficiaries was phased in over 3 years,
beginning in 2007.
Certain beneficiaries’ premium increase is limited by the increase in their Social
Security checks (that is, the “hold harmless” provision).
States, or another third party, may pay the Part B premium for certain beneficiaries.
Certain beneficiaries may pay a late-enrollment penalty.

Given the MA requirement that benefits must be uniform within an MA plan, the amount of
rebate dollars that can be applied to the Part B premium is limited to the amount pre-populated
in the BPT by CMS at the time when the BPT is released.
The bid pricing tool and instructions are released annually in April, but the Part B premium is
not announced by CMS for the upcoming contract year until several months later. Therefore,
plans must use the CMS pre-populated amount in the bid form to determine the level of rebates
to allocate to the Part B premium buydown.
Plan Premiums, Rebate Reallocation, and Premium Rounding

The MA BPT calculates the plan’s premium for services under the Medicare Advantage
program. Estimated Part D premiums, calculated in the separate Part D BPT, are then entered
in the MA BPT in order to—
•
•
•

Underscore the relationship of MA rebates and Part D premiums.
Recognize the integrated relationship of the MA and Part D programs, which are
viewed by the enrollee as a single product with a single premium.
Display the total estimated plan premium (sum of MA and Part D).

When the bid is initially submitted in June, the Part D basic premium entered in the MA BPT is
an estimated value. The actual premium will be calculated by CMS following 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
preferred provider organization (RPPO) benchmarks (typically in August). Therefore, for
MA-PD plans, the premium shown on the MA BPT may not be the final plan premium for
CY2014.
For local MA-only plans, the premium shown on the MA BPT in the initial June submission is
the final actual premium (not an estimate), since these plans are not affected by the Part D
national average monthly bid amount and regional PPO benchmark calculations. Local
MA-only plans do not have an opportunity to resubmit in August for rebate reallocations. The
initial June bid submission must reflect the desired plan premium.
For RPPO plans, the initial bid submission in June contains an estimated MA premium. The
actual MA premium will not be known until August, when the regional PPO benchmarks are

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calculated by CMS. Note that after the MA regional PPO benchmarks are released by CMS, all
regional MA Plan sponsors are required to resubmit the MA BPTs in order to reflect the actual
plan bid component in Worksheet 5, and they may need to re-allocate rebates accordingly.
This requirement also applies to EGWP regional MA plans (that is, all EGWP RPPOs are
required to resubmit the MA BPTs in August after the announcement of the regional MA
benchmarks).
MA-PD plans and regional MA-only Plan sponsors have the opportunity to reallocate rebates
after the release of the Part D national average bid amount and regional PPO benchmarks.
Appendix E contains rebate reallocation and rounding rules, including the following:
•
•
•
•
•
•

A description of the rebate reallocation period.
The types of benefit changes that are permitted during the rebate reallocation period.
A summary of the circumstances under which rebate allocation is required, permitted,
or not permitted.
Limitations on significant changes to the BPT when rounding premiums.
Specific rules for returning to the target Part D basic premium.
Examples of rebate allocation and rounding.

It is important to note that for all plans, the initial June bid submission must reflect the desired
level of premium rounding, since there are specific rules regarding the level of premium
rounding permitted during the rebate reallocation period.
Plan Intention for Target Part D Basic Premium

Following 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, MA organizations may reallocate MA rebate dollars in certain
MA-PD bids in order to return to the target Part D basic premium. MA-PD Plan sponsors
must choose one of the following two options for the target premium: “Premium amount
displayed in line 7d” or “Low Income Premium Subsidy Amount.”
The target Part D basic premium is the Part D basic premium net of any MA rebate dollars that
were applied to reduce (buy down) the premium; it does not include the Part D supplemental
premium or the MA premium. Similarly, the low-income premium subsidy amount applies to
the Part D basic premium and does not cover the cost of Part D supplemental benefits.
MA-PD Plan sponsors must choose a plan intention for the target Part D basic premium option
in the initial June bid submission and cannot change the chosen target in a subsequent
resubmission. CMS will consider only the option selected in the initial June bid submission as
the plan’s intention.
Point-of-Service (POS)

There is no separate service category for POS; therefore, POS base period experience data and
projected allowed costs must be included in the appropriate service categories.

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Preventive Services Incentives

The CY2010 Call Letter outlined requirements for items or services that a plan offers
conditional to an enrollee taking some action (for example, receiving a flu shot) or participating
in some program (for example, a smoking cessation program).
When an incentive program incurs a cost, then this cost must be priced in the bid. The
projected PMPM cost of incentives must be combined with the cost of other non-covered
benefits and entered in line q of the MA BPT. Note that combining the costs with “Other
Non-Covered” does not change the nature of incentives or benefits; incentives cannot be
“benefits” as defined in MA regulation 42 CFR §422.2 and explained in the CY2010 Call
Letter. Supporting documentation is required with the initial June bid submission.
Rebate Allocations

The following rules apply for rebate allocations in the initial June bid submission:
•

•
•
•
•
•
•
•

The fifth column of Worksheet 6, Section IIIB shows the maximum amount that may be
applied for each rebate option. Each rebate allocation cannot exceed the applicable
maximum. Note that if the maximum value is negative (such as a negative Part D basic
premium before rebates), then the rebate allocation must be zero.
The total rebates allocated must equal the total rebates available. Plans are not
permitted to under- or over-allocate rebates in total. This rule applies to all bids,
including 800-series EGWP bids.
No rebate allocations may be negative.
Rebate allocations for “Reduce A/B Cost Sharing” and “Other A/B Mandatory
Supplemental Benefits” are rounded by the BPT to two decimals.
The rebate allocations for Part B premium, Part D basic premium, and Part D
supplemental premium are rounded by the BPT to one decimal (that is, the nearest
dime) due to withhold system requirements.
Employer-only group bids (that is, “800-series” plans) cannot allocate rebates to Part D.
MA-only bids cannot allocate rebates to Part D.
Rebates allocated to buy down the Part B premium are subject to the maximum amount
shown on Worksheet 6 when the BPT is released by CMS. See the “Part B Premium
and Buydown” pricing consideration and the instructions for Worksheet 6, Section II,
for further information about rebates applied to the Part B premium.

Regional Preferred Provider Organizations (RPPOs)
Part B-Only RPPOs

An RPPO plan must cover only enrollees eligible for both Part A and Part B of
Medicare. See Chapter 1 of the Medicare Managed Care Manual (MMCM), which can
be found at: http://www.cms.gov/Regulations-and-Guidance/Guidance/Manuals/
downloads/mc86c01.pdf.
Intra-Service Area Rate (ISAR) Factors

In the event that the variation in the MA rates is not an accurate reflection of the
variation in a plan’s projected costs in its service area, CMS will consider allowing MA

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organizations, on a case-by-case basis, to request that payment rates for RPPOs be
developed using plan-provided geographic intra-service area rate (ISAR) factors. See
the instructions for Worksheet 5 for more details on ISAR factors.
Related-Party Agreements (Medical and Non-Benefit)

The objective of the requirements for related-party medical or service agreements is to assure
that financial arrangements between the Plan sponsor and related parties (i) are negotiated at
arm’s length, and (ii) do not provide the opportunity to over- or under- subsidize the bid. In
these instructions, the term “related party” refers to entities that are associated with the Plan
sponsor by any form of common, privately held ownership, control, or investment.
CMS requires all Plan sponsors to disclose whether or not they are in a related-party agreement.
Further, Plan sponsors in a related-party agreement must disclose and support all related-party
agreements at the time of bid submission and prepare the bid in accord with the guidance below
for each related-party agreement identified.
The level of disclosure of related-party medical and service 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.
A Plan 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 Plan 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, consider the gain/loss
and non-benefit expense of the related party to be those of the sponsor.
Develop the medical, gain/loss and non-benefit expense of the related-party
subcontractor in accord with these Instructions for completing the bid pricing tool.
Support the development of the gain/loss and the actual costs associated with the
medical and non-benefit expense as required by these instructions for completing the
bid pricing tool.

A Plan 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 related-party organization and other
unrelated parties of similar size and market position to the Plan 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 Plan 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.

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•

Prepare the BPT in a manner that recognizes the independence of the subcontracted
related party by allocating all medical expenses and administrative costs in the
related-party agreement to medical expenses and non-benefit expense, respectively.

A Plan 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 Plan sponsor
must consider the gain/loss and non-benefit expense of the related party to be those of
the sponsor.
Develop the medical, gain/loss and non-benefit expense of the related-party
subcontractor in accord with these instructions for completing the bid pricing tool.
Support the development of the gain/loss and the actual costs associated with the
medical and non-benefit expense as required by these instructions for completing the
bid pricing tool.

Regardless of the bidding approach, Plan sponsors must substantiate all information presented
in the BPT pertaining to related-party agreements even when that information is held by the
related party.
Risk Score Development for CY2014

The projected CY2014 risk score must—
•
•
•
•
•
•

Be based on the risk model to be used in payment year 2014.
Reflect plan-specific coding trend.
Be appropriate for the expected population.
Include the appropriate MA coding pattern differences adjustment factor.
Be adjusted for FFS normalization.
Include a frailty factor, if applicable.

Risk Score Definitions and Information Sources
CMS Hierarchical Condition Categories (CMS-HCC) Risk Model

The CMS-HCC risk model was recalibrated for CY2013. The disease groupings are the
same as in past models; however, the factors are different. Diagnoses from CY2008
were used to predict CY2009 expenditures; the denominator year is 2011. Additional
information on the CMS-HCC model, including the 2014 normalization factor, is
contained in the 2014 payment notice.
Normalization Factor

The risk scores used in payment for each plan enrollee will be divided by a factor,
known as the FFS normalization factor for 2014. This adjustment accounts for the
expectation of higher intensity of coding in the aggregate risk scores for the contract
year (2014) versus the model denominator year (2011) and is designed to bring the

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average risk score back to 1.0. Accordingly, the projected risk scores in the CY2014
bids must reflect the CY2014 normalization factor of 1.028.
MA Coding Pattern Differences Adjustment Factor

In addition to normalization, the projected risk scores in the CY2014 bids must reflect
the MA coding pattern differences adjustment factor. This adjustment accounts for the
difference in diagnostic coding between MA and FFS. The CY2014 MA coding pattern
differences adjustment is 3.41 percent. Accordingly, the projected CY2014 normalized
risk scores must be multiplied by .9659.
Risk Adjustment Information Sources

The following materials can be found on the “Medicare Advantage Rates and Statistics”
page of the CMS website at http://www.cms.gov/Medicare/Health-Plans/
MedicareAdvtgSpecRateStats/index.html:
•
•
•

“Announcement of Calendar Year (CY) 2009 Medicare Advantage Capitation Rates
and Medicare Advantage and Part D Payment Policies”
“Advance Notice of Methodological Changes for Calendar Year (CY) 2014 for
Medicare Advantage (MA) Capitation Rates, Part C and Part D Payment Policies
and 2014 Draft Call Letter”
“Announcement of Calendar Year (CY) 2014 Medicare Advantage Capitation Rates
and Medicare Advantage and Part D Payment Policies and Final Call Letter”

See the links under “Risk Adjustment,” “Announcements & Documents,” and
“Ratebooks & Supporting Data.”
Additional information on the risk adjustment process can be found at
http://www.csscoperations.com/.
Risk Score Calculation Approaches
Preferred Methodology

The preferred method for projecting the 2014 risk scores is use of the CMS-HCC risk
scores for the risk model provided by CMS in—
•
•

The plan-level data for the July 2012 enrollee cohort with retroactive enrollment and
status adjustments; or
The beneficiary-level file containing twelve months of 2012 membership with
retroactive enrollment adjustments and status adjustments.

The plan-level data are available under the “Risk Adjustment” link on the HPMS Home
page. The risk 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 2011 HCC risk scores in the projection of the
CY2014 risk score:
•
•

They are consistent with the base-period medical expenses.
They require no adjustment for seasonality.

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•
•
•

They reflect the most complete MA diagnosis data for 2010 dates of service
submitted through January 31, 2012, which is the final reporting deadline for this
period.
They are based on the risk model to be used in 2014.
In the beneficiary-level file, they are based on both the 2011 risk model and the
updated 2013 risk model. In the plan-level data for the July 2012 enrollee cohort,
they are based on the latest risk model.

Please note that since the HPMS plan-level risk scores are based on a mid-year cohort
using 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 2012 to 2014 with explicit adjustment for the following factors:
•
•
•

Plan-specific coding trend.
Changes in plan population.
Other appropriate factors.

Finally, the projected risk scores must be normalized by dividing by the 2014 FFS
normalization factor and by adjusting for MA coding pattern differences.
Alternate Approaches

An alternate method for the development of risk scores may be appropriate if the plan
was first offered in 2013, if there was limited enrollment in 2012, or if there were
significant changes in plan or enrollment characteristics between 2012 and 2013.
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.
◦ Note that conversion from 2013 MMR data must adjust for both the
normalization factor and the MA coding pattern differences factor.
Impact of lagged versus non-lagged diagnosis data.
◦ If the starting risk score is based on lagged diagnosis data, as it is when the
initial risk scores are used, then an adjustment is required to transition the scores
from lagged to non-lagged. An example is a starting point of March 2013 MMR
data, which contain risk scores based on the July 2010 to June 2012 diagnosis
data.
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 diagnosis data and will be when the starting point is
MMR data, then an adjustment factor is required to transition the scores from
incomplete to complete diagnosis data. Starting risk scores from MMR data do
not reflect the final reconciliation.

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•

•

•
•

•

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 that to be
used for CY2014 payments, then an adjustment for the risk model change must
be made.
Plan-specific coding trend.
Population changes.
◦ If the starting risk score is based on a population with different risk
characteristics than the expected population, then an adjustment for population
changes must be made.
Other appropriate factors.

Once projected to CY2014, the scores must be normalized by dividing by the 2014 FFS
normalization factor and by adjusting for the MA coding pattern differences adjustment
factor. Note that, if a nominal or actual risk score associated with a different model
calibration year is being normalized, the contract year 2014 FFS normalization factor is
not appropriate and must be adjusted.
Supporting documentation that clearly demonstrates consistency with the preferred
approach is required.
Service Area Changes

The initial bid submission must reflect pending service area expansions and changes. The user
must enter county-level data on Worksheet 5 for each county in the proposed service area. If
the pending request is later denied, then the Plan sponsor must resubmit a BPT that includes
only the approved counties. The revised bid values must reflect only the change in the service
area.
Skilled Nursing Facility

MA regulation 42 CFR §422.101(c) states that “MA organizations may elect to furnish, as part
of their Medicare covered benefits, coverage of post hospital SNF care . . . in the absence of
prior qualifying hospital stay that would otherwise be required for coverage of this care.”
Users may price the waiver of prior hospitalization requirement as a Medicare-covered benefit.
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.

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III. DATA ENTRY AND FORMULAS
This section contains line-by-line instructions for completing the Medicare Advantage (MA)
Bid Pricing Tool (BPT), the Medical Savings Account (MSA) BPT, and the ESRD-SNP BPT.
It also describes the formulas for calculated cells.

MEDICARE ADVANTAGE
To complete the MA bid form, organizations must provide a series of data entries on the
appropriate form pages.
The MA bid form is organized as outlined below:
•
•
•
•
•
•
•

Worksheet 1 – MA Base Period Experience and Projection Assumptions
Worksheet 2 – MA Projected Allowed Costs PMPM
Worksheet 3 – MA Projected Cost Sharing PMPM
Worksheet 4 – MA Projected Revenue Requirement PMPM
Worksheet 5 – MA Benchmark PMPM
Worksheet 6 – MA Bid Summary
Worksheet 7 – Optional Supplemental Benefits

All worksheets must be completed, with the following exception: if the plan does not offer any
optional supplemental benefit packages, then Worksheet 7 may be left blank.

MEDICAL SAVINGS ACCOUNT
Appendix H provides additional guidance in completing the MSA BPT for MSA plans.
Appendix H highlights only the differences between the MSA BPT and the MA BPT.

ESRD-SNP
Appendix I provides additional guidance in completing the ESRD-SNP BPT for ESRD-SNP
plans. Appendix I highlights only the differences between the ESRD-SNP BPT and the MA
BPT.

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

MA WORKSHEET 1 – MA BASE PERIOD EXPERIENCE AND
PROJECTION ASSUMPTIONS
The purpose of Worksheet 1 is to capture bid-specific experience for the base period, regardless
of the level of enrollment and credibility, and to summarize the key assumptions used to project
allowed costs to the contract period.
•
•
•
•
•
•

Section I contains general plan information that will be displayed on all MA BPT
worksheets.
Section II captures base period background information.
Section III summarizes the base period data for the plan.
Section IV captures the factors used to project the base period data to the contract
period.
Section V contains a text field that describes other utilization factors and/or additive
factors used in Section IV.
Section VI contains a summary of the base period revenue and expenses.

Section I must be fully completed for all bids. (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 2012 regardless of the level of enrollment.

SECTION I – GENERAL INFORMATION
The fields of Section I have been formatted as the “General” format in Excel, in order to
support the functionality to link 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. All fields in Section I must be completed;
none can be left blank.
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 E (Employer/Union Direct
Contract Private Fee-for-Service) and includes four Arabic numerals (for example, H9999,
R9999, E9999). Be sure to include all leading zeros (for example, H0001).
Line 2 – Plan ID

The Plan ID (accompanied by the corresponding contract number) forms a unique identifier for
the plan benefit package being priced in the bid form. Plan IDs contain three Arabic numerals.
This field must be entered as a text input (that is, must include a preceding apostrophe) and
must include any leading zeros (for example, ‘001).
If the bid is for a plan that is offered only to employer or union groups, then the Plan ID will be
800 or higher. This plan may be referred to as an “800-series plan,” a “group plan,” an
“employer/union-only group waiver plan (EGWP),” or an “employer-only group plan.”

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WORKSHEET 1
Line 3 – Segment ID

If the bid is for a “service area segment” of a local plan, enter the segment ID. This field must
be entered as a text input (that is, must include a preceding apostrophe) and must include any
leading zeros (for example, ‘01).
Line 4 – Contract Year

This 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 the
PBP.
Line 6 – Plan Name

Enter the plan name of the plan benefit package. This information also appears in HPMS and
the PBP.
Line 7 – Plan Type

Enter the type of MA plan. The valid options are listed in the table below. The MA bid form is
not completed for MSA, ESRD-SNP, Cost, and PACE plans. There is a separate MSA BPT
and a separate ESRD-SNP BPT.
Note that an MA organization must offer at least one benefit plan (of any plan type) that
includes Part D coverage for each service area. This requirement does not apply to
private-fee-for-service (PFFS) plans, which can be offered in a service area without Part D
coverage.
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 (PFFS)
Religious Fraternal Benefit PFFS
Employer/Union Direct Contract Private Fee-for-Service Plan:
Employer/Union Direct Contract PFFS
Employer/Union Direct Contract LPPO

CY2014 MA BPT Instructions

Plan Type Code
HMO
RFB HMO
RFB HMOPOS
HMOPOS
PSO State License
RFB PSO State License
LPPO
RFB LPPO
RPPO
PFFS
RFB PFFS
ED PFFS
ED LPPO

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Line 8 – MA-PD

If the plan is offering Part D benefits during the contract year (and is therefore submitting a
separate Part D bid form for the same Plan ID), enter “Y”. Otherwise, enter “N”.
Line 9 – Enrollee Type

If the bid prices a plan covering enrollees eligible for both Part A and Part B of Medicare, enter
“A/B”. If the bid prices a plan covering enrollees eligible for Part B only, enter “PART B
ONLY”. (See Appendix C for additional information regarding Part B-only plans.)
If the plan type equals “RPPO”, then the enrollee type must equal “A/B”.
Line 10 – MA Region

If the MA plan is a regional PPO (that is, plan type equals RPPO), then input the region number
associated with the region that the plan will cover. This field must be entered as a text input
(that is, must include a preceding apostrophe) and must include any leading zeros (for example,
‘01).
For regional PPO plans, valid entries are shown in the following table:
Region
01
02
03
04
05
06
07
08
09
10
11
12
13
14

Description
Northern New England (New
Hampshire and Maine)
Central New England
(Connecticut, Massachusetts,
Rhode Island, and Vermont)
New York
New Jersey
Mid-Atlantic (Delaware, District
of Columbia, and Maryland)
Pennsylvania and West Virginia
North Carolina and Virginia
Georgia and South Carolina
Florida
Alabama and Tennessee
Michigan
Ohio
Indiana and Kentucky
Illinois and Wisconsin

Region
15
16
17
18

19

20
21
22
23
24
25
26

Description
Arkansas and Missouri
Louisiana and Mississippi
Texas
Kansas and Oklahoma
Upper Midwest and Northern
Plains (Iowa, Minnesota,
Montana, Nebraska, North
Dakota, South Dakota, and
Wyoming)
Colorado and New Mexico
Arizona
Nevada
Northwest (Idaho, Oregon, Utah,
and Washington)
California
Hawaii
Alaska

Line 11 – Actuarial Swap or Equivalences Apply

If an individual-market plan will use actuarial swaps or equivalences for employer or union
groups, enter “Y”. Otherwise, enter “N”. (See Appendix D for further information on using
swaps or equivalences.)
Line 12 – SNP

If the plan is a Special Needs Plan (SNP), enter “Y”. Otherwise, enter “N”.

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Line 13 – Region Name

No user input is required. This field displays the region name, based on the region number
entered in line 10.
Line 14 – SNP Type

If the plan is a Special Needs Plan, enter the SNP type. Valid options are “Institutional”,
“Dual-Eligible”, or “Chronic or Disabling Condition”. This entry must match the SNP type in
the PBP.
Line 15 – EGWP

No user input is required. This field displays a yes/no indicator based on the plan ID entered in
line 2.

SECTION II – BASE PERIOD BACKGROUND INFORMATION
Line 1 – Time Period Definition

CMS requires base experience data to be based on claims incurred in calendar year 2012 and
generally expects at least 30 days of paid claims run-out; 2 - 3 months of paid claim run-out is
preferable. See the “Pricing Considerations” section of these instructions for more information.
The incurred dates are pre-populated on the first two lines, as 1/1 through 12/31 for the 2 years
prior to the contract year. Enter the “paid through” date on the third line. For example, if the
data reflect payment information through February 2013, then the “paid through” date is
2/28/2013.
Line 2 – Member Months

This line is calculated as the sum of the member months entered in line 5. The total member
months in line 2 represent the base period experience excluding ESRD enrollees for the time
period that enrollees are in ESRD status based on CMS eligibility records and excluding
hospice enrollees for the time period that the enrollees are in hospice status.
Enter the subset of member months that represents the non-DE# enrollees. The DE# subset
will be calculated as the difference between the total and the non-DE# amounts entered.
Line 3 – Risk Score

Enter the final risk score for the non-ESRD and non-hospice members of the population
represented in the base period data using the CMS-HCC risk model for payment in CY2012.
This factor must include the appropriate MA coding pattern difference adjustment factor and
FFS normalization factor for payment in CY2012.
Also enter the risk score for the non-DE# subset. The DE# subset will be calculated based on
the total and non-DE# amounts entered. If DE# members equals zero, then the non-DE# risk
score must equal the total risk score.
Line 4 – Completion Factor

Enter the multiplicative 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
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WORKSHEET 1

unpaid claims as of the “paid through” date. The factor entered must be the amount to adjust
only the portion of paid claims that requires completion (that is, omit capitations from the
calculation of this factor).
For example, assume the following:
Incurred Date
Paid Through Date (PTD)
Capitation Payments
PTD Claims Requiring Completion
Estimate of Unpaid 2012 Claims as of 2/28/2013
Total Incurred Claims for 2012
The Completion Factor would be calculated as:
Completion Factor = (400 + 30) ÷ 400 = 1.075

1/1/2012 – 12/31/2012
2/28/2013
$100
$400
$30
$530

Line 5 – Plan/Segments Included in Base Period Data

Enter the contract number and Plan ID (in the format H9999-999) of the plan for the base
period data. If the segment is “01” or greater, include the segment ID (H9999-999-01). CMS
expects that the contract number, Plan ID, and segment ID, if applicable, for the base period
data will be the same as that shown in Section I, except for Plan ID changes and plan
cross-walks. In the second column, input each plan’s member months. The sum of the member
months entered in line 5 is displayed as the total member months in line 2.
Plan IDs are to be reported in descending order of member months, such that the plan with the
largest member months is listed first. For example:
5. Plans in Base

Contract-Plan ID
a. H9999-032
b. H8888-004-02
c.
d.

Member Months
5,000
1,000

If members of more than eight plans are cross-walked into the Plan ID of the bid, then the Plan
sponsor must submit supporting documentation that provides the base period member months
for each plan included in the data. In this situation, Plan sponsors may enter “All Other” for the
contract number/Plan ID indicated in the last line.
Data entered must be in the format of either: H####-### or H####-###-## (with the first
character being H, E or R). “All Other” is an acceptable entry in the eighth (that is, last) line.
Line 6 – Base Period Description

Use the text box provided to briefly describe changes in the benefit plan, service area, or
contract number/Plan ID/segment ID from the base period to the contract year.

SECTION III – BASE PERIOD DATA (AT PLAN’S RISK FACTOR) FOR 1/1/2012 –
12/31/2012
Section III summarizes the base period data by benefit service category.

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In lines a through r:
✔ Column b, lines a through r – Service Category

The benefit service categories are displayed in column b.
✔ Column c, lines a through q – Utilizers

Enter the number of unique plan enrollees who used each of the service categories for
the base period.
This field must reflect the number of members that incurred a service in the specified
category in the base period. The determination that a service was used by a beneficiary
must be reported consistently with the utilization types displayed in column f.
✔ Column d, lines a through q – Net PMPM

Enter the net medical PMPM for each of the benefit service categories for the base
period. Note that line r, COB, is set equal to the allowed PMPM in column i by
formula.
✔ Column e, lines a through r – Cost Sharing

These fields are calculated automatically, as the difference between column i (allowed
PMPM) and column d (net PMPM). The values must be greater than or equal to zero.
Note that line r, COB, is set equal to zero.
✔ Column f, lines a through q – Utilization type

Column f displays the utilization types entered on Worksheet 2. Utilization types are
required inputs on Worksheet 2, whether the pricing is based on base period experience
data or manual rates.
✔ Column g, lines a through q – Annualized Utilization/1,000

Enter the annualized utilization per thousand enrollees for each of the benefit service
categories for the base period data. The utilization/1000 must be reported consistently
with the utilization type displayed in column f.
✔ Column h, lines a through q – Average Cost

These cells are calculated automatically using the utilization provided in column g and
allowed PMPM provided in column i.
✔ Column i, lines a through r – Allowed PMPM

Enter the allowed PMPM by service category for the base period. Input any
COB/Subrogation offsets to costs as a negative number, since line r will be added to
total medical expenses.
Line s – Total Medical Expenses

Calculated automatically as the sum of lines a through r. Value should be greater than zero if
base period member months are greater than zero.
Line t – Subtotal Medicare-Covered Service Categories

Calculated automatically as the sum of lines a through k.

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SECTION IV – PROJECTION ASSUMPTIONS
Section IV contains the utilization, average unit cost, and other adjustment assumptions to
project the base period data to the contract period. The values in columns j through n are the
total adjustment factors from the base period to the contract period, not annual trend rates. For
example, assume that the base period is calendar year 2012 and that the contract year is 2014.
If the utilization trend is 5 percent from 2012 to 2013 and 6 percent for projecting 2013 to
2014, then enter “1.113” in column j (1.05 x 1.06).
In lines a through r:
✔ Column j – Utilization Adjustment – Utilization/1,000 Trend

Enter the utilization trend factor from the base period to the contract period by service
category. Entering 1.000 would indicate 0 percent trend. Do not leave blank. Do not
enter zero (0).
✔ Column k – Utilization Adjustment – Benefit Plan Change

Enter the multiplicative adjustment factor for any benefit plan changes (for example,
increase in coverage level from base period to contract period) that affect the base
period utilization by service category. Entering 1.000 would indicate 0 percent change.
Do not leave blank. Do not enter zero (0).
✔ Column l – Utilization Adjustment – Population Change

Enter any expected demographic or morbidity changes that are necessary to adjust the
base period data to the contract period. Entering 1.000 would indicate 0 percent
change. Do not leave blank. Do not enter zero (0).
✔ Column m – Utilization Adjustment – Other Factor

Enter any other utilization factor adjustments by service category. Describe the reason
for any adjustments in Section V if a factor other than 1.000 is used. An example of the
use of this factor is to adjust the base period service area to the contract year service
area. Entering 1.000 would indicate 0 percent adjustment. Do not leave blank. Do not
enter zero (0).
✔ Column n – Unit Cost Adjustment – Provider Payment Change

Enter the unit cost adjustments for expected changes in provider payments from the
base period to the contract period by service category. Examples of this type of change
include increases in provider reimbursement due to inflation or an indexing provision in
provider contracts. Entering 1.000 would indicate 0 percent trend. Do not leave blank.
Do not enter zero (0).
✔ Column o – Unit Cost Adjustment – Other Factor

Enter any other factors for unit cost adjustments by service category. An example of
this type of change is a change in unit cost due to intensity of service trend. Describe
the reason for any adjustments in Section V if a factor other than 1.000 is used.
Entering 1.000 would indicate 0 percent adjustment. Do not leave blank. Do not enter
zero (0).

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✔ Columns p and q – Projected Additive Adjustments

Use these columns to reflect adjustments that are additive; adjustments in columns j
through o are multiplicative factors.
•
•

For a benefit that is no longer being offered, but is included in the base period data,
enter the projected value of such benefit as a negative number in column q.
The adjustment for a new benefit in the contract year depends upon whether or not
there is base period experience for other benefits in the same service category.
◦ If there is base period experience for other benefits in the same service category,
then—
‣ Enter the projected value of the new benefit as a positive number in
column p.
‣ Do not price the benefits in the service category solely with manual rates;
the credibility percentage for the category must be the same in the projection
period as it would have been if the new service had not been added.

Describe the reason for any additive adjustments in Section V.

SECTION V – DESCRIPTION OF OTHER UTILIZATION ADJUSTMENT FACTOR, OTHER
UNIT COST ADJUSTMENT FACTOR, AND ADDITIVE ADJUSTMENTS
Use this “text box” field to describe the reason for using a multiplicative factor other than 1.000
in columns m and o, and any additive adjustments entered in columns p and q.

SECTION VI – BASE PERIOD SUMMARY FOR 1/1/2012 – 12/31/2012 (EXCLUDES
OPTIONAL SUPPLEMENTAL)
Section VI contains a summary of the actual bid-level base period revenue and expenses. This
section must be completed consistently with the “Plans in Base” bid ID information (reported
in Section II line 5) and consistently with the information reported in Section III. See the
“Pricing Considerations” section of these instructions for more information on reporting base
period data.
Note that Section VI must be completed in total dollars, and it must include all beneficiaries
(that is, ESRD, hospice, and all other, which includes out-of-area or OOA members). To
reiterate: the revenue (line 3), net medical expenses (line 4), and non-benefit expenses (line 7e)
must include ESRD and hospice beneficiaries in addition to all other beneficiaries (which
include OOA members).
Section VI must not include amounts that are entered in Worksheet 1 of the Part D bid pricing
tool. (For example, do not include MA rebates applied to Part D premiums.)
Section VI must not include optional supplemental benefits.
This section must not be left blank.
Line 1 – CMS Revenue

This field captures MA revenue from CMS earned in the base period in total dollars. Enter
bid-based MA payments and accruals from CMS.

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WORKSHEET 1

•
•
•
•

Include rebates for the reduction of A/B cost sharing and other A/B mandatory
supplemental benefits.
Include an estimate of the final risk-adjustment reconciliation payment for CY2012,
which will be received in mid-2013, such as the final risk-adjustment reconciliation
payment for the prior year, if appropriate.
Do not include rebates applied to Parts B and D premium buydowns.
Report the CMS revenues gross of user fee reductions.

In the first column, enter the amount applicable for ESRD enrollees. In the second column,
enter the amount applicable for hospice enrollees. In the third column, enter the amount
applicable to all other enrollees (including OOA members). The sum total is displayed in the
fourth column. Values must be greater than or equal to zero.
Line 2 – Premium Revenue

Enter the revenue from earned MA premiums for the base period in total dollars. Include
premiums associated with Medicare-covered and all A/B mandatory supplemental benefits,
including actual employer and employee premiums for EGWPs. Do not include premiums for
optional supplemental benefits. Do not include Part D premiums.
In the first column, enter the amount applicable for ESRD enrollees. In the second column,
enter the amount applicable for hospice enrollees. In the third column, enter the amount
applicable to all other enrollees (including OOA members). The sum total is displayed in the
fourth column. Values must be greater than or equal to zero.
Line 3 – Total Revenue

This line is calculated as the sum of lines 1 and 2. If base period data is entered in Section III,
then this line total must be completed (that is, must be greater than zero).
Line 4 – Net Medical Expenses

Enter the net medical expenses for the base period in total dollars. Include net medical
expenses associated with Medicare-covered and all A/B mandatory supplemental benefits. Do
not include expenses for optional supplemental benefits, and do not include expenses for
Part D benefits.
In the first column, enter the amount applicable for ESRD enrollees. In the second column,
enter the amount applicable for hospice enrollees. In the third column, enter the amount
applicable to all other enrollees (including OOA members).
The sum total is displayed in the fourth column. Values must be greater than or equal to zero.
If base period data is entered in Section III, then this line total must be completed (that is, must
be greater than zero).
Line 5 – Member Months

Enter the base period member months.
In the first column, enter the amount applicable for ESRD enrollees. In the second column,
enter the amount applicable for hospice enrollees. The third column displays the amount

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WORKSHEET 1

applicable to all other enrollees (including OOA), which is equal to the member months entered
in Section II. The sum total is displayed in the fourth column.
Line 6 – PMPMs

Lines 6a through 6d compute base period “per member per month” values for revenue, net
medical expenses, non-benefit expenses, and gain/loss margin.
Line 7 – Non-Benefit Expenses

Enter the MA non-benefit expenses for the base period in total dollars by category. A total is
computed. Values in lines 7a, 7b, and 7c must be greater than or equal to zero. If base period
data is entered in Section III, then this line total must be completed (that is, must be greater
than zero).
Uncollected premiums must be included in line 7b (“Direct Administration”).
Line 8 – Gain/Loss Margin

Calculated as MA revenue (line 3) less net medical expenses (line 4) less MA non-benefit
expenses (line 7).
Line 9 – Percentage of Revenue

Lines 9a, 9b, and 9c compute the percentage of MA revenue for net medical expenses,
non-benefit expenses, and gain/loss margin for the base period.
Lines 10a and 10b – Quality Initiatives and Taxes and Fees

See the “Pricing Considerations” section of these instructions.
The amounts entered in lines 10a and 10b are in total dollars (not PMPMs).

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WORKSHEET 2

MA WORKSHEET 2 – MA PROJECTED ALLOWED COSTS PMPM
This worksheet calculates the projected allowed costs for the contract year. For plans without
fully credible experience, it will be necessary to input manual rate information. The service
category lines are the same as those on Worksheet 1.

SECTION I – GENERAL INFORMATION
This section displays the information entered on Worksheet 1, Section I.

SECTION II – PROJECTED ALLOWED COSTS
Lines 1 and 2 – Projected Member Months and Projected Risk Factor

The projected member months and projected risk factors are obtained from Worksheet 5 for
total (non-DE# plus DE#), non-DE#, and DE# members.
In lines a through r:
✔ Column e – Utilization Type

Enter the type of utilization in column e for each benefit category that contains PMPM
costs in column o. Do not leave this column blank. If manual rates are not used, entries
in this column are still required and are displayed on Worksheet 1.
For each service category line, enter the appropriate utilization type that reflects the
annualized utilization/1000 enrollees entered in columns f and i. The valid utilization
types are listed below. Note that the valid utilization types vary by service category, as
indicated in the BPT cell labels.
•
•
•
•
•
•
•
•

A –
D –
BP –
V –
P –
T –
S –
O –

Admits
Days
Benefit Period
Visits
Procedures
Trips
Scripts
Other

✔ Columns f through h – Projected Experience Rate

Columns f through h are calculated automatically using the information provided in
Sections III and IV on Worksheet 1. No user inputs are needed. Column f calculates
the projected utilization, column g is the expected average cost, and column h is
allowed PMPM for the contract period, projected based on base period experience data.
✔ Columns i through k – Manual Rate

For a plan with less than fully credible experience or no experience, enter manual rate
information for the contract period, and provide a description of the source of the
manual rate in line u.

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✔ Column i – Annual Utilization/1,000

Enter utilization/1000 assumptions by service category in column i for lines a
through q. Do not leave the utilization type (column e) blank.
✔ Column j – Average Cost

Average cost will be calculated automatically based on the entries in columns i
and k.
✔ Column k – Allowed PMPM

Enter PMPM amounts in column k.
✔ Line r – COB/Subrogation (outside claim system)

Enter any COB/Subrogation offsets to costs as a negative number, since line r will be
added to total medical expenses.
✔ Column l – Experience Credibility Percentage

Enter the experience credibility percentage by service category in column l.
The percentage entered must be between 0 percent and 100 percent. This percentage
must be between 0 percent and 99 percent if the plan is using a manual rate in the
projection. The percentage must equal 100 percent if a manual rate is not being used in
the projection.
Between lines s and t of column l, the BPT displays the credibility percentage that is
calculated based on CMS guidance and the base period member months entered on
Worksheet 1. If the credibility entered by the plan does not equal the CMS credibility,
then supporting documentation must be uploaded to HPMS.
✔ Columns m through o – Blended Rate

Columns m through o calculate the blended contract year rate, based on the projected
experience rate, the manual rate, and the credibility percentage.
Note that, in column o, if the allowed PMPM is greater than zero and a utilization type
is not entered, the BPT results in an error. A utilization type must be entered in
column e for all service categories in which allowed PMPMs are projected.
PMPM values in column o must be greater than or equal to zero, with the exception of
line r (COB/Subrg.), which may be negative.
✔ Columns p and q – Non-DE# and DE# Allowed PMPMs

Columns p and q capture the separate allowed PMPM costs for non-DE# and DE#
enrollees. Column p must be entered on a “per non-DE# member per month” basis, and
column q must be entered on a “per DE# member per month” basis. The amounts
entered in columns p and q are used on Worksheet 4.
The BPT contains validations such that the total allowed PMPM in column o must be
approximately equal to the weighted average of the non-DE# and DE# PMPMs.
•

For each service category, the PMPM value for the total population must be within
$0.05 (5 cents) of the weighted average of the non-DE# and DE# PMPMs.

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•

The BPT will finalize only if the total PMPM for all enrollees is within $0.50
(50 cents) of the weighted average of the non-DE# and DE# PMPMs.

See the “Pricing Considerations” section of these instructions for more information on
the reporting requirements of DE# pricing.
Enter any COB/Subrogation offsets to costs as a negative number, since line r will be
added to total medical expenses.
PMPM values entered in columns p and q must be greater than or equal to zero, with the
exception of line r (COB/Subrg.), which may be negative.
✔ Column r – Percentage of Services Provided Out-of-Network

Enter the percentage of total allowed costs that are expected to be provided
out-of-network for each service line. Enter a 0 if zero percent is expected; do not leave
the field blank to indicate 0 percent. The percentage entered must be between 0 percent
and 100 percent.
If the plan has OON cost sharing PMPM on Worksheet 3, or is an RPPO plan type, then
it is expected that the percentage of services provided out-of-network on Worksheet 2
will be greater than 0 percent.
Line s – Total Medical Expenses

Calculated automatically as the sum of lines a through r. Values must be greater than or equal
to zero.
Line t – Subtotal Medicare-Covered Service Categories

Calculated automatically as the sum of lines a through k. Values must be greater than or equal
to zero.
Line u – Manual Rate Description

Use the text box to describe the general approach to manual rating, including a description of
the source of the manual rate. This description is in addition to the required supporting
documentation (see Appendix B). If the experience credibility used is less than 100 percent,
then the manual rate description must not be left blank.

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WORKSHEET 3

MA WORKSHEET 3 – MA PROJECTED COST SHARING PMPM
Worksheet 3 summarizes the projected MA cost sharing for the contract year and includes both
in-network and out-of-network cost sharing.
See the “Pricing Considerations” section of these instructions for more information on cost
sharing in general and the cost sharing for DE# beneficiaries.

SECTION I – GENERAL INFORMATION
This section displays the information entered on Worksheet 1, Section I.

SECTION II – MAXIMUM COST SHARING PER MEMBER PER YEAR
The responses to the plan-level (out-of-pocket) OOP maximum drop-down questions depend
on how Section D of the Plan Benefit Package (PBP) is completed and must be—
•
•

“No” if the corresponding in-network, out-of-network, or combined plan-level
maximum enrollee OOP cost is blank in the PBP or if the PBP field is not applicable.
“Yes” if the corresponding in-network, out-of-network, or combined plan-level
maximum enrollee OOP cost is entered in the PBP. The PBP amount must be entered
in the corresponding amount field on the BPT.

The responses to the plan-level OOP maximum drop-down questions are summarized below by
type of plan:
•

•

•

•

•

For HMO plans and HMO with optional supplemental POS plans enter—
◦ “Yes” for the plan-level in-network OOP maximum.
◦ “No” for the plan-level out-of-network and combined OOP maximum.
For HMO with mandatory supplemental POS plans enter—
◦ “Yes” for the plan-level in-network OOP maximum.
◦ “Yes” or “No” for the plan-level out-of-network or combined OOP maximum,
consistent with the PBP.
For local PPO and regional PPO plans enter—
◦ “Yes” for the plan-level in-network and combined OOP maximums.
◦ “Yes” or “No” for the plan-level out-of-network OOP maximum, consistent
with the PBP.
For full network PFFS and partial network PFFS plans enter—
◦ “Yes” for the plan-level combined OOP maximum.
◦ “Yes” or “No” for the plan-level in-network and out-of-network OOP
maximums, consistent with the PBP.
For non-network PFFS plans enter—
◦ “Yes” for the plan-level combined OOP maximum drop-down question in the
BPT. Note that this question corresponds to the general maximum enrollee
out-of-pocket cost amount entered on the PBP.
◦ “No” for the plan-level in-network and out-of-network plan-level OOP
maximums.

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WORKSHEET 3

When the response to the OOP maximum drop-down question is “Yes”, the entry in the OOP
maximum amount field must be numeric and greater than or equal to zero.
Line 1 – In-Network

In the first field, select “Yes” or “No” to the question “Is there a plan-level in-network OOP
maximum?” If the answer is “Yes”, then enter in the second field the maximum total dollar
amount that a member could pay for in-network cost sharing for the contract year. This dollar
amount must match the dollar amount entered in the in-network maximum enrollee OOP cost
field in Section D of the PBP.
Line 2 – Out-of-Network

In the first field, select “Yes” or “No” to the question “Is there a plan-level out-of-network
OOP maximum?” If the answer is “Yes”, then enter in the second field the maximum total
dollar amount that a member could pay for out-of-network cost sharing for the contract year.
This dollar amount must match the dollar amount entered in the out-of-network maximum
enrollee out-of-pocket cost field in Section D of the PBP.
Line 3 – Combined

In the first field, select “Yes” or “No” to the question “Is there a plan-level combined OOP
maximum?” If the answer is “Yes”, then enter in the second field one of the following
amounts:
•

•

For non-network PFFS plans, the maximum total dollar amount that a member could
pay in the contract year for cost sharing. This dollar amount must match the dollar
amount entered in the maximum enrollee out-of-pocket cost field in Section D of the
PBP.
For other plans, the maximum total dollar amount that a member could pay in the
contract year for cost sharing both in- and out-of-network. This dollar amount must
match the dollar amount entered in the combined (in-network and out-of-network)
maximum enrollee out-of-pocket cost field in Section D of the PBP. Do not sum
separate in-network and out-of-network OOP maximums.

Line 4 – Maximum Cost-Sharing Description

In the text box provided, briefly explain the methodology used to reflect the impact of
maximum cost sharing on the PMPM values entered in Section III.

SECTION III – DEVELOPMENT OF CONTRACT YEAR COST SHARING PMPM (PLAN’S
RISK FACTOR)
Section III summarizes the cost sharing for all services included in the plan benefit package.
The service categories are the same as presented in previous worksheets, except that line r
(COB) has been omitted. Please note that for some service categories (for example, “Inpatient
Facility”), there is more than one cost-sharing line available. A number of lines allow you to
enter multiple cost-sharing items in a service category to better match the PBP. In addition to
the lines presented, you may also use the ten blank lines at the bottom of the section to include

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WORKSHEET 3

additional cost-sharing items that do not fit into an already defined service category line item.
Do not insert any additional rows.
The BPT allows for flexibility in entering cost-sharing information. Following are some
examples:
Example 1: The PBP contains in-network inpatient cost sharing of $100 per day for

both acute and psychiatric stays with no cost sharing maximum. Assume that the total
in-network inpatient utilization/1000 is 2,000 days, 1,900 of which are for acute and the
remaining 100 for psychiatric. There is no in-network cost sharing maximum. These
figures could be reflected in the bid form in either of the following ways:
Option A:

Column d
Line a1 – Acute
Line a2 – Mental Health
Total

Column g
1,900
100
2,000

Column j
$100.00
$100.00
$100.00

Column k
$15.83
$ 0.83
$16.67

Column g
2,000
2,000

Column j
$100.00
$100.00

Column k
$16.67
$16.67

Option B:

Column d
Line a1 – Acute
Total

Example 2: The PBP has in-network professional copays of $10 for PCP, $20 for

specialists excluding mental health (MH) services, $20 for MH group sessions, and $40
for individual MH sessions. There is no in-network cost sharing maximum. Assume
that in-network office visit utilization is distributed as follows:
Type of Service
PCP
Mental Health – Individual
Mental Health – Group
Other Spec
Total

Utilization
5,000
50
50
2,900
8,000

Following are some of the options that could be used to complete the bid form:
Option A: Use the finest level of detail, with individual MH in line i3 and group

MH in line i6.
Line – Description
Line i1 – PCP
Line i2 – Specialist excl MH
Line i3 – Mental Health
Line i6 – Other
Total

Column g
5,000
2,900
50
50
8,000

Column j
$10.00
$20.00
$40.00
$20.00
$13.88

Column k
$4.17
$4.83
$.17
$.08
$9.25

Note that one of the blank rows at the bottom of the form could also be used to
enter one of the MH copays.
Option B: Same as Option A, but combine the individual and group MH copays

onto line i3.
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WORKSHEET 3
Line – Description
Line i1 – PCP
Line i2 – Specialist
excl MH

Col g
5,000

Col h (not in finalized BPT)
$10 per visit

Col j
$10.00

Col k
$4.17

2,900

$20.00

$4.83

Line i3 – MH
Total

100
8,000

$20 per visit
$40/visit for indiv MH sessions,
$20/visit for group MH

$30.00
$13.88

$.25
$9.25

Option C: Enter all services on one line (for example, i6).

Line – Description

Col g

Line i6
Total

8,000
8,000

Col h (not in finalized BPT)
$10/visit PCP
$20/visit non-MH specialist
$20/visit for group MH
$40/visit for indiv MH

Col j

Col k

$13.88
$13.88

$9.25
$9.25

Column c – Service Category

This column is pre-populated for most of the available rows. When the blank rows at the
bottom of the worksheet are used to provide detailed cost-sharing information, the valid entries
are as follows:
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•

Inpatient Facility
Skilled Nursing Facility
Home Health
Ambulance
DME/Prosthetics/Supplies
Outpatient (OP) Facility – Emergency
OP Facility – Surgery
OP Facility – Other
Professional
Part B Rx
Other Medicare Part B
Transportation (Non-covered)
Dental (Non-covered)
Vision (Non-covered)
Hearing (Non-covered)
Health & Education (Non-covered)
Other Non-covered

Technical note: When the blank rows at the bottom of the worksheet are used, the service
category entries must match those listed above exactly. If there is a typographical error in the
entry, the BPT will not recognize the entered cost-sharing information on Worksheet 4.
Column d – Service Category Description

This column provides a description for many of the fixed-line cost-sharing items. For lines
with multiple options (for example, “Inpatient Facility”), the description is intended to help you

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WORKSHEET 3

provide detailed information that can easily be checked against the PBP. You may input a
description if you are using a blank row at the bottom of the worksheet to enter additional
cost-sharing lines.
Column e – Measurement Unit Code

For each cost-sharing line, enter the appropriate measurement unit that reflects the projected
utilization per 1,000 or PMPM value entered in column g. The valid utilization types are listed
below. Note that the valid utilization types vary by service category, as indicated in the BPT
cells.
•
A – Admits
•
D – Days
• BP – Benefit Period
•
V – Visits
•
P – Procedures
•
T – Trips
•
S – Scripts
•
O – Other
• Coin Coinsurance
• Ded – Deductible (used only for single-line items, such as per-benefit period
deductibles; plan-level deductibles that apply to multiple service
categories and the pricing impact are entered in the footnote and column f)
Column f – In-Network Effective Plan-Level Deductible PMPM

If there is an in-network plan-level deductible (which includes an in-network plan-level
deductible applicable only for Part B services) in Section D of the PBP, you must enter the
effective amount of the deductible on each service category line affected. For each service that
is subject to the plan-level deductible, enter an amount such that the sum total represents the
effective PMPM value of the deductible.
Enter the actual in-network plan-level deductible amount (for example, $500 or “Medicare
FFS”) in the footnote. If an effective plan-level deductible is entered in column f, then an
actual plan-level deductible must be entered in the footnote. The footnote area also includes
drop-down questions about the applicability of plan-level deductibles for Part B services.
Note to include the effect of service-specific deductibles entered in Section B of the PBP in
columns g through j.
Columns g through k – In-Network Cost Sharing after Plan-Level Deductible

These fields pertain to the in-network cost sharing priced in the BPT.
✔ Column g – In-Network Util/1000 or PMPM

Enter the projected in-network utilization/1000, or PMPM value in the case of
coinsurance—
•
•
•

For the time period for which the cost sharing applies.
After the plan-level deductible has been satisfied.
Before the impact of the OOP maximum.

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WORKSHEET 3
✔ Column h – In-Network Description of Cost Sharing/Additional Days/Benefit Limits

These cells are text fields that may be used by bid preparers to enter internal
descriptions of in-network plan cost sharing contained in the PBP, including
descriptions of all PBP benefits priced together within each BPT service category and
any benefit limits. These details are useful since each BPT category may map to several
PBP benefit categories.
The text in column h above the “Total” row 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. This text will not be deleted from the working file or from the backup
file during finalization.
Enter the actual combined plan-level deductible amount (if applicable) in the footnote.
✔ Column i – In-Network Effective Copay/Coinsurance before OOP Max

Enter the projected effective in-network cost-sharing amount after the plan-level
deductible has been satisfied and before the impact of the OOP max. This amount must
represent either the effective copay (if utilization is entered in column g) or the effective
coinsurance percentage (if PMPM is entered in column g).
Note that this cell is not used to calculate the in-network PMPM in column k. However,
if a value is entered in column j, then a corresponding value must be entered in column i
for each service category.
✔ Column j – In-Network Effective Copay/Coinsurance after OOP Max

Enter the projected effective in-network cost-sharing amount after the plan-level
deductible has been satisfied and including the impact of the OOP max. This amount
must represent either the effective copay (if utilization is entered in column g) or the
effective coinsurance percentage (if PMPM is entered in column g). This cell is used to
calculate the in-network PMPM in column k. The values in column j must be less than
or equal to the corresponding values in column i.
Enter the PMPM pricing impact of the in-network OOP maximum in the footnote.
✔ Column k – In-Network PMPM

These cells are calculated automatically and reflect the projected cost-sharing value
PMPM for in-network services, excluding the effective in-network plan-level deductible
and including the impact of the OOP maximum. The formula uses the utilization or
PMPM amounts in column g and the effective copay or coinsurance in column j.
•

If the measurement unit is coinsurance (“Coin”), then the calculation is column g
times column j.
• For measurement units other than coinsurance, the calculation is column g times
column j divided by 12,000.
Enter the actual in-network plan-level deductible and the pricing impact of the
in-network OOP maximum in the footnote.

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WORKSHEET 3
Column l – Total In-Network Cost Share PMPM

These cells are calculated automatically as the sum of columns f and k. This column is the total
projected cost sharing for in-network services.
Note that, in column l, if the cost sharing PMPM is greater than zero and a utilization type is
not entered, the BPT result is an error. A utilization type must be entered in column e for all
service categories into which cost sharing PMPMs are entered.
Column m – Out-of-Network Description of Cost Sharing/Additional Days/Benefit Limits

This column may be used to enter internal descriptions of the out-of-network cost sharing for
each service category. This column will be deleted from the finalized file. See the instructions
for in-network cost sharing in column h for additional information.
Column n – Out-of-Network Cost Sharing PMPM

Enter the effective value of cost sharing for out-of-network benefits for each service category.
This column must reflect the total projected cost sharing for all out-of-network services.
Enter the actual out-of-network plan-level deductible and the pricing impact of the
out-of-network OOP maximum in the footnote.
Column o – Grand Total Cost Share PMPM (In-Network and Out-of-Network)

This column is calculated automatically as the sum of the in-network cost sharing (column l)
and the out-of-network cost sharing (column n).
Footnotes

If cost sharing is designed to match original Medicare cost sharing, enter the actual deductible
as “Medicare FFS”.
✔ Column h

In the first footnote, enter the actual combined (in-network and out-of-network)
plan-level deductible (which includes a combined plan-level deductible applicable only
for Part B services when matching Medicare FFS cost sharing), consistent with the
PBP.
In the second footnote, consistent with the PBP, enter “Yes” or “No” to the question
“Does the actual combined plan-level deductible apply to Part B-Only?”
✔ Column k

In the first footnote, enter the actual in-network plan-level deductible (which includes
an in-network plan-level deductible applicable only for Part B services when matching
Medicare FFS cost sharing), consistent with the PBP.
In the second footnote, consistent with the PBP, enter “Yes” or “No” to the question
“Does the actual in-network plan-level deductible apply to Part B-Only?”
In the third footnote, enter the PMPM pricing impact of the in-network OOP maximum.
This value must reflect the PMPM difference between the pricing for in-network cost
sharing before and after the OOP maximum has been applied. This value must be
greater than or equal to zero.
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WORKSHEET 3
✔ Column n

In the first footnote, enter the actual out-of-network plan-level deductible (which
includes an out-of-network plan-level deductible applicable only for Part B services
when matching Medicare FFS cost sharing), consistent with the PBP.
In the second footnote, consistent with the PBP, enter “Yes” or “No” to the question
“Does the actual out-of-network plan-level deductible apply to Part B-Only?”
In the third footnote, enter the PMPM pricing impact of the out-of-network OOP
maximum. This value must reflect the PMPM difference between the pricing for
out-of-network cost sharing before and after the OOP maximum has been applied. This
value must be greater than or equal to zero.

SECTION IV – MAPPING OF PBP SERVICE CATEGORIES TO BPT
Section IV captures the mapping of PBP benefit categories to BPT service categories for all
benefits and services included in the plan benefit package. These cells are pre-populated based
on the suggested mapping of PBP to BPT categories in Appendix F, but must be overwritten by
the user to reflect the actual mapping used in developing PMPM amounts by service category
in the BPT.

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WORKSHEET 4

MA WORKSHEET 4 – MA PROJECTED REVENUE REQUIREMENT
PMPM
This worksheet uses the allowed costs (Worksheet 2) and cost sharing (Worksheet 3) to
determine net medical costs in Section II. Below are the subsections contained in Section II:
•
•
•

Subsection A - “Non-DE# (Non-Dual Eligible Beneficiaries AND Dual Eligible
Beneficiaries with full Medicare cost sharing liability).”
Subsection B - “DE# (Dual-Eligible Beneficiaries without full Medicare cost sharing
liability).”
Subsection C - “All Beneficiaries.” (Total of subsections A and B)

Subsection C is the weighted average total of subsections A and B.
Non-benefit expenses and gain/loss margin are entered in Section IIC to establish the plan’s
revenue requirements for the contract year. Values are allocated between Medicare-covered
benefits and A/B mandatory supplemental benefits and reflect the plan’s risk factor for the
contract period. In Section III, the Plan sponsor may enter the projected ESRD “subsidy”.
The Plan sponsor may use Section IV to provide the costs associated with additional
“unspecified” benefits for employer/union-only group waiver plan (EGWP) bids. Section V
captures projected Medicaid data for DE# beneficiaries.
See the “Pricing Considerations” section of these instructions for information on completing
Worksheet 4 for DE# beneficiaries.

SECTION I – GENERAL INFORMATION
This section displays the information entered on Worksheet 1, Section I.

SECTION II – DEVELOPMENT OF PROJECTED REVENUE REQUIREMENT
Subsection A – Non-Dual-Eligible Beneficiaries and Dual-Eligible Beneficiaries with Full
Medicare Cost-Sharing Liability (Non-DE#)

The risk factor for non-DE# beneficiaries is obtained from Worksheet 5 and displayed at the
top of this section.
In lines a through r:
✔ Column e – Allowed PMPM for Total Benefits

The allowed PMPM is obtained from column p of Worksheet 2.
✔ Column f – Plan Cost Sharing for Total Benefits

The total in-network and out-of-network cost sharing PMPMs are obtained from
column o of Worksheet 3 for each service category (except for line r). If you enter
additional cost-sharing lines on Worksheet 3, then you must verify that the total cost
sharing on Worksheet 4 equals the total on Worksheet 3.

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WORKSHEET 4
✔ Column g – N/A

This column is left intentionally blank; it is not applicable to this section.
✔ Column h – Net PMPM for Total Benefits

The net PMPM is calculated automatically as column e less column f. Values must be
greater than or equal to zero.
✔ Columns i and j – Percentage for Covered Services

The PMPM amounts shown in columns e, f, and h reflect all benefits covered by the
MA plan. In columns i and j, you must enter the expected percentages of these benefits
that represent Medicare-covered. The percentages in column i are used to allocate
allowed costs (column e) between Medicare-covered (column m) and A/B mandatory
supplemental benefits. The percentages in column j are used to allocate the plan’s cost
sharing (column f) between plan cost sharing for Medicare-covered services (column l)
and cost sharing for A/B mandatory supplemental benefits.
The percentage entered must be between 0 percent and 100 percent.
For services that are non-covered as defined, the percentage is defaulted to 0.0 percent
(for example, line l, “Transportation Non-covered”). For all other services, the Plan
sponsor must estimate the percentage of covered services for both the allowed costs and
the cost sharing. Enter these percentages in columns i and j. If the plan’s benefit for a
service is richer than that under FFS Medicare, the percentage entered must be less than
100 percent.
Example:

The Plan sponsor estimates that 99.92 percent of the allowed PMPM in column
e for outpatient facility emergency services is for Medicare-covered services and
0.08 percent is for A/B mandatory supplemental benefits, whereas 98.03 percent
of the cost sharing PMPM in column f is for Medicare-covered services and
1.97 percent of the cost sharing is for A/B mandatory supplemental benefits.
The entries in columns i and j would be as follows:
(c)

(i)

(j)
% for Cov. Svcs

Service Category

Allowed

Cost Sharing

f. OP Facility – Emergency

99.92%

98.03%

See Appendix C for instructions on completing columns i and j for Part B-only plans.
For the Medicare-covered service categories (lines a through k), the values entered in
columns i and j must generate appropriate pricing for mandatory supplemental benefits
in columns p through r, consistent with the PBP. In addition, the relationship of the
PBP benefits and the BPT pricing is to be consistent with the mapping entered on
Worksheet 3 Section IV. For example, if a plan covers additional inpatient hospital
days, and the plan is using the suggested mapping from Appendix F, the PMPM pricing

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WORKSHEET 4

for the non-covered inpatient services is to be represented in line a, column p, “Net
PMPM for Additional Services.”
✔ Column k – FFS Medicare Actuarial Equivalent (AE) Cost-Sharing Proportions

These values are populated automatically based on the enrollment projections entered in
Worksheet 5.
✔ Column l – Plan Cost Sharing for Medicare-Covered Services

This column calculates the portion of the plan’s cost sharing that is attributable to
Medicare-covered benefits (calculated as column f times column j). This column is
used to determine the reduction of A/B cost sharing in column q.
Plan cost sharing for Medicare-covered services is compared to Medicare FFS
actuarially equivalent cost sharing in the BPT “red-circle” validations.
✔ Columns m through o – Medicare-Covered using Actuarial Equivalent Cost Sharing

These columns are calculated automatically and are the basis for the costs included in
the “Plan A/B Bid.”
✔ Column m – Allowed PMPM

The Medicare-covered allowed costs are calculated automatically based on the
percentage of Medicare-covered benefits input in column i. Column m is
calculated as column e times column i.
✔ Column n – Fee-for-Service Medicare Actuarial Equivalent (AE) Cost Sharing

The FFS Medicare AE cost sharing PMPMs are based on the proportions in
column k. Column n is calculated as column k times column m.
✔ Column o – Net PMPM

Calculated as column m minus column n.
Columns p through r – A/B Mandatory Supplemental (MS) Benefits

These columns are calculated automatically and are the basis for the costs included in the A/B
mandatory supplemental premium.
✔ Column p – Net PMPM for Additional Services

These amounts reflect the net costs (that is, allowed costs less enrollee cost sharing) for
non-covered benefits. This column is calculated automatically as the allowed costs for
non-covered benefits (column e minus column m) less the cost sharing for non-covered
benefits (column f minus column l). These values must be greater than or equal to zero
(except line r, COB, which may be negative).
✔ Column q – Reduction of A/B Cost Sharing

This column is the difference between FFS AE cost sharing and the plan cost sharing
for Medicare-covered services, calculated automatically as column n minus column l.
This reduction is sometimes referred to as the “FFS cost-sharing buydown.”

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✔ Column r – Total A/B Mandatory Supplemental Benefits

This column is calculated automatically as the sum of columns p and q.
Line s – Total Medical Expenses

The total medical expense is the sum of lines a through r, except for columns i, j, and k.
Subsection B – Dual-Eligible Beneficiaries without Full Medicare Cost-Sharing Liability
(DE#)

The risk factor for DE# beneficiaries is obtained from Worksheet 5 and displayed at the top of
this section.
In lines a through r:
✔ Column e – Reimbursement plus Actual Cost Sharing for Total Benefits

Calculated automatically as the sum of columns g and h.
✔ Column f – Plan Cost Sharing for Total Benefits

This column contains a formula that may be overwritten by the user. The default
formula divides the non-DE# beneficiary cost sharing by the non-DE# allowed, and
then multiplies by the DE# allowed from column q of Worksheet 2. See the “Pricing
Considerations” section of these instructions for more guidance.
✔ Column g – Actual Cost Sharing for Total Benefits

Calculated automatically as the minimum of columns f and k.
✔ Column h – Plan Reimbursement for Total Benefits

Calculated automatically as column q from Worksheet 2 less column f.
✔ Columns i and j – Percentage for Covered Services

See instructions under Worksheet 4, subsection IIA, columns i and j.
✔ Column k – State Medicaid Required Beneficiary Cost Sharing

Enter values in accordance with the “Pricing Considerations” section of these
instructions.
✔ Column l – Actual Cost Sharing for Medicare-Covered Services

Calculated automatically as column g times column j.
✔ Columns m through o – Medicare-Covered using Medicaid Cost Sharing

These columns are calculated automatically and are the basis for the costs included in
the “Plan A/B Bid.”
✔ Column m – Allowed PMPM

The Medicare-covered allowed costs are calculated automatically based on the
percentage of Medicare-covered benefits input in column i. Column m is
calculated as column e times column i.

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WORKSHEET 4
✔ Column n – Medicaid Cost Sharing

Calculated automatically as column k times column j.
✔ Column o – Net PMPM

Calculated as column m minus column n.
Columns p through r – A/B Mandatory Supplemental (MS) Benefits

These columns are calculated automatically and are the basis for the costs included in the A/B
mandatory supplemental premium.
✔ Column p – Net PMPM for Additional Services

This column is calculated automatically as the allowed costs for non-covered benefits
(column e minus column m) less the cost sharing (column g minus column l). These
values must be greater than or equal to zero (except line r, COB, which may be
negative).
✔ Column q – Reduction of A/B Cost Sharing

This column is calculated automatically as column n minus column l.
✔ Column r – Total A/B Mandatory Supplemental Benefits

This column is calculated automatically as the sum of columns p and q.
Line s – Total Medical Expenses

The total medical expense is the sum of lines a through r, except for columns i and j.
Subsection C – All Beneficiaries (Total of Subsections A and B)

The risk factor for total beneficiaries (non-DE# plus DE#) is obtained from Worksheet 5 and
displayed at the top of this section.
In lines a through q and t:
✔ Columns e through g – N/A

These columns are left intentionally blank; they are not applicable to this section.
✔ Column h – Net PMPM for Total Benefits

The PMPM is calculated automatically as the weighted average of subsections A and B,
based on projected enrollment in Worksheet 5.
✔ Columns i through n – N/A

These columns are left intentionally blank; they are not applicable to this section.
✔ Column o – Net PMPM for Medicare-Covered Benefits

The PMPM is calculated automatically as the weighted average of subsections A and B,
based on projected enrollment in Worksheet 5.

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WORKSHEET 4
Columns p through r – A/B Mandatory Supplemental (MS) Benefits

These columns are calculated automatically and are the basis for the costs included in the A/B
mandatory supplemental premium.
✔ Column p – Net PMPM for Additional Services

The PMPM is calculated automatically as the weighted average of subsections A and B,
based on projected enrollment in Worksheet 5.
✔ Column q – Reduction of A/B Cost Sharing

The PMPM is calculated automatically as the weighted average of subsections A and B,
based on projected enrollment in Worksheet 5.
✔ Column r – Total A/B Mandatory Supplemental Benefits

This column is calculated automatically as the sum of columns p and q.
Line r – ESRD

This line is populated based on Section III.
Line s – Additional Benefits (employer bids only)

This line is populated based on Section IV.
Line u – Total Medical Expenses

The total medical expense is the sum of lines a through t. The value in column o is the net
medical cost included in the “Plan A/B Bid.” The value in column r is the net medical cost
included in the A/B mandatory supplemental premium.
Line v – Non-Benefit Expenses

Enter the non-benefit expense information for total MA benefits in column h for each of the
categories.
The worksheet distributes the non-benefit expenses proportionately between Medicare-covered
(column o) and A/B mandatory supplemental (column r) for each category. Non-benefit
expenses are also distributed within A/B mandatory supplemental benefits between “Additional
Services” (column p) and “Reduction of A/B Cost Sharing” (column q).
See the “Pricing Considerations” section of these instructions for more information regarding
non-benefit expenses.
Lines v1 through v4 – Non-Benefit Expenses

Total non-benefit expenses are input in column h and allocated proportionately between
Medicare-covered (column o) and A/B mandatory supplemental (column r). Note that the same
proportion is used for each line item. The allocation is based on the relative proportion of the
plan’s medical expense requirements for Medicare-covered (“bid”) and A/B mandatory
supplemental, excluding the PMPM impact of the ESRD subsidy.

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✔ Column h – Non-Benefit Expense PMPM for Total Benefits

Enter the PMPM by category. Lines v1, v2, and v3 must be greater than or equal to
zero.
✔ Column o – Non-Benefit Expense PMPM for Medicare-Covered

These values are calculated as column h minus column r.
✔ Column r – Non-Benefit Expense PMPM for A/B Mandatory Supplemental

These values are calculated based on the relative proportion of A/B mandatory
supplemental, excluding the impact of the ESRD subsidy.
Line v5, columns h, o, and r – Total Non-Benefit Expense

The sum of lines v1 through v4. The value must be greater than or equal to zero.
Line v5, columns p and q – Total Non-Benefit Expense for Additional Services and
Reduction of A/B Cost Sharing

The total non-benefit expense for A/B mandatory supplemental benefits (column r) is allocated
between additional services (column p) and reduction of A/B cost sharing (column q). The
allocation is based on the relative proportions of additional services and reduction of A/B cost
sharing, excluding the impact of the ESRD subsidy.
Line w – Gain/Loss Margin

Enter the projected PMPM for the gain/loss in column h for total MA services. Do not leave
this field blank.
The gain/loss margin is distributed proportionately between Medicare-covered and A/B
mandatory supplemental. The allocation is based on the relative proportions of the medical
expense requirements for Medicare-covered and A/B mandatory supplemental, excluding the
PMPM impact of the ESRD subsidy.
See the “Pricing Considerations” section of these instructions for more information regarding
gain/loss margin.
Line x – Total Revenue Requirement

The sum of lines u (medical expense), v (non-benefit expense), and w (gain/loss margin). The
value in column o is the total revenue requirement of the “Plan A/B Bid.”
Lines y1, y2 and y3 – Percentage of Revenue

These lines calculate the ratio of net medical expense, non-benefit expense, and gain/loss
margin as a percentage of revenue.
Line y4 – Adjusted MLR

This line is calculated based on the projections of Worksheet 4 column h, as the ratio of:
•
•

Medical expenses (line u) plus quality initiatives (line z1), to
Total revenue requirement (line x) less taxes and fees (line z2).

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See the “Pricing Considerations” section of these instructions for more information regarding
the Adjusted MLR.
Lines z1 and z2 – Quality Initiatives and Taxes and Fees

See the “Pricing Considerations” section of these instructions.
Line z3 – List the specific items included in Quality Initiatives and in Taxes and Fees

This line contains a text box to capture the list of items included in the quality initiatives
amount entered in line z1 and the list of items included in the taxes and fees amount entered in
line z2.
See the “Pricing Considerations” section of these instructions for more information.
Line z4 – Overall Gain/(Loss) Margin Level

Enter the level at which the overall gain/loss margin requirements are met. See the “Pricing
Considerations” section of these instructions for more information regarding gain/loss margin.
This line contains a drop-down menu with three options: “Contract”, “Organization” and
“Parent-Organization”. EGWP plans are defaulted to the “Contract” option.
Do not leave this field blank.

SECTION III – DEVELOPMENT OF PROJECTED CONTRACT YEAR ESRD “SUBSIDY”
Section III allows for an adjustment to A/B mandatory supplemental benefits in line r of
Section II. This adjustment is split into two sections: one for basic benefits and the other for
supplemental benefits. Values entered in input cells must be greater than or equal to zero.
CY Member Months (entered by county)

This value is obtained from Worksheet 5.
CY ESRD Member Months

This value is obtained from Worksheet 5.
CY Out-of-Area (OOA) Member Months

This value is obtained from Worksheet 5.
Basic Benefits

See the “Pricing Considerations” section on ESRD for more information.
Supplemental Benefits

See “Pricing Considerations” section on ESRD for more information.

SECTION IV – FOR EMPLOYER BID USE ONLY (“800-SERIES”)
This section may be used for employer/union-only group waiver plan bids (“800-series”
Plan IDs) and employer/union direct contract private fee-for-service plans (that is, plan type
equal to “ED PFFS”) to provide CMS with the PMPM costs associated with additional
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“unspecified” benefits. These services may be funded by rebate dollars. Consistent with
individual-market bids, all rebates available to the plan must be allocated on Worksheet 6.
See Appendix D for further information on group bids.
Line 1 – PMPM for Additional (Unspecified) Mandatory Supplemental Benefits

Enter the PMPM value of medical costs associated with additional “unspecified” benefits. The
benefits represented by this value may be customized for each employer or union group that
enrolls in the plan. See Appendix D for further guidance on the use of this field.
This value will be used in line s of Section IIC.

SECTION V – PROJECTED MEDICAID DATA FOR DE# BENEFICIARIES
This section contains two input cells: line 1, “Medicaid Projected Revenue,” and line 2,
“Medicaid Projected Cost (not in bid).” Entries must be reported on a “per DE# Member per
Month” basis. Values must be greater than or equal to zero. See the “Pricing Considerations”
section of these instructions for more guidance.

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WORKSHEET 5

MA WORKSHEET 5 – MA BENCHMARK PMPM
This worksheet calculates the A/B benchmark and evaluates whether the plan realizes a savings
or needs to charge a basic member premium.
Below is a brief description of the sections contained in this worksheet:
•
•
•
•
•
•
•

Section I – General information entered on Worksheet 1.
Section II – Summary of development of the benchmark and the bid.
Section III – Summary of development of the savings or basic member premium.
Section IV – Development of the regional A/B benchmark (including the statutory
component of the regional benchmark). Applies to RPPO plan types only.
Section V – Summary of Quality Bonus Rating information (from CMS).
Section VI – Projected plan-specific information for counties within the service area.
Section VII – Other Medicare information (populated based on the enrollment
projection).

The A/B benchmark calculation is based on the following data elements:
•
•
•
•
•
•

Service Area: Counties within the MA service area defined by their respective Social
Security Administration (SSA) state-county codes.
Projected Member Months (excluding ESRD and hospice): Projected non-ESRD
non-hospice member months, reported by county of the plan’s service area.
Projected Risk Factor (excluding ESRD and hospice): Projected average risk factor for
non-ESRD non-hospice enrollees, reported by county of the plan’s service area.
Medicare Secondary Payer Adjustment Factor: Factor relative to all payments.
For RPPOs, the mix of Medicare beneficiaries (nationally) between original Medicare
and Medicare Advantage (used to weight the statutory and plan bid components of the
regional A/B benchmark).
Quality Bonus Rating (from CMS).

SECTION I – GENERAL INFORMATION
This section displays the information entered on Worksheet 1, Section I.

SECTION II – BENCHMARK AND BID DEVELOPMENT
Line 1 – Member Months (from Section VI)

The value for projected member months (excluding ESRD and hospice) is obtained from
Section VI (entered by county of the plan’s service area). You must enter the projected
non-DE# member months. The value for DE# member months is calculated as the difference
between the total and the non-DE# amounts. See the “Pricing Considerations” section of these
instructions for more guidance.
Line 2 – Standardized A/B Benchmark (at 1.000 Risk Score)

This value is obtained from Section IV for regional plans and from Section VI for local plans.

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Line 3 – Medicare Secondary Payer (MSP) Adjustment

User input is required. Note that this field is formatted as a percentage; therefore, if the value is
2.53 percent, enter “2.53” or “0.0253”. Do not leave this field blank. If zero percent is the
projected value, then enter a “0” in this field. The value entered must be between 0 percent and
100 percent.
Line 4 – Weighted Average Risk Factor

This value is obtained from Section VI. You must enter the projected non-DE# value. The
DE# value is calculated based on the total and the non-DE# amounts. See the “Pricing
Considerations” section of these instructions for more guidance.
If the value for DE# members equals zero, then the non-DE# risk score must equal the total risk
score.
Line 5 – Conversion Factor

Calculated as (1.000 minus line 3) times line 4. This is an intermediate step in the BPT
calculations.
Line 6 – Plan (or Regional) A/B Benchmark

Calculated as line 2 times line 5. The BPT finalization process will verify that this value must
be greater than zero.
Line 7 – Plan A/B Bid

This value is obtained from Worksheet 4, rounded to two decimals. The BPT finalization
process will verify that this value must be greater than zero.
Line 8 – Standardized A/B Bid (@ 1.000)

Calculated as line 7 divided by line 5, and then rounded to two decimals.

SECTION III – SAVINGS/BASIC MEMBER PREMIUM DEVELOPMENT
Line 1 – Savings

Calculated as the difference between the plan (or regional) A/B benchmark and the plan A/B
bid, but not less than zero. This value is rounded to two decimals.
Line 2 – Rebate

Calculated as Section III, line 1 (“Savings”) times Section V, line 3 (“Rebate %”). This value
is rounded to two decimals.
Line 3 – Basic Member Premium

Calculated as the standardized A/B bid less the standardized A/B benchmark, but not less than
zero. This value is rounded to two decimals.
The BPT will not finalize if there are any invalid values (such as “#N/A”, “#DIV/0!”, “#REF!”,
“#NAME?”, etc.) in this field.

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SECTION IV – STANDARDIZED A/B BENCHMARK – REGIONAL PLANS ONLY
This section calculates the standardized A/B benchmark for regional PPO plans.
Line 1 – Statutory Component for Region

The PMPM amount, defined by region, is pre-populated by CMS. The weighting is also
pre-populated in the bid form by CMS.
Line 2 – Plan Bid Component

The plan bid component will be announced by CMS after the bids are submitted. It will likely
be announced at the same time that the Part D national average is announced (typically in
August).
Plan sponsors may input an estimated average regional bid amount in their initial June bid
submission.
For bids that are submitted prior to the announcement of the RPPO averages, there are two
options for completing this field: (1) leave the cell blank, in which case the plan’s submitted
standardized bid (Section II, line 8) is used as the plan bid component, or (2) input a reasonable
estimate of the average RPPO bid for the region.
The RPPO announcement includes the weighted average MA RPPO bid for each region.
Organizations will be instructed at the time of the announcement to submit revised RPPO MA
BPTs with the applicable average bid amount entered in line 2. Regional employer bids
(“800-series” bids) must also be resubmitted to reflect the RPPO average bids in line 2. Any
changes in rebates due to the actual plan bid component must be re-allocated at the same time.
Appendix E contains additional guidance regarding the rebate reallocation period.
Line 3 – Standardized A/B Benchmark

This line is calculated as the weighted average of lines 1 and 2 (if line 2 has a value entered). If
line 2 does not have a value entered (that is, if the Plan sponsor has not entered an estimated
value for a pre-announcement bid submission), the amount from Section II, line 8 is used in the
calculation.

SECTION V – QUALITY RATING
This section captures quality rating information released by CMS. See the “Pricing
Considerations” section of these instructions for more information.
Line 1 – Quality Bonus Rating (per CMS)

Enter the quality bonus rating (that is, QBP “star rating”) released by CMS for the contract.
The rating is a numeric value from 1.0 through 5.0.
The value entered in the BPT will be validated upon upload. (That is, if the BPT value does not
match the value released by CMS, the upload will be rejected.)

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Line 2 – New/Low Indicator (per CMS)

Enter the new/low indicator released by CMS for the contract. The four valid options are as
follows:
•
•
•
•

New contract under existing parent org
New contract under new parent org
Low
Not applicable

For plans where the new/low indicator is applicable, the text entered in the BPT will be
validated upon upload. (That is, if the BPT text does not match the text released by CMS, the
upload will be rejected.)
Line 3 – Rebate Percentage

The BPT computes the rebate percentage that is used in Section III, line 2.
See the “Pricing Considerations” section of these instructions for more information.

SECTION VI – COUNTY-LEVEL DETAIL AND SERVICE AREA SUMMARY
This section contains detailed data by county and develops plan-specific county-level MA
payment rates. For most plans, the only user inputs are the state-county codes (column b),
projected member months (column e), and projected risk factors (column f) by county. Entries
must reflect plan-specific non-ESRD non-hospice enrollment projections for each county
within the service area. Plans are permitted to project zero enrollment in a particular county in
order to generate a county-level payment rate for that county.
As with all aspects of the projections for MA-PD plans, the enrollment and risk scores for the
MA bid must be based on a population consistent with the corresponding Part D bid.
Payment rates for RPPOs may be developed using plan-provided geographic intra-service area
rate (ISAR) factors on a case-by-case basis, as explained in the “Pricing Considerations”
section of these instructions.
The BPT will not finalize if there are any invalid values (such as “#N/A”, “#DIV/0!”, “#REF!”,
“#NAME?”, etc.) in Section VI.
Line 1 – Use of Plan-Provided ISAR Factors

Regional plans that wish to use ISAR factors to develop their county payment rates must enter
“Yes”. (Technical note: Do not enter “Y” in this field; enter the entire word “Yes”.)
Line 2 – Total or Weighted Average for the Service Area

The county-level data are summarized in this line, weighted by projected member months.
Line 3 – County-Level Detail
✔ Column b – State-County Code

Enter the Social Security Administration (SSA) state-county codes that define the MA
service area, in accordance with the following:

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•

•
•
•
•
•

Each state-county code must be entered as a text input (that is, must include a
preceding apostrophe) and must include all leading zeroes (for example, ‘01000).
This field is formatted as the “General” format in Excel, in order to support the
functionality to link spreadsheets. Therefore, county codes must be entered as text
(that is, using a preceding apostrophe) and must include any leading zeros.
If the service area has more than one county, do not leave any blank rows between
the first and last state-county code entered. Also, do not leave blank rows before the
first county code entered.
Do not enter the same state-county code more than once.
Do not insert any additional rows in the worksheet.
Do not input the out-of-area (OOA) county, “99999”. OOA enrollees are not
explicitly represented in the benchmark calculation.
The county codes entered in the BPT must match the service area defined in HPMS
by the MA organization. Any service area discrepancies between the BPT and
HPMS may result in delays during bid review and could affect the approval timeline
of the bid.

Technical note: In the “finalized” MA BPT file, the county-level section will be sorted
in a descending order, based on the county codes entered in column b. See the BPT
technical instructions for further information.
✔ Column c – State

The BPT will display the applicable state name based on the corresponding code
entered in column b. No user entry is required.
✔ Column d – County Name

The BPT will display the applicable county name based on the corresponding code
entered in column b. No user entry is required.
✔ Column e – Projected Member Months

Enter the projected contract year member months for each county in the service area.
The projected member months must include both aged and disabled members, and DE#
and non-DE# members, but exclude ESRD and hospice members.
See the “Pricing Considerations” section of these instructions for more guidance.
Technical note: The data will display as whole values but can be entered with decimal
places.
If member months are entered in a particular row of column e, then a corresponding
county code and a risk score must be entered in columns b and f, respectively.
✔ Column f – Projected Risk Factors

Enter the risk factors for the projected non-ESRD non-hospice membership by county.
If a risk score is entered in a particular row of column f, then a corresponding county
code must be entered in column b.

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✔ Column g – Plan-Provided ISAR Factors

If the Plan sponsor has support for plan-specific ISAR factors for a regional PPO,
then—
•
•

Enter “Yes” in line 1, in response to the question “Use of plan-provided ISAR?”
(Technical note: Do not enter “Y” in this field; enter the entire word “Yes”.)
Enter the plan-provided ISAR factors in column g of the county-level section.
Factors can be in the form of either PMPM values or a relative scale.

✔ Column h – MA Risk Ratebook: Unadjusted

The BPT will display the applicable published ratebook risk rates for the contract
period. If enrollee type is “A/B,” the amounts shown are the total of Part A and Part B.
If enrollee type is “Part B-Only”, the amount shown is the Part B rate.
✔ Column i – MA Risk Ratebook: Risk-Adjusted

The BPT will calculate the risk-adjusted rates based on the rates in column h and the
risk scores entered in column f.
✔ Column j – ISAR Scale

The BPT will calculate the ISAR scale based on either the plan-provided ISAR factors
in column g (if provided) or the ratebook rates in column h.
✔ Column k – ISAR-Adjusted Bid

The BPT will calculate the ISAR-adjusted bid based on the ISAR scale in column j and
the standardized A/B bid in Section II. Note that the payment rates represent coverage
for Medicare Part A and Part B (except for Part B-only plans). The values will then be
separated into Part A and Part B payment rates in columns l and m.
✔ Columns l through m – Risk Payment Rates

These columns are calculated based on the ISAR-adjusted bid in column k and the risk
ratebook proportions for Part A and Part B.

SECTION VII – OTHER MEDICARE INFORMATION
This section contains county-level Medicare information used in the bid form and is populated
based on the county codes input in column b and the projected member months entered in
column e.
The BPT will not finalize if there are any invalid values (such as “#N/A”, “#DIV/0!”, “#REF!”,
“#NAME?”, etc.) in Section VII.
Columns n through p – Original Medicare Cost-Sharing Proportional Factors

These columns are populated based on the enrollment projections and are used in column k of
Worksheet 4, Section IIA.
Columns q through s – FFS Costs Used to Weight Original Medicare Cost Sharing

These columns are populated based on the enrollment projections and are used in the weighted
averages (row 36) of columns n through p.

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Columns t through u – Metropolitan Statistical Area (MSA)

These columns are populated based on the enrollment projections. The names shown are based
on metropolitan and micropolitan statistical areas, as defined by the Office of Management and
Budget. Though this information is not directly used in the BPT calculations, it is used by
CMS during bid reviews.

SECTION VIII – PROJECTED CY MEMBER MONTHS
This section captures and summarizes the various components of the plan’s member months.
Line 1 – Member Months entered by county (from Section VI)

This value is obtained from Section VI.
Line 2 – ESRD Member Months

Enter the projected CY ESRD member months. Do not leave this field blank. If no ESRD
enrollees are expected during the contract period, then enter a zero (0) in this field.
This amount is used on Worksheet 4 Section III.
Line 3 – Hospice Member Months

Enter the projected CY hospice member months. Do not leave this field blank. If no hospice
enrollees are expected during the contract period, then enter a zero (0) in this field.
Line 4 – Out-of-Area (OOA) Member Months

Enter the projected CY OOA member months. Do not leave this field blank. If no OOA
enrollees are expected during the contract period, then enter a zero (0) in this field.
This amount is used on Worksheet 4 Section III.
Line 5 – Total Member Months

Calculated as the sum of line 1 through 4.
The enrollment for the MA bid must be based on a population consistent with the
corresponding Part D bid.

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WORKSHEET 6

MA WORKSHEET 6 – MA BID SUMMARY
Worksheet 6 summarizes the results of the calculations of the bid form. In addition, some user
inputs are required, as described below.

SECTION I – GENERAL INFORMATION
This section displays the information entered on Worksheet 1, Section I.

SECTION II – OTHER INFORMATION
Section A – Part B Information
See the “Pricing Considerations” section for further information regarding allocating rebates to
buy down the Part B premium.
Line 1 – Maximum Part B Premium Buydown Amount, per CMS

This value is pre-populated by CMS at the time that the bid form is released.
Section B – Rebate Allocation for Part B Premium
Line 1 – PMPM Rebate Allocation for Part B Premium

Enter the PMPM amount of rebates to reduce the Part B premium.
Line 2 – Rounded Part B Rebate Allocation

The PMPM amount entered in line 1 is rounded to one decimal (that is, the nearest dime) to
comply with withhold system requirements.
Section C – Rebate Allocations
Line 1 – Reduce A/B Cost Sharing

Enter the PMPM amount of rebates to reduce A/B cost sharing.
Line 2 – Other A/B Mandatory Supplemental Benefits

Enter the PMPM amount of rebates to apply toward other A/B mandatory supplemental
benefits.

SECTION III – PLAN A/B BID SUMMARY
Section III summarizes the bid pricing tool information in three sections.
•
•

Section A is an overview of the plan A/B bid and the costs of A/B mandatory
supplemental benefits, and it also displays some benchmark and risk score information
from Worksheet 5.
Section B contains the MA rebate allocation.

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•

Section C develops the MA premium and requires the input of the Part D premium
information. Consistent with previous worksheets, any optional supplemental
benefits/premiums are to be excluded.

Section A – Overview
This section summarizes information entered on previous worksheets.
Line 1 – Net Medical Cost

These amounts are obtained from Worksheet 4.
Line 2 – Non-Benefit Expenses

These amounts are obtained from Worksheet 4.
Line 3 – Gain/Loss Margin

These amounts reflect the estimated net gain/loss for the plan, including the amount of risk
margin desired. These amounts are obtained from Worksheet 4.
Line 4 – Total Revenue Requirement

The sum of lines 1 through 3. These amounts are the required revenue at the plan’s risk factor
and are calculated prior to any rebate allocation.
Line 5 – Standardized A/B Benchmark

This amount is obtained from Worksheet 5.
Line 6 – Plan A/B Benchmark (or Regional A/B Benchmark for RPPO Plans)

This amount is obtained from Worksheet 5.
Line 7 – Risk Factor

This amount is obtained from Worksheet 5.
Line 8 – Conversion Factor

This amount is obtained from Worksheet 5.
Section B – MA Rebate Allocation
Plan sponsors may choose which of the following category, or categories, in which to allocate
rebates.
•
•
•
•
•

Reduce A/B cost sharing.
Other A/B mandatory supplemental benefits.
Part B premium buydown.
Part D basic premium buydown.
Part D supplemental premium buydown.

See Appendix E for information regarding the reallocation of rebates (permitted for certain
plans) after the publication of the Part D and MA regional benchmarks.
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Line 1 – MA Rebate

This amount is obtained from Worksheet 5.
The BPT will not finalize if there are any invalid values (such as “#N/A”, “#DIV/0!”, “#REF!”,
“#NAME?”, etc.) in this field.
Lines 2 through 6 – Rebate Allocations by Category

The fourth column displays the portion of the total MA rebate that is allocated to each of the
rebate options. Note that the rebate allocations are actually entered in separate sections of this
worksheet, to ensure that the rebate allocations are rounded to comply with withhold system
requirements.
The first three columns distribute the allocated rebate among medical expenses, non-benefit
expenses, and gain/loss in the same proportion as used in Worksheet 4. The fifth column
contains the maximum value that applies to each rebate category. See the “Pricing
Considerations” section of these instructions for more information on rebate allocation.
The BPT will not finalize if there are any invalid values (such as “#N/A”, “#DIV/0!”, “#REF!”,
“#NAME?”, etc.) in these fields.
Line 7 – Total Rebate Allocated

The sum of lines 2 through 6. This amount must equal the amount in line 1.
If there are any “unallocated” rebates shown, including pennies, these amounts must be
distributed among the categories available. The BPT will not finalize if there are any invalid
values (such as “#N/A”, “#DIV/0!”, “#REF!”, “#NAME?”, etc.) in this field.
Section C – Development of Estimated Plan Premium
Line 1 – A/B Mandatory Supplemental Revenue Requirements

This amount is obtained from Section IIIA.
Line 2 – Less Rebate Allocations

These amounts are obtained from Section IIIB, lines 2 and 3.
Line 3 – A/B Mandatory Supplemental Premium

The sum of lines 1 and 2.
Line 4 – Basic MA Premium

This amount is obtained from Worksheet 5.
Line 5 – Total MA Premium (excluding Optional Supplemental)

The sum of lines 3 and 4.
Line 6 – Rounded MA Premium (excluding Optional Supplemental)

The total MA premium from line 5 is rounded to one decimal (that is, the nearest dime) to
comply with withhold system requirements. Value must be greater than or equal to zero.

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The BPT will not finalize if there are any invalid values (such as “#N/A”, “#DIV/0!”, “#REF!”,
“#NAME?”, etc.) in this field.
Line 7 – Part D Basic Premium
✔ Line 7a – Prior to Rebates

Enter the Part D basic premium prior to rebates after rounding (found on the separate
Part D bid form). This amount must equal the amount on the Part D BPT (that is, the
amount prior to application of any MA rebates). Note: The Part D basic premium prior
to rebates must be entered in the MA BPT, even if no MA rebates are allocated to buy
down the Part D basic premium. This field is not applicable to MA-only plans and
EGWP plans.
✔ Lines 7b and 7c – A/B Rebates Allocated to the Part D Basic Premium

Enter the rebates that the Plan sponsor wishes to allocate to the Part D basic premium.
The Part D rebate allocation must be rounded to one decimal. If this is not done, then
the bid form will round these rebates to one decimal (in line 7c), to comply with
withhold system requirements. This field is not applicable to MA-only plans and
EGWP plans.
✔ Line 7d – Part D Basic Premium

The estimated Part D basic premium net of rebates is calculated automatically as line 7a
minus line 7c.
The Part D basic premium in the MA BPT is an estimate when the bid is initially
submitted in June. The actual plan premium will be calculated by CMS, outside the
BPT, when the Part D national average monthly bid amount is determined (typically in
August).
Note that the Part D basic premium prior to rebates can be a negative number.
This field is not applicable to MA-only plans and EGWP plans (that is, it must be equal
to zero).
If the plan intention for the target premium (cell R47) equals “Low Income Premium
Subsidy Amount” and the plan enters Part D basic rebates (cell R36) greater than zero,
then the Part D basic premium after rebates (cell R37) must be greater than zero.
Line 8 – Part D Supplemental Premium
✔ Line 8a – Prior to Rebates

Enter the Part D supplemental premium prior to rebates (found on the separate Part D
bid form) after rounding. This amount must equal the amount on the Part D BPT (that
is, the amount prior to application of any MA rebates). Note: The Part D supplemental
premium prior to rebates must be entered in the MA BPT, even if no MA rebates are
allocated to buy down the Part D supplemental premium. This field is not applicable to
MA-only plans and EGWP plans.
Note that if the Part D basic premium is negative, then the Part D supplemental
premium must offset the negative amount. That is, the sum of the Part D basic and
supplemental premiums must be greater than or equal to zero.

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WORKSHEET 6
✔ Lines 8b and 8c – A/B Rebates Allocated to the Part D Supplemental Premium

Enter the rebates that the Plan sponsor wishes to allocate to the Part D supplemental
premium. The Part D rebate allocation must be rounded to one decimal. If this is not
done, then the bid form will round these rebates to one decimal (in line 8c), to comply
with withhold system requirements. This field is not applicable to MA-only plans and
EGWP plans.
✔ Line 8d – Part D Supplemental Premium

Calculates the Part D supplemental premium net of rebates. Line 8d equals line 8a
minus line 8c. The value must be greater than or equal to zero. This field is not
applicable to MA-only plans and EGWP plans (that is, it must be equal to zero in these
cases).
The BPT will not finalize if there are any invalid values (such as “#N/A”, “#DIV/0!”,
“#REF!”, “#NAME?”, etc.) in this field.
Line 9 – Total Estimated Plan Premium

The sum of the rounded MA, Part D basic, and Part D supplemental premiums after rebates.
This amount excludes any optional supplemental MA premiums, which are calculated on
Worksheet 7. The value must be greater than or equal to zero.
The BPT will not finalize if there are any invalid values (such as “#N/A”, “#DIV/0!”, “#REF!”,
“#NAME?”, etc.) in this field.
Line 10 – Plan Intention for Target Part D Basic Premium

For MA-PD plans, this field contains a drop-down menu with two options: “Premium amount
displayed in line 7d” or “Low Income Premium Subsidy Amount”. MA-PD Plan sponsors
must choose one of these two options for the target Part D basic premium in the initial June bid
submission and cannot change the chosen target in a subsequent resubmission. CMS will
consider only the option chosen in June as the plan’s intention.
For MA-only plans and EGWPs, the target Part D basic premium is not applicable.
See the “Pricing Considerations” section of these instructions for more information on the
target Part D basic premium.

SECTION IV – CONTACT INFORMATION AND DATE PREPARED
Plan sponsors must identify three persons as MA plan bid contact, MA certifying actuary, and
additional MA BPT actuarial contact. The MA certifying actuary and additional MA BPT
actuarial 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; in
addition, 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.

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WORKSHEET 6

Section IV also contains a field labeled “Date Prepared”. This field must contain the date that
the BPT was prepared. If the BPT is revised and resubmitted during the bid review process,
then this field must be updated accordingly.

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 from the backup file during finalization.

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WORKSHEET 7

MA WORKSHEET 7 – OPTIONAL SUPPLEMENTAL BENEFITS
Worksheet 7 contains the actuarial pricing elements for any optional supplemental benefit
(OSB) packages to be offered during the contract year, up to a maximum of five.
The PBP packages must be entered in the same order as they are entered in the PBP.
For each of the five packages, the worksheet contains 20 category lines. If additional category
lines are needed, then provide a supporting exhibit that shows all of the benefit category details,
and include a summary of those category lines on this worksheet. Do not insert any additional
rows into the form.

SECTION I – GENERAL INFORMATION
This section displays the information entered on Worksheet 1, Section I.

SECTION II – OPTIONAL SUPPLEMENTAL PACKAGES
Column b – Package ID

Displays the identification (ID) number to signify which package of optional supplemental
benefits is being priced. The number “1” is used to identify the first package. Sequential
numbers (that is, 2, 3) identify additional packages of optional supplemental benefits. The
package IDs must correspond to the packages enumerated and described in the PBP.
Column c – Service Category

On the first line for each package, enter a description of the OSB package. This description
must match the description/package name entered in the PBP for each package. Examples:
“Enhanced Dental”, “Gold Package”, etc. The description field must not be left blank when
there is an optional supplemental package entered.
On each subsequent line, enter the service category. Valid entries are those consistent with the
categories included on Worksheet 1:
•
•
•
•
•
•
•
•
•
•
•
•
•

Inpatient Facility
Skilled Nursing Facility
Home Health
Ambulance
DME/Prosthetics/Supplies
OP Facility – Emergency
OP Facility – Surgery
OP Facility – Other
Professional
Part B Rx
Other Medicare Part B
Transportation (Non-covered)
Dental (Non-covered)

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WORKSHEET 7

•
•
•
•

Vision (Non-covered)
Hearing (Non-covered)
Health & Education (Non-covered)
Other Non-covered

Column d – Benefit Category/Pricing Component

Enter a description of the benefit category/pricing component.
Column e – Allowed Medical Expense: Utilization Type

Enter the appropriate measurement unit from the list used for column e of Worksheet 2.
Column f – Allowed Medical Expense: Annual Utilization/1,000

Enter the projected contract year annual utilization per thousand enrollees for allowed medical
expenses for each benefit category.
Column g – Allowed Medical Expense: Average Cost

Enter the projected contract year average annual cost for allowed medical expenses for each
benefit category.
Column h – Allowed Medical Expense: PMPM

Column h is calculated automatically using the utilization reported in column f and the average
cost information reported in column g.
Column i – Enrollee Cost Sharing: Measurement Unit Code

Enter the appropriate cost-sharing measurement unit using the codes provided for column e of
Worksheet 3.
Column j – Enrollee Cost Sharing: Utilization/1000 or PMPM

Enter the projected contract year utilization per thousand enrollees or the PMPM value in the
case of coinsurance.
Column k – Enrollee Cost Sharing: Average Cost Sharing

Enter the projected contract year average per-service cost-sharing amount or coinsurance
percentage.
Column l – Enrollee Cost Sharing: PMPM

Column l is calculated automatically using the utilization (or PMPM) reported in column j and
the average cost (or coinsurance percentage) reported in column k.
Column m – Net PMPM Value

Column m is calculated automatically as the allowed PMPM (column h) minus the cost sharing
PMPM (column l).

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WORKSHEET 7
Column n – Non-Benefit Expense

Enter the total projected contract year non-benefit expense for each OSB package offered.
Column o – Gain/Loss Margin

Enter the total projected contract year gain/loss margin for each OSB package offered.
Column p – Premium

The sum of columns m (medical expenses), n (non-benefit expenses), and o (gain/loss margin).
The premiums are automatically rounded to one decimal to comply with premium withhold
system requirements. Premium values must be greater than zero if an OSB package is offered
and must be equal to zero if an OSB package is not offered.
The BPT will not finalize if there are any invalid values (such as “#N/A”, “#DIV/0!”, “#REF!”,
“#NAME?”, etc.) in this field.
Column q – Projected Member Months

Enter the total projected contract year member months for each OSB package offered.

SECTION III – COMMENTS
Enter any comments needed to describe the OSB packages.

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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 the actuarial certification, the actuary must certify that 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.
ASOP No. 45, The Use of Health Status Based Risk Adjustment Methodologies.

The certifying actuary must also certify that the actuarial work supporting the bid complies
with applicable laws, rules, CY2014 bid instructions, 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
intermittent resubmission throughout the bid review process, but they may do so if they wish.
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APPENDIX A

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.
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.
Plan sponsors may have multiple actuaries assigned to one contract to perform the
certifications. For example, a consulting actuary may certify the Part D portion of a bid, while
an internal plan staff actuary may certify the MA portion of the bid. Also, one actuary may
certify plan Hxxxx-001, while a different actuary may certify plan Hxxxx-002. The
instructions contained in this appendix must be followed by all actuaries who will be certifying
CY2014 bids.
If a certification is not submitted via the HPMS certification module, the bid will not be
considered for CMS review and approval.
Every MA BPT requires a certification. Likewise, every PD BPT requires a certification.
Since Part D BPTs are not submitted for “800-series” EGWP employer bids, a Part D actuarial
certification is not required for EGWPs. However, a certification is still required for the MA
portion of “800-series” employer bids.
Additional information regarding the actuarial certification process (including technical
instructions for completing the HPMS certification module) will be included in the initial
actuarial certification deadline memorandum issued in June 2013.
Required Certification Elements

The certification module contains the following information, as part of the standardized
language:
•
•

•
•
•
•

The certifying actuary’s name/user ID and the date, “stamped” when the certification is
submitted.
Attestation that the actuary submitting the certification is a member of the American
Academy of Actuaries (MAAA). As such, the actuary is familiar with the requirements
for preparing Medicare Advantage and Prescription Drug bid submissions and meets the
Academy’s qualification standards for doing so.
The specific contract, Plan ID, and segment ID of the bid associated with the
certification.
The contract year of the bid contained in the certification.
Indication of whether the certification applies to the Medicare Advantage bid, the
Part D bid, or both.
Attestation that the certification complies with the applicable laws,1 rules,2 CY2014 bid
instructions, and current CMS guidance.

1

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

2

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

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APPENDIX A

•
•
•
•
•

Attestation that, in accordance with federal law, the bid is based on the “average
revenue requirements in the payment area for a Medicare Advantage/Prescription Drug
enrollee with a national average risk profile.”
Attestation that the data and assumptions used in the development of the bid are
reasonable for the plan’s benefit package (PBP).
Attestation that the data and assumptions used in the development of the bid are
consistent with the organization’s current business plan.
Attestation that the bid was prepared in compliance with 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 compliance 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.
Certification Module Access

Detailed instructions regarding how to apply for access to the CY2014 certification module
were released via an HPMS memorandum.

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APPENDIX B

APPENDIX B – SUPPORTING DOCUMENTATION
GENERAL
In addition to the BPT and actuarial certification, Plan sponsors must provide CMS with
supporting documentation for every bid, as described in these instructions.
Unless otherwise noted, Plan sponsors must upload all required supporting documentation at
the time of the initial June bid submission. Additional supporting documentation, if requested,
must be made available to CMS reviewers within 48 hours, as required by these instructions.
Plan sponsors must upload supporting documentation consistent with the final certified bid.
Supporting documentation requirements apply regardless of the source of the assumption,
whether it was developed by the actuary, the Plan sponsor, or a third party. If the actuary relied
upon others for certain bid data and/or assumptions, 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 3.2, “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 easily understood by CMS reviewers and must include the
following:
•
•
•
•

The rationale for the assumption, including quantitative support and details, rather than
just narrative descriptions of assumptions.
Plan-specific variations in addition to the overall pricing assumption or methodology.
Values that match entries in the current BPT and tie to the PBP.
Excel spreadsheets with working formulas, rather than pdf files.

Supporting documentation must be clearly labeled and include the following information:
•
•
•
•

The bid ID. At a minimum, the contract number and organization name 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.
A reference to MA, Part D, or both.
A hard-coded date.
Contract/Plan number and topic in the beginning of the file name.

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.

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APPENDIX B

•
•
•
•

A complete description of data sources—for example, a report’s official name/title, file
name, date obtained, source file, etc.
Intermediate calculations showing each step taken to calculate an assumption.
A summary of contractual terms of administrative services agreements.
A business plan.

Supporting documentation that is not acceptable or that may result in a request for additional
information includes, but is not limited to, the following items:
•
•
•
•
•
•
•

Materials that can be 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, Plan sponsors must upload a cover sheet that lists all of the
supporting documentation that is uploaded or provided on 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

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APPENDIX B

that contain certain assumptions (for example, manual rate documentation applies only if a
bid’s projection is based on manual rates). For documentation categories that apply to a 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

Plan 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. See the “Upon Request by CMS
Reviewers” section of this appendix for more information. 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 uploaded into HPMS prior to bid approval. Plan sponsors must also upload additional
substantiation provided in e-mail correspondence during bid review and supporting
documentation consistent with the final certified bid.
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, service area changes,
type of coverage, contractual arrangements, marketing approach, and any other
pertinent information that would help expedite the bid review. For dual-eligible SNPs,
include a statement indicating how the plan conforms to state and territorial Medicaid
regulations for benefits, cost sharing, care management, and margins.
A document titled “Related Party Declaration,” which states whether or not the Plan
sponsor is in a related-party agreement (Worksheets 1 and 4).
Support for the claims credibility assumptions (Worksheet 2), including—
◦ A statement of the credibility approach 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.

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APPENDIX B

◦

•
•

•

The method for blending differences between the credibility for utilization and
that for unit cost into a composite PMPM credibility factor.
◦ Justification for any variation in the credibility approach by line of business.
◦ An explanation for a zero credibility percentage for a service category with
credible data.
A detailed description of the process used for adjusting cost sharing due to maximum
OOP limits, including how the PMPM impact of the maximum OOP was determined.
Worksheet 3).
Support for non-benefit expense assumptions. The required elements include—
◦ A reconciliation of the base period non-benefit expenses reported in the BPT
and auditable material such as corporate financials and plan-level operational
data (Worksheet 1).
◦ A description of the expenses included in each non-benefit expense category in
the BPT. (Worksheet 4)
◦ Detailed support for the development of projected non-benefit expenses
(Worksheet 4). The required elements include—
‣ A description of the methodology used to develop projected non-benefit
expenses.
‣ A description of the data source and its relationship to the base period
non-benefit expenses reported in the BPT.
‣ A demonstration of the development of each line item using relevant data,
assumptions, contracts, financial information, business plans, and other
projections.
Justification of the gain/loss margin (Worksheet 4). The required elements include—
◦ Support for overall margin levels including—
‣ A description of the methodology used to develop the gain/loss margin
assumption and the level at which the aggregate margins are determined.
‣ For Plan sponsors that choose to satisfy aggregate-level gain/loss
requirements at the organization level, a list of the MA contract numbers
offered by the organization.
‣ A demonstration of consistency of projected margins from year to year.
‣ The Plan sponsor’s margin requirement for all non-Medicare health
insurance lines of business, including any change in such requirement in the
prior two years, and identification of these lines of business.
‣ A demonstration of consistency between the aggregate margin for general
enrollment plans & I/C SNPs (or for other gain/loss margin categories, if
applicable) and the Plan sponsor’s margin requirement for all non-Medicare
health insurance lines of business.
‣ A demonstration of consistency between the aggregate margin for general
enrollment plans & I/C SNPs and other gain/loss margin categories, if
applicable.
‣ A demonstration of consistency between (projected) aggregate margins and
actual aggregate returns over the long term.

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APPENDIX B

◦

•
•

Justification for bids with relatively large projected overall gains/losses
including an explanation of how the PBP offers benefit value in relation to the
margin level.
◦ Support for bids with negative margins, including one of the following items:
‣ For a new plan, or a plan with a zero or positive projected gain/loss margin
for the prior contract year, a year-by-year numeric business plan that
demonstrates profitability within 3 to 5 years.
‣ For a plan with a negative projected gain/loss margin for the prior contract
year, a numerical comparison of the gain/loss margin to the margin in the
original business plan. The required elements include—
• Details and sources of deviation from the original business plan.
• An explanation and demonstration as to how the targeted margin in the
original business plan will be met, if the plan is progressing towards a
positive margin less rapidly than projected in the original business plan.
• A copy of the original business plan uploaded to HPMS in a separate
file.
‣ A description of the product pairing, which includes the gain/loss margin for
each plan and shows that the plans—
• Have identical service areas,
• Are all local coordinated care plans, or all RPPOs, or all PFFS plans,
• Have the same SNP type (or are all non-SNPs), and
• Have a positive combined gain/loss margin.
◦ For MA-PD plans, a description of the approach for setting the Part D margin in
relation to the MA margin.
A detailed description of the quality initiatives and taxes and fees listed in text box z3,
including an explanation as to why the item is included (Worksheet 4).
Detailed support for the development of projected risk scores (Worksheet 5). The
required elements include—
◦ A detailed description, and corresponding numerical demonstration, of the
methodology used to develop projected CY2014 MA risk scores.
◦ A description of the source data for the development of the projected CY2014
MA risk scores.
◦ Justification for and a description of the credibility assumption for actual plan
risk scores.
◦ A description of all projection factors and the basis for the factors.
◦ A demonstration that the method used is consistent with the preferred
development approach in these instructions.
◦ A statement about the consistency between the development of the projected
risk scores for the plan population and the development of projected medical
expenses.
A sample summary of the development of the projected risk scores is provided at the
end of Appendix B.

The following documentation requirements apply to all bids that contain the assumptions
specified below:

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APPENDIX B

•

•

•
•
•
•
•

Detailed support for the development of base period experience (Worksheet 1). This
documentation, which is based on regulatory authority for the review of materials that
pertain to any aspect of services provided, is also required in cases in which medical
services are provided under a capitated arrangement. The required elements include—
◦ A description of the allocation of allowed costs by service category when the
allocation method is not based on plan experience data (Worksheet 1).
◦ Information regarding the base period member months, if for some reason more
than eight plans constitute the base period data (see Worksheet 1, Section II,
line 5).
◦ Reconciliation of base period experience with the audited 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.
Detailed qualitative and quantitative support for the development of each projection
factor (Worksheet 1). The required elements include—
◦ A description of the source data, including the data’s relevance to the MA plan.
◦ A summary of the Plan sponsor’s historical trends including—
‣ The percentage trends.
‣ A description of the methodology used to analyze the data.
‣ The numeric calculations.
◦ Any applicable adjustments to the source data, such as considerations for—
‣ Plan sponsor’s experience.
‣ Industry and/or internal studies.
‣ Benefit design analysis.
A detailed description of the quality initiatives and taxes and fees reflected in base
period data (Worksheet 1 Section VI).
Support for the allocation of enrollment between DE# and non-DE# beneficiaries
including the basis for classifying dual-eligible enrollees as DE# (Worksheets 1 and 5).
Support for the pricing, including utilization and unit cost, of incentive programs for
preventive services (Worksheets 1 and 2, line q).
Support for claim costs for hospice enrollees for mandatory supplemental benefits when
these costs are included in the projected allowed cost PMPM.
Detailed support for the data and methodology used in the development of appropriate
manual rates for the expected population (Worksheet 2). The required elements
include—
◦ A description of the source data, including the data’s relevance to the MA plan
and the precise name of any published tables used.
◦ 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 and/or
expenditures that are not reflected in the source data.

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APPENDIX B

‣
‣
‣

•
•
•
•

•

•

Addition of Medicare-covered benefits not reflected in the source data.
Exclusion of non-covered benefits reflected in the source data.
Techniques and factors used to reflect differences between the underlying
population and that expected of the MA plan.
‣ Techniques and factors used to adjust for differences in health care delivery
system and plan design of the source data as compared to the MA plan.
‣ Methodology and data used to gross up reimbursements to an allowed-cost
basis.
◦ Data and methodology used to project the data from base period to CY2014.
◦ The reasonableness of allowed costs and projection factors for costs based on
capitated payments to related parties.
◦ The allocation of projected allowed costs by service categories.
◦ All other applicable factors and/or adjustments.
Support for non-DE# projected allowed costs (Worksheet 2).
An explanation for a zero cost of a benefit that is included in the PBP.
The rationale for including in non-benefit expenses the cost of a benefit that is included
the PBP.
Support, at the benefit level, for non-covered services (Worksheet 2, lines l through q,
column o), if any, including a breakdown of the PMPM value shown in the BPT. For
example, a $4.00 PMPM in column o of row p, “Health and Education,” is to be shown
in the supporting documentation as $1.50 PMPM for a smoking cessation program and
$2.50 PMPM for nutritional counseling. (Detailed support for the pricing of each
additional benefit is available upon request.)
Disclosure of related-party medical and service agreements (Worksheets 1and 4).
◦ A Plan sponsor in a related-party agreement must provide the following:
‣ Disclosure of every related-party agreement.
‣ A summary that explains the relationship in terms of the parties involved,
and common ownership, control, or investment.
‣ A summary of the contractual terms of each relationship, to include a
description of the services provided, and money exchanged.
‣ A description of the approach used to report the gain/loss margin and
non-benefit expense of the related party organization in the bid.
◦ A Plan sponsor that 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 a written summary outlining the terms of actual contracts between
the subcontractor and the comparable, unrelated parties for similar services.
‣ Demonstrate that the financial arrangements between related parties are not
significantly different from those that would have been achieved by the Plan
sponsor in the absence of the related-party relationships.
Support for the development of the contract year ESRD subsidy (Worksheet 4). This
required documentation includes the following:
◦ Base period (for example, 2012) revenues and medical expenditures for
Medicare-covered benefits provided to enrollees in ESRD status.

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APPENDIX B

•
•
•

•
•
•
•
•
•

•

◦ The source for, and the development process of, any manual rates used.
◦ Relevant base-to-contract year trend factors.
◦ A short narrative on the credibility approach applied to the ESRD experience.
Detailed support for the MSP adjustment (Worksheet 5).
Support for zero projected DE# member months when there are DE# members in the
base period (Worksheet 5).
Support for the development of plan-provided ISAR factors (Worksheet 5), if used.
(This requirement applies to RPPOs only.) A description of the methodology and data
source(s) used to calculate the ISAR factor(s) must be included. The factors must
reflect the requirements for medical expense, non-benefit expense, and gain/loss
margin. Additionally, the support must illustrate the county-level medical costs (such
as unit costs and/or utilization) and retention (that is, non-benefit expense and gain/loss
margin) that were assumed in the development of the factors.
Contract-level optional supplemental benefit experience for CY2012, including
enrollment, earned premiums, and incurred benefits (Worksheet 7).
Support for the benefit, projected non-benefit expense, and projected gain/loss margin
for specific OSB packages (Worksheet 7).
In accordance with Appendix D, support for actuarial swaps/equivalence customization
allowable for employer and union groups enrolled in individual-market plans, when
used (that is, when indicated in the “General Information” section of Worksheet 1).
For EGWPs, an explanation of the consistency between the pricing in the bid and the
expected underwriting assumptions for all groups, in aggregate. This documentation
includes, but is not limited to, a description of the underwriting methodology.
The input sheet(s) for the pricing model used in the development of the bid.
An explanation of and detailed support for how CY2013 bid audit findings and
observations were corrected 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 Appendix B.
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:

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APPENDIX B

•
•
•
•
•
•
•
•
•
•

Support for the pricing of the non-covered services, including utilization and unit cost
(Worksheet 2, lines l through r, column o). (Support at the benefit level is required in
the initial June bid submission.)
Detailed support for cost-sharing utilization assumptions and plan-level deductible
(Worksheet 3).
Support for allocation of allowed costs and cost sharing between Medicare-covered and
A/B mandatory supplemental benefits (Worksheet 4).
Support for when the formulas provided in the BPT for DE# plan cost sharing
(Worksheet 4, Section IIB, column f) are overwritten at the discretion of the certifying
actuary.
Copies of related-party agreements for a Plan sponsor who has entered into a
related-party agreement with an organization that is providing services to unrelated
parties.
Support for the calculation of the “Medicaid Cost Sharing” in column k, including cost
sharing required by state or territory Medicaid programs in the plan’s service area based
on the eligibility rules for subsidized cost sharing for DE# beneficiaries (Worksheet 4).
Justification for significant differences between the assumptions of corresponding
employer-only group and individual-market products (such as the relationship of the bid
to the benchmark). See Appendix D for more information.
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 Plan sponsor throughout the bid
review process (that is, e-mail communication) that was not uploaded to HPMS during
bid review.
Detailed support for how certain findings from the Office of Financial Management
(OFM) audit were addressed in the current bid.

Additional information not specified in this list may be requested by CMS reviewers, as
needed, at any point during the bid desk review process.

MA CHECKLIST FOR REQUIRED SUPPORTING DOCUMENTATION
Initial June Bid Submission – Required for All Bids
Cover sheet
Product narrative
Related-party declaration
Credibility assumption
Adjustment to cost sharing for maximum OOP limit
Projected non-benefit expenses
Projected gain/loss margin
Projected quality initiatives and taxes and fees
Projected risk scores

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APPENDIX B
Initial June Bid Submission – Required for All Bids with Specified Assumptions
Base period experience and reconciliation
Projection factors
Base period quality initiatives and taxes and fees
Enrollment allocation (DE#/non-DE#)
Preventive services incentive programs
Hospice claims costs for mandatory supplemental
Manual rate development
Non-DE# projected allowed costs
Zero cost benefit
Cost of benefit included in non-benefit expenses
Non-covered services benefit-level summary
Disclosure of related-party agreements
ESRD "subsidy"
MSP adjustment
Projected zero DE# member months
ISAR factors
Optional supplemental benefit (OSB) experience for 2012
OSB packages pricing assumptions
Actuarial swaps/equivalences
EGWP comparison of bid pricing and expected underwriting assumptions
Input sheets for pricing model
Bid audit results
Reliance information

Upon Request by CMS Reviewers
Non-covered services pricing
Cost-sharing utilization and plan-level deductible
Allocation of allowed costs/cost sharing to Medicare-covered and non-covered
Override of formulas for DE# plan cost sharing
Related-party agreements
State and territory cost sharing requirements
Differences in EGWP and general market pricing assumptions
Reliance letter
Bid review communications
OFM audit results
Other

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APPENDIX B

SAMPLE COVER SHEET – SUBMITTED WITH INITIAL BID UPLOAD IN JUNE
Supporting Documentation Cover Sheet #1
CY2014 Bid Submission

Organization Name: Health One
Contract(s): H1234, H9999, and S9999
Date: June 4, 2013
Documentation
Requirement
Cover sheet
Product
narrative
Credibility
assumption
Cost sharing
mapping
Non-benefit
expenses
Gain/loss
margins
Risk scores
Manual rates
ESRD subsidy

Specific
Bid ID(s) or
N/A
All bids
All bids

File Name
Cover Sheet 6-1-2013.pdf
Cover Sheet 6-1-2013.pdf

Location within
File (if
Applicable)
Page 1
Pages 2-4

Applies to:
MA, PD, or
Both
both
both

All bids

Cover Sheet 6-1-2013.pdf

Page 5

both

All bids

Cover Sheet 6-1-2013.pdf

Page 6

both

All bids

AdminProfit.xls

Sheet 1

both

All bids

AdminProfit.xls

Sheet 2

both

All bids

Risk CY2014.xls

both

H1234-003-0
S9999-001-0
H1234-001-0
H1234-004-0

Manual.xls

MA-Sheet 1
PD-Sheet 2
Section II

Manual.xls

Section I

MA

CY2014 MA BPT Instructions

PD

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APPENDIX B

SAMPLE COVER SHEET – SUBMITTED AS A SUBSEQUENT SUBSTANTIATION UPLOAD
Supporting Documentation Cover Sheet #2
CY2014 Bid Submission

Organization Name: Health One
Contract(s): H1234, H9999, and S9999
Date: July 16, 2013
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 7-16-2013.doc

Location
within File (if
Applicable)
n/a

Applies to:
MA, PD, or
Both
both

Email1.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

CY2014 MA 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 98 of 134

APPENDIX B

SAMPLE FORMAT FOR SUMMARY OF THE PROJECTED RISK SCORE DEVELOPMENT
– PREFERRED METHODOLOGY
Organization Name: Health One
Contract(s): H1234
Date: June 4, 2013
Projected risk scores were calculated under the CMS preferred methodology for plans 001-00
and 002-00. See the “H1234 Risk Score” file for the detailed explanations and calculations.
Step Description
Starting risk score (HPMS 2012 beneficiary-level file or
A plan-level summary for July 2012 enrollee cohort)
B Plan-specific coding trend 2012 to 2014
C Population change
D 2014 MA coding pattern differences (multiply )
E 2014 FFS normalization (divide)
F Frailty factor (add)
Final risk score
G [(A × B × C × D ) / E] + F

H1234-001-00

H1234-002-00

1.0500
1.0816
1.0000
.9659
1.028
0

0.9900
1.0962
1.0000
.9659
1.028
0

1.0671

1.0197

A – The average starting risk score is based on CY2011 risk scores in the beneficiary-level files provided by CMS
for bid development via HPMS under the updated CY2013 risk model, excluding ESRD and hospice. See the MA
RS Methodology tab in the “H1234 Risk Score” file for a description of this calculation.
B – The plan-specific coding factor is based on historical coding practices and special initiatives to improve
coding at an annual rate of 4% for plan 001 and 4.7% for plan 002. See the “Plan Coding” tab of the “H1234 Risk
Score” file for an explanation and demonstration of how this factor was developed.
C – No significant changes in the covered population’s risk are expected as explained in the Product Narrative.
D – The 2014 MA coding pattern differences factor is specified by CMS in the CY2014 MA bid instructions.
E – The 2014 FFS normalization factor is specified by CMS in the CY2014 MA bid instructions.
F – The frailty factor does not apply to these bids.

SAMPLE FORMAT FOR SUMMARY OF THE PROJECTED RISK SCORE DEVELOPMENT
– ALTERNATE METHODOLOGY
Organization Name: Health One
Contract(s): H1234
Date: June 4, 2013
Projected risk scores were calculated under an alternate methodology for H1234-004 due to
inordinate shifts in enrollment during early 2013 that were not captured in the files provided by
CMS for CY2014 bid development.
See the “H1234 Risk Score” file for the detailed explanations and calculations.

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APPENDIX B

Step
A
B
C
D
E
F
G
H
I
J
K
L

Description
Starting risk score
Covert to raw – remove normalization (multiply)
Covert to raw – remove MA coding pattern adj (divide)
Lagged to non-lagged
Completion/run-out
Seasonality
Risk model change
Plan-specific coding trend 2013 to 2014
Population change
2014 MA coding pattern differences (multiply)
2014 FFS Normalization (divide)
Frailty factor
Final risk score
M [(A × B / C × D × E × F × G × H × I × J ) /K] + L

H1234-004-00
1.0750
1.0790
0.9659
1.0200
1.0190
.9775
1.0100
1.0250
1.0550
.9649
1.028
0
1.2508

A – The starting risk score is based on March 2013 MMR risk scores for plan 004 due to inordinate shifts in
enrollment as explained in the “MA RS Methodology” tab in the “H1234 Risk Score” file.
B –The starting risk score is converted to a raw risk score using the 2013 FFS normalization specified by CMS in
the CY2013 MA bid instructions because MMR risk scores are normalized for payment.
C – The starting risk score is converted to a raw risk score using the 2013 MA coding pattern differences
adjustment factor specified by CMS in the CY2013 MA bid instructions because MMR risk scores reflect an MA
coding pattern differences adjustment factor.
D –The starting risk score is transitioned from lagged to non-lagged diagnosis data because March 2013 MMR risk
scores are initial risk scores based on lagged diagnosis data for June 2010 to June 2011. See the “MA Lagged vs
Non-Lagged” tab of the “H1234 Risk Score” file for an explanation and demonstration of how this factor was
developed.
E – The starting risk score must be completed because MMR risk scores do not reflect the final risk score
reconciliation. See the “MA Completion” tab of the “H1234 Risk Score” file for an explanation and demonstration
of how this factor was developed.
F –March risk scores do not reflect full calendar-year data and require a seasonality adjustment. See the “MA RS
Methodology” tab of the “H1234 Risk Score” file for an explanation and demonstration of how this factor was
developed.
G – The CMS-HCC risk model was updated for CY2013. See the “MA RS Methodology” tab of the “H1234 Risk
Score” file for an explanation and demonstration of how the model change factor was developed.
H – See the “MA Risk Score” tab of the “H1234 Risk Score” file for an explanation and demonstration of how the
plan-specific coding factor was developed.
I – See the “Population” tab of the “H1234 Risk Score” file for an explanation and demonstration of how the
population change factor was developed.
J – The 2014 MA coding pattern differences factor is specified by CMS in the CY2014 MA bid instructions.
K – The 2014 FFS normalization factor is specified by CMS in the CY2014 MA bid instructions.
L – The frailty factor does not apply to this bid.

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APPENDIX C

APPENDIX C – PART B-ONLY ENROLLEES
This appendix includes bid requirements for plans that cover only enrollees eligible for
Medicare Part B. An RPPO plan must cover enrollees eligible for both Medicare Part A and
Part B.
Medicare beneficiaries with Medicare coverage only under Part B have not been allowed to
elect an MA plan since December 31, 1998 unless they were members of employer or union
groups.
However, Medicare beneficiaries (with Part B coverage under Medicare) who were Medicare
enrollees of a Section 1876 contractor on December 31, 1998 were considered to be enrolled
with that organization on January 1, 1999 if the organization had an MA contract for providing
benefits on the latter date. Health benefit coverage that MA organizations provide to such
remaining Part B-only enrollees constitutes a separate MA plan (which requires a separate bid
submission).
CMS encourages MA organizations to submit as few plans as possible for their pre-1999
Part B-only members, rather than duplicating each of their A/B plans. In fact, an MA
organization can submit one plan for all its pre-1999 Part B-only members under an MA
contract if they are in the same type of plan. In addition, if the plan is offering the pre-1999
Part B-only members the same benefits at the same price as those offered to A/B members (that
is, members eligible for both Part A and Part B of Medicare), the Plan sponsor is not required
to submit a separate bid for the Part B-only members.
On the other hand, MA organizations that enroll Medicare beneficiaries with Part B-only
coverage in an employer-only group plan must prepare a separate Part B-only bid. If a separate
Part B-only plan is not created, the CMS managed care payment system will reject any
enrollments submitted on behalf of individuals without Part A.
MA organizations are to prepare Part B-only bids in much the same way as those prepared for
Part A/B members.
In completing the bids for Part B-only plans, MA organizations must give special consideration
to allocating the portion of services that are considered to be Medicare-covered (Worksheet 4,
Section II, columns i and j):
• The Medicare-covered proportion of inpatient services (line a) must equal zero
(0) percent.
• While the majority of Medicare expenditures for skilled nursing facilities (SNFs) are
covered under Part A (Hospital Insurance), in certain circumstances benefits are
covered under Part B (Supplementary Medical Insurance). Guidance on these covered
services can be found in Section 70 of Chapter 8 of the Medicare Benefit Policy Manual
at http://www.cms.gov/Regulations-and-Guidance/Guidance/Manuals/downloads/
mc86c08.pdf. We estimate that for calendar year 2014, about 5 percent of Medicare
expenditures for SNFs will be covered under Part B.
• Also, as is stated in Section 60.3 of Chapter 7 of the Medicare Benefit Policy Manual, if
a beneficiary is enrolled only in Part B and is qualified for the Medicare home health
benefit, then all of the home health services are financed under Part B. Thus, for most
Part B-only plans, the Medicare-covered proportion of home health services (line c) will
be 100 percent.

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APPENDIX D

APPENDIX D – MEDICARE ADVANTAGE PRODUCTS AVAILABLE TO
GROUPS
(EMPLOYER GROUPS AND UNION GROUPS)
Organizations have two options for offering Medicare Advantage (MA) products to members
of employer and union groups: individual-market plans and employer-only or union-only group
waiver plans (that is, EGWP or “800-series” plans).
Individual-Market Plans (“Mixed Enrollment” plans)

Essentially, MA organizations may either offer their individual-market products without
modification or they may tailor the products to specific employer and union groups through two
types of allowable customization: “actuarial swapping” or “actuarial equivalence.”
Actuarial Swaps

If you are requesting the actuarial swapping category of customization, identify in the
supporting documentation both the benefits that might be swapped during negotiations
with employers and/or unions and the MA plan covering those benefits. Only
supplemental benefits not covered under original Medicare are eligible for actuarial
swapping, and only those benefits in your bids that are candidates for swaps need to be
identified. When you make specific swaps in negotiations with employers or unions,
you can do so in the context of the CMS general approval of your candidates, without
obtaining further approval from CMS for the actual swaps.
Actuarial Equivalence

If you request the actuarial equivalence category of customization allowable for
employer and union groups, provide the following information as supporting
documentation:
•
•
•

The cost-sharing amounts you intend to change and the MA plan containing the cost
sharing.
Any modification to the premium you will charge.
Any improvement in the benefit related to the changed cost sharing.

Unlike the actuarial swapping flexibility, this customization can apply to both covered
and non-covered Medicare benefits.
Please retain in your files a package of documents with computations supporting the proposed
changes under these two types of allowable customization. Do not include those packages of
documents in the backup material that you submit to CMS.
Employer-Only or Union-Only Group Waiver Plans (EGWPs)

The MMA gives employers and unions multiple options for providing Medicare coverage to
their Medicare-eligible active employees and retirees. Under the Medicare Prescription Drug,
Improvement, and Modernization Act of 2003 (MMA), those options include making special

CY2014 MA BPT Instructions

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APPENDIX D

arrangements with MA organizations to purchase customized benefits for their active
employees and retirees or contracting directly with CMS to sponsor a MA plan.
Under section 1857(i) of the Social Security Act (SSA), CMS may waive or modify
requirements for the kinds of arrangements that “hinder the design of, the offering of, or the
enrollment in” these employer or union-only sponsored group plans. CMS may exercise its
statutory waiver authority for two basic types of MA plan entities: (i) MA organizations that
offer or administer employer/union-only sponsored group waiver plans (“EGWPs” or
“employer-only group plans”); and (ii) employers/unions that directly contract with CMS to
themselves offer an employer/union-only sponsored group waiver plan (“Direct Contract”
EGWPs).
See Chapter 9 of the Medicare Managed Care Manual (MMCM), which can be found at:
http://www.cms.gov/Regulations-and-Guidance/Guidance/Manuals/downloads/mc86c09.pdf.
As described in Chapter 9 of the MMCM, organizations may offer MA plans that are available
only to employer and union groups. These plans must follow all MA bidding requirements,
except those that are specifically waived per Chapter 9 of the MMCM.
Following are some of the key features to be reflected in employer-only group bids:
•
•
•

•

•

•

Base period data must reflect actual experience for the groups enrolled.
Total projected allowed costs for Medicare-covered services reflect the composite
characteristics of the individuals expected to enroll in the plan for the contract year.
The pricing in the bid must reflect the expected underwriting assumptions for all
groups, in aggregate.
◦ Each employer-only group bid must reflect the composite characteristics of the
individuals expected to enroll in the plan for the contract year. These
characteristics include, but are not limited to, the following: risk scores,
geographical distribution of enrollees, non-benefit expenses, and gain/loss
margins.
◦ Projected enrollment within the plan’s service area must be consistent with the
location of employer groups.
The cost sharing priced in Worksheet 3 must correspond to that contained in the PBP.
◦ The PBP can be prepared using either the expected composite benefit plan or the
Medicare fee-for-service benefit provisions.
◦ If the PBP reflects Medicare fee-for-service benefits and an MA rebate is
generated, then the user must enter the PMPM value of the medical costs
associated with these additional “unspecified” benefits in Worksheet 4,
Section IV.
Generally, CMS expects that actuarial and financial assumptions supporting each
employer-only group bid would bear a reasonable relationship to corresponding
individual-market products offered by the organization. Significant differences between
corresponding employer-only group and individual-market products (such as the
relationship of the bid to the benchmark) must be based on actual credible experience.
Organizations must provide documentation in support of differences in actuarial/
financial assumptions between the corresponding products.
There is no requirement to charge the filed MA basic and supplemental premium to
each employer or union group that enrolls in the plan. However, the average premium

CY2014 MA BPT Instructions

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APPENDIX D

•

charged, weighted by enrollees, across all groups enrolled in the plan must correspond
to (that is, be consistent with) the filed premium. This rule on premiums does not apply
when the Medicare fee-for-service bidding approach is utilized, since these filed plans,
and resulting premiums, are not an accurate depiction of what is actually being offered
to employer/union groups.
Following are the guidelines for rebates:
◦ Similar to CMS’ payment on behalf of beneficiaries enrolled in individualmarket plans, a uniform rebate amount will be paid by CMS on behalf of each
individual enrolled in an employer-only group plan.
◦ The allocation of rebates may vary from employer to employer within the
employer-only group plan. (The bid form contains one allocation.)
◦ Employer-only group bids cannot reflect an allocation of rebates to the Part D
basic premium or the Part D supplemental premium. However, plans may, in
fact, allocate rebates to the Part D premium when negotiating with employer/
union groups.
◦ Part B premium buydowns (that is, rebate allocation) must be the same for all
enrollees within the same employer-only group plan.
◦ Consistent with individual-market bids, rebates allocated to reduce members’
Part B premium will be transferred to the Social Security Administration, not the
MA organization.
◦ All groups enrolled in an employer-only plan with supplemental A/B rebates
(both reduction in A/B cost sharing and additional benefits) must receive
supplemental benefits equal to the amount of the A/B rebate allocation.
However, A/B supplemental benefits provided to each employer may be
customized. Further, MA organizations may use the field in Worksheet 4,
Section IV, line 1, “PMPM for additional/unspecified MS benefits,” to account
for A/B supplemental benefits that are likely to be customized.
◦ All rebates must be accounted for and must be used only for the purposes
provided for in law. Documentation that supports the use of all of the rebates on
a detailed basis must be retained by the employer-only group plan.

For RPPO EGWP plans, the initial June bid submission contains an estimated MA premium.
The actual MA premium will not be known until August, when the regional benchmarks are
calculated by CMS. Note that after the MA regional benchmarks are released by CMS, all
regional MA Plan sponsors will be required to resubmit the MA BPTs in order to reflect the
actual plan bid component (in Worksheet 5, cell M17). Regional MA plans may need to
reallocate rebates accordingly. Note that this requirement also applies to EGWP regional MA
plans (that is, all EGWP RPPOs will be required to resubmit the MA BPTs in August after the
announcement of the regional MA benchmarks).

CY2014 MA BPT Instructions

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APPENDIX E

APPENDIX E – REBATE REALLOCATION AND PREMIUM ROUNDING
Organizations may resubmit bids in order to reallocate MA rebate dollars for certain plan bids
after CMS publishes 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.
Rebate reallocation is required for some MA plans, is permitted (but not required) for others,
and is not permitted for certain plans, as indicated in this appendix. The rebate reallocation
guidance applies to plans with all types of pricing arrangements, including risk sharing and
global capitation, and to pricing assumptions that were developed as a percent of revenue.
CMS will announce the exact dates of the rebate reallocation period when the Part D and MA
benchmarks are released.
In addition to reallocation guidance, this appendix provides premium rounding rules and
describes the premium rounding that is permissible during rebate reallocation.

I. REBATE REALLOCATION PERMISSIBILITY BY PLAN TYPE
MA-PD Plan sponsors may resubmit bids to reallocate rebates in order to return to the target
Part D basic premium. Some MA-PD plans are required to reallocate rebates.
The target premium is communicated to CMS in the MA BPT in the initial June bid
submission. The target may not be changed after initial submission.
MA-PD Plan sponsors have two options for the target premium. They can set it equal to—
•
•

The basic Part D premium net of rebates (that is, the amount displayed in line 7d of
Worksheet 6, Section IIIC), or
The low income premium subsidy amount.

This choice is designated on line 10 of Worksheet 6 Section IIIC; it is called the “Plan Intention
for target Part D basic premium.”
The target Part D basic premium concept does not apply to MA-only plans and EGWP plans,
since these plans do not submit a Part D BPT.
All RPPO plans, including EGWPs, must resubmit during the rebate reallocation period, to
reflect the published RPPO benchmarks within their bids.
The following tables summarize rebate reallocation permissibility during the rebate reallocation
period for various plan types and rebate scenarios and show where examples can be found in
this appendix. Additionally, the tables indicate if premium rounding is permitted during rebate
reallocation.

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MA-PD Plans with MA Rebate Dollars in the Initial June Bid Submission

Type of Plan
Local (excluding
EGWP)
Local (excluding
EGWP)
Local (excluding
EGWP)

Rebate Scenario*
Premium decreases
below $0
Premium decreases
but is greater than $0

Rebate Reallocation

Premium
Rounding

Example

Required

Permitted

1

Permitted

Permitted

2

Premium increases

Permitted
Required, to reflect the
published MA regional
benchmarks

Permitted

3

Permitted

4

RPPO

* Impact on the Part D basic premium net of rebates (line 7D of Worksheet 6, Section IIIC) of
reflecting the CMS published benchmarks.
MA-PD Plans with No MA Rebate Dollars in the Initial June Bid Submission

Type of Plan
Local
RPPO

Rebate Reallocation
Not applicable
Required, to reflect the published
MA regional benchmarks

Premium Rounding
Permitted (excluding EGWP)

Rebate Reallocation
Not permitted; these plans are not
affected by the Part D and MA
regional benchmarks
Required, to reflect the published
MA regional benchmarks

Premium Rounding
Not permitted; premiums must
reflect desired rounding in the
initial June bid submission

Permitted

MA-Only Plans

Type of Plan

Local
RPPO

Permitted

II. REBATE REALLOCATION RULES AND EXAMPLES
A. Return to the Target Premium

When rebates are reallocated, the Part D basic premium net of rebate must be returned to the
target premium indicated in the initial June bid submission. CMS will not accept a partial return
to the target premium, except in the following situation: the Plan sponsor intends to return to
the target premium, and the entire rebate has been reallocated to reduce the Part D basic
premium, but the resulting premium is still greater than the target premium.
B. Negative Part D Basic Premium Net of Rebate after Part D Benchmark Announcement

If, after reflecting announced Part D benchmarks, the Part D basic premium net of rebate is less
than zero, rebate reallocation is required.
The amount of rebate allocated to buy down the Part D basic premium cannot exceed the
amount of the pre-rebate premium. Therefore, if the premium resulting from application of the
national average monthly bid amount and the base beneficiary premium is negative, then the
“excess” rebate allocated to buy down the Part D basic premium must be reallocated to buy

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down the other premiums (the A/B mandatory supplemental premium, the Part D supplemental
premium, and/or the Part B premium).
Example 1.

MA BPT Worksheet 6,
Section IIIC, Line—
7a. Part D basic premium
prior to rebates (rounded)
7c. MA rebates allocated to
Part D basic premium
(rounded)
7d. Part D basic premium
10. Plan intention for target
Part D basic premium

Initial June Bid
Submission

After Release
of Benchmark

Rebate
Reallocation
Resubmission

$36

$34

$34

$36
$0
Premium amount
displayed in line 7d

$36
−$2

$34
$0

Not applicable

Not applicable

The required change is the shift from a $36 to a $34 rebate allocation to the Part D basic
premium in order to return to the target premium of $0. The “excess” $2 is allocated to
buy down other premiums.
C. Part D Basic Premium Net of Rebate after Part D Benchmark Announcement Is Less than
Target Part D Basic Premium, but Not Less than Zero

Rebate reallocation to reduce the other premiums (A/B mandatory supplemental, Part B, and/or
Part D supplemental) is optional if the Part D basic premium net of rebate is lower than the
target Part D basic premium, but not less than zero. The MA organization has the following two
options for rebate allocation:
•
•

Leave the final Part D basic premium net of rebate unchanged (that is, at the level
resulting from application of the national average monthly bid amount and the base
beneficiary premium), or
Reallocate rebate in order to return to the target Part D basic premium. The rebate may
be reallocated to reduce other beneficiary premiums (A/B mandatory supplemental,
Part B, and/or Part D supplemental).

Note: If the MA organization elects to allocate the “excess” rebate dollars to the other
premiums, then the final Part D basic premium must equal the target premium. In other words,
a partial return to the target premium will not be accepted.

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Example 2.

MA BPT Worksheet 6,
Section IIIC, Line—
7a. Part D basic premium
prior to rebates (rounded)
7c. MA rebates allocated
to Part D basic premium
(rounded)

Initial June Bid
Submission

After
Release of
Benchmark

Rebate
Reallocation
Option 1

Rebate
Reallocation
Option 2

$35

$30

$30

$30

$15

$15

$15

$10

7d. Part D basic premium
10. Plan intention for
target Part D basic
premium

$20
Premium amount
displayed in line
7d

$15

$15

$20

Not
applicable

Not
applicable

Not
applicable

The MA organization has one of the following two options for rebate allocation:
•
•

No rebate reallocation; leave the Part D basic premium at the post-Part D benchmark
announcement basic premium of $15. Resubmission is not necessary.
Reallocate $5 of rebates to other premiums in order to return to the target Part D basic
premium of $20.

Note: If the MA organization does not want to leave the post-Part D benchmark announcement
premium at $15, only a return to $20 is acceptable, not a partial return of, for example, $18.
D. Part D Basic Premium Net of Rebate after Part D Benchmark Announcement Is Greater
than Target Part D Basic Premium

Rebate reallocation from other premiums (A/B mandatory supplemental, Part B, and/or Part D
supplemental) to the Part D basic premium in order to meet the target Part D basic premium is
optional if the Part D basic beneficiary premium net of rebate is higher than the target premium
(that is, the plan has insufficient rebates). The MA organization has the following two options
for rebate allocation:
•
•

Leave the final Part D basic premium net of rebate unchanged (that is, at the level
resulting from application of the national average monthly bid amount and the base
beneficiary premium), or
Reallocate rebate that had been applied to the reduction of other premiums (A/B
mandatory supplemental, Part B, and/or Part D supplemental) toward the Part D basic
premium, in order to return to the target D basic premium. If the MA organization does
elect to reallocate additional rebate dollars from other benefits, the final Part D basic
premium must be the target premium except in the following situation: the Plan sponsor
intends to return to the target premium, and the entire rebate has been reallocated to
reduce the Part D basic premium, but the resulting premium is still greater than the
target premium.

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Example 3.

MA BPT Worksheet 6,
Section IIIC, Line —
7a. Part D basic premium
prior to rebates (rounded)
7c. MA rebates allocated
to Part D basic premium
(rounded)
7d. Part D basic premium
10. Plan intention for
target Part D basic
premium

Initial June Bid
Submission

After
Release of
Benchmark

Rebate
Reallocation
Option 1

Rebate
Reallocation
Option 2

$35

$40

$40

$40

$15
$20
Premium amount
displayed in line
7d

$15
$25

$15
$25

$20
$20

Not
applicable

Not
applicable

Not
applicable

The MA organization has one of the following two options for rebate allocation:
•
•

No rebate reallocation; leave the Part D basic premium at the post-Part D benchmark
announcement Part D basic premium of $25. Resubmission is not necessary.
Reallocate $5 of rebates from other premiums in order to return to the target Part D
basic premium of $20.

Note: If the MA organization does not want to leave the post-Part D benchmark announcement
premium at $25, only a return to $20 is acceptable, not a partial return , of, for example, $23,
unless $23 is the result of allocating all rebates to the Part D basic premium.
E. Increase or Decrease in RPPO Total Rebate Dollars

Once CMS announces the MA regional benchmarks, there may be an increase or decrease in
the total rebate dollars in a regional plan’s bid. The allocation of rebate dollars must be revised
to reflect the new total rebate dollars.

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Example 4.

MA BPT Worksheet 6
Total MA rebate (IIIB,
line 1)
MA rebates allocated to
benefits other than Part D
basic premium (IIIB,
lines 2-4 and 6)
MA rebates allocated to
Part D basic premium
(rounded) (IIIB, line 5)
Total rebates allocated
(IIIB, line 7)
Unallocated rebates
Part D basic premium
prior to rebates (rounded)
(IIIC, line 7a)
Part D basic premium net
of rebates (IIIC, line 7d)
Plan intention for target
Part D basic premium
(IIIC, line 10)

Initial June
Bid
Submission

After
Release of
Benchmark

Rebate
Reallocation
Option 1

Rebate
Reallocation
Option 2

$55

$53

$53

$53

$40

$40

$38

$43

$15

$15

$15

$10

$55
$0

$55
-$2

$53
$0

$53
$0

$35

$30

$30

$30

$20
Premium
amount
displayed in
line 7d

$15

$15

$20

Not
applicable

Not
applicable

Not
applicable

The MA organization has one of the following two options for rebate allocation:
•
•

Leave the basic Part D premium net of rebate at the post-Part D benchmark
announcement premium of $15. Subtract $2 of rebates that were allocated to other
premiums such that the total rebates allocated equal the total rebates available.
Reduce the rebate allocation for the basic Part D premium by $5 in order to return to the
target Part D basic premium of $20. Reallocate $3 of rebates to other premiums in
order to return to the target Part D basic premium of $20.

F. Every Plan Bid Must Allocate the Exact Amount of the Plan’s Total Rebate

The exact amount of the plan’s total rebate must be allocated among the various options
described above. MA organizations must account for all rebate dollars in a plan’s bid.
Moreover, the amount of rebate allocated to each benefit (A/B mandatory supplemental, Part B,
Part D) must not exceed the value of that benefit. For example, if the Part D supplemental
premium is $50, an MA organization may not allocate more than $50 to buy down that
premium. Rebate allocations to the Part B premium cannot exceed the amount provided by
CMS that is pre-populated in the bid pricing tool.

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G. Examples in which Target Part D Basic Premium Is the Low-Income Premium Subsidy
Amount (LIPSA) (and the Plan Desires to Return to the Target)
Part D Basic Premium Net of Rebate after Part D Benchmark Announcement Is Less
than LIPSA

If the Part D basic premium net of rebate is lower than the LIPSA, and LIPSA is
designated as the target Part D basic premium, then the MA organization may increase
the Part D basic premium in order to reach the target LIPSA by either (i) reallocating
rebates to reduce other beneficiary premiums (A/B mandatory supplemental, Part B,
and/or Part D supplemental), or (ii) adding A/B mandatory supplemental benefits, in
accordance with this appendix, and reallocating rebates to reduce the premium for the
newly added benefits.
Note: The final Part D basic premium must equal the target premium unless all of the
rebates are allocated to the Part D basic premium and it is still less than the LIPSA.
Example 5a.

MA BPT Worksheet 6,
Section IIIC, Line—
7a. Part D basic premium
prior to rebates (rounded)
7c. MA rebates allocated
to Part D basic premium
(rounded)
7d. Part D basic premium
10. Plan intention for
target Part D basic
premium
LIPSA

Initial June Bid
Submission

After
Release of
Benchmark

Rebate
Reallocation

$35

$30

$30

$15
$20

$15
$15

$12
$18

LIPSA
Not applicable

Not
applicable
$18

Not
applicable
$18

The LIPSA is less than expected, and the Part D basic premium post-benchmark is less
than the LIPSA. To return to the target LIPSA, the only option that the MA
organization has is to reallocate rebates to other benefits/premiums.
Part D Basic Premium Net of Rebate after Part D Benchmark Announcement Is
Greater than LIPSA

If the Part D basic premium net of rebate post-benchmark is greater than the LIPSA,
then the MA organization may lower the Part D basic premium to the target LIPSA by
reallocating the rebate to the Part D basic premium that was applied to buy down other
premiums (A/B mandatory supplemental, Part B, and/or Part D supplemental). If the
MA organization chooses to reallocate additional rebate dollars from other premiums,
the final Part D basic premium must equal the LIPSA except in the following situation:
the Plan sponsor intends to return to the target premium, and the entire rebate has been
reallocated to reduce the Part D basic premium, but the resulting premium is still greater
than the LIPSA.

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Example 5b. (Similar to Example 3)

MA BPT Worksheet 6,
Section IIIC, Line—
7a. Part D basic premium
prior to rebates (rounded)
7c. MA rebates allocated to
Part D basic premium
(rounded)
7d. Part D basic premium
10. Plan intention for target
Part D basic premium
LIPSA

Initial June Bid
Submission

After
Release of
Benchmark

Rebate
Reallocation

$35

$40

$40

$15
$20

$15
$25
Not
applicable
$15

$25
$15
Not
applicable
$15

LIPSA
Not applicable

The LIPSA is less than expected, and the Part D basic premium post-benchmark is
greater than the LIPSA. To return to the target LIPSA, the only option the MA
organization has is to reallocate rebates from other benefits/premiums to the Part D
basic premium.
Part D Basic Premium Net of Rebate after Part D Benchmark Announcement Is
Greater than LIPSA - De Minimis Election

The Part D basic premium post-benchmark is greater than the LIPSA and LIPSA is
designated as the target Part D basic premium. If (i) the MA organization has no
rebates or has allocated all of the MA rebates to the Part D basic premium, and (ii) the
difference between the Part D basic premium post-benchmark and the LIPSA is
between $0 and the de minimis amount published by CMS, the MA organization may
volunteer to waive the portion of the Part D basic premium equal to this difference.
Conversely, if the difference between the Part D basic premium post-benchmark and the
LIPSA is greater than the de minimis amount published by CMS, the MA organization
cannot volunteer to waive the de minimis amount.
Example 5c (MA rebates allocated to Part D basic premium equal total MA rebates)

MA BPT Worksheet 6,
Section IIIC, Line—
7a. Part D basic premium
prior to rebates (rounded)
7c. MA rebates allocated to
Part D basic premium
(rounded)
7d. Part D basic premium
10. Plan intention for target
Part D basic premium
LIPSA

Initial June Bid
Submission

After Release
of Benchmark

Rebate
Reallocation

$35

$40

$40

$15
$20

$15
$25

$23
$17

LIPSA
Not applicable

Not applicable
$15

Not applicable
$15

The difference between the $17 Part D basic premium post-benchmark and the $15
LIPSA is $2. The MA organization may volunteer to waive $2 of the $17 Part D basic

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APPENDIX E

premium to reach the target LIPSA only if CMS publishes a de minimis amount greater
than or equal to $2. If CMS publishes a de minimis amount less than $2, the MA
organization may not participate in the de minimis program or waive any portion of the
$17 Part D basic premium.
Note that the de minimis amounts in this example are hypothetical and do not reflect
CMS’ de minimis policy for CY2014.
H. First-Time Allocation of Rebate Dollars to Part D Basic Premium during the Rebate
Reallocation Period.

In the June bid submission, an MA-PD plan with MA rebate dollars may have opted not to
allocate any of the rebate to buying down the Part D basic premium. For these bids, if the
Part D basic premium after application of the Part D national average monthly bid amount and
the base beneficiary premium were to be higher than the target premium, CMS would allow a
return to the plan’s target premium.
Example 6.

MA BPT Worksheet 6,
Section IIIC, Line —
7a. Part D basic premium
prior to rebates (rounded)
7c. MA rebates allocated
to Part D basic premium
(rounded)
7d. Part D basic premium
10. Plan intention for
target Part D basic
premium

Initial June Bid
Submission

After
Release of
Benchmark

Rebate
Reallocation
Option 1

Rebate
Reallocation
Option 2

$10

$15

$15

$15

$0
$10
Premium amount
displayed in line
7d

$0
$15

$0
$15

$5
$10

Not
applicable

Not
applicable

Not
applicable

III. ADDITIONAL REBATE REALLOCATION GUIDANCE
Changes Allowed to Funding of the Part D Basic and Supplemental Benefits

During the rebate reallocation period, rebate dollars that are not used to reach the target
premium for basic Part D coverage may be used to buy down the Part D supplemental
premium. However, no modifications are allowed to the benefit design or pricing of the Part D
basic benefit or the supplemental benefit offered under the “enhanced alternative” design. That
is, this prohibition includes that no changes are permitted to the allowed costs, administrative
costs, or gain/loss margin in the Part D basic and supplemental benefits.
Changes Allowed to Funding of the A/B Mandatory Supplemental Benefits

The A/B mandatory supplemental benefit includes reductions in cost sharing for Part A/B items
and services from levels actuarially equivalent to average cost sharing under original Medicare
and additional items and services not covered by original Medicare. CMS will not allow MA
organizations to substantially redesign A/B mandatory supplemental benefits during the rebate
reallocation period. CMS expects only marginal adjustments during this period and will
evaluate material differences.

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APPENDIX E

The value of the added or eliminated A/B mandatory supplemental benefit is required to match
the amount of rebate that must be shifted to return to the Part D target premium. For a regional
plan, the value of added or eliminated benefits is required to match the net shift in total MA
rebate dollars due to an increase or decrease in those dollars after application of the regional
benchmark and/or return to the Part D target premium. CMS will not allow the MA
organization to eliminate one additional benefit and then add another additional benefit.
When the Part D basic premium net of rebate is lower than the target Part D basic premium
after the Part D benchmark announcement, the MA organization could—
•
•
•

Further buy down the initial A/B mandatory supplemental premium;
Reduce plan cost sharing and then buy down the new A/B mandatory supplemental
premium to the initial level; or
Add new non-drug benefits (for example, vision) to the A/B mandatory supplemental
benefit package and then buy down the new A/B mandatory supplemental premium to
the initial level.
Example 7.

After application of the national average monthly bid amount and the base beneficiary
premium, an MA-PD organization’s Part D basic premium net of rebates shifts from $0
to -$3. The MA organization is required to reallocate $3 of rebates and may decide to
buy down the cost of a benefit in the A/B mandatory supplemental package.
However, CMS will not allow the MA organization to accomplish rebate reallocation
by changing the value of benefits by more than $3, for example, by moving $15 out of
A/B cost-sharing reductions and moving $18 into an additional benefit. We would
consider this to be a substantial redesign of the A/B mandatory supplemental benefit.
When the Part D basic premium net of rebate is greater than the target Part D basic premium
after the Part D benchmark announcement, the MA organization could—
•
•

Buy down less of the A/B mandatory supplemental premium; or
Eliminate or reduce an A/B mandatory supplemental benefit (for example, provide an
eye exam less frequently), and then buy down the new A/B mandatory supplemental
premium to the initial level.

Similarly, to return a regional plan with a decrease in the total amount of rebate to the original
premium, the MA organization could, for example, eliminate from the A/B mandatory
supplemental benefit package the coverage of a non-Medicare covered item or service.
The CY2010 Call Letter included the following guidance regarding benefit changes during
rebate reallocation (page 22):
“III. Bidding
Rebate Re-allocation

...
In situations when MA-PD plans are allowed to re-allocate Part C rebate dollars in order to
return to the Target Part D basic premium (due to “insufficient allocation” resulting in a
Part D basic premium larger than the target premium or due to a reduction in the total

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APPENDIX E

amount of rebate for a regional plan), MAOs should make re-allocations that reflect the
following priorities. Specifically, there may not be any reduction of rebate allocated to
priority (3) unless reductions have first been made to priority (1), then priority (2) noted
below.
1. Reduce or remove non-Medicare covered benefits;
2. Increase cost sharing for widely-used services such as primary care visits; and
3. As a last resort, increase cost sharing for more limited-use services such as
inpatient, skilled nursing facility (SNF), and home health care.
MAOs that do not adhere to this guidance may be asked to resubmit.”
Changes Allowed to the Part B Premium Reduction

One use of rebate dollars allowed under 42 CFR §422.266 is reduction of the Part B premium.
During the rebate reallocation period, rebate dollars allocated for this purpose may be increased
or decreased. However, the maximum amount of rebate that can be allocated to reduce the
Part B premium is equal to the amount pre-populated by CMS in the BPT.
Plans Required to Include Prescription Drug Coverage

MA organizations must meet the 42 CFR §423.104(f) requirement on type of drug coverage
offered by certain plans and must reallocate the rebate, if necessary, to meet this requirement.
In accordance with 42 CFR §423.104(f), MA organizations may not offer an MA coordinated
care plan in an area unless that plan (or another MA plan offered by the same MA organization
in the same service area) includes required prescription drug coverage.
Required prescription drug coverage is defined by 42 CFR §423.100 as MA-PD plan coverage
of Part D drugs that is either—
•
•

Basic prescription drug coverage (that is, defined standard coverage, actuarially
equivalent standard coverage, or basic alternative coverage); or
Enhanced alternative coverage with no beneficiary premium for the Part D
supplemental benefit. An MA-PD plan must apply rebate dollars to reduce to zero the
beneficiary premium for the Part D supplemental benefit.

MA organizations are required to comply with this rule. If necessary, MA organizations must
reallocate rebate dollars from other benefits to achieve the required Part D supplemental benefit
in the plan.
To restate: MA organizations offering coordinated care plans must offer in an area either (i) a
basic-only Part D plan or (ii) a basic plus supplemental Part D plan for which the supplemental
premium (net of rebates) equals zero. Failure to meet this requirement will result in the
organization’s inability to offer a Part D benefit. In addition, MA organizations that offer
coordinated care plans but that fail to offer a Part D benefit in an area will be unable to offer an
MA benefit as well, under the rules of 42 C.F.R. §422.4(c).
Non-Benefit Expenses and Gain/Loss Margins

This guidance applies to all pricing arrangements and methodologies, including percent of
revenue, risk sharing, and global capitation.

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APPENDIX E
Changes to A/B Mandatory Supplemental

CMS will allow only the following minor changes to non-benefit expenses and the
gain/loss margin as a result of rebate reallocation:
•
•
•

A change, if any, in non-benefit expenses related to the incremental change of
A/B mandatory supplemental benefits.
A small change in the gain/loss margin related to premium rounding (see
premium rounding rules in Appendix E).
A small change resulting from the proportional allocation of non-benefit
expenses and the gain/loss margin in the BPT.

Changes to Medicare-Covered

CMS will allow only the minor modifications specified below to the pricing of
Medicare-covered benefits as a result of rebate reallocation; that is, the PMPM value of
allowed costs, non-benefit expenses, and the gain/loss margin may not change except
for—
•
•

A small change, if any, in allowed costs directly related to a change in utilization
due to the change in A/B mandatory supplemental benefits.
A small change in non-benefit expenses and the gain/loss margin resulting
solely from the proportional allocation of non-benefit expenses and the gain/loss
margin in the BPT.

Local MA Plan Segments

The above rules on rebate reallocation apply to bids for local MA plan segments, with the
following clarifications.
Segmentation does not apply to the Part D benefit. The Part D prescription drug benefit must be
uniform across a plan’s service area; it may not vary across segments. Therefore, prior to the
allocation of rebates to buy down the premium, the Part D basic and supplemental premium
must be the same across segments. However, the amount of rebates allocated to buy down
Part D basic and supplemental premiums may differ by segment.

IV. RULES FOR ROUNDING PREMIUMS
This section describes system requirements for rounded premiums and the circumstances in
which the Plan sponsor may round premiums in order to reach plan premium goals.
Rule 1 – System Requirements Regarding Premiums and Rebates

To comply with premium withhold system requirements, the BPTs round the following
premiums to the nearest one decimal: MA (the sum of basic plus mandatory supplemental),
Part D basic, and Part D supplemental. No pennies are allowed.
Rebate dollars allocated to reduce the Part B and Part D premiums are rounded to one decimal.
Rebate dollars allocated to reduce the A/B mandatory supplemental premium are rounded to
two decimal places.

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Note: Prescription Drug Plans (PDPs) express their intention to round the Part D premium in
the initial June bid submission, because the rebate reallocation period does not apply to PDPs.
In the Part D bid pricing tool, PDPs are permitted to round their premiums to either the nearest
$0.10 or the nearest $0.50.
Rule 2 – Local MA-Only Plans

For local MA-only plan bids, the plan premium submitted in the initial June bid submission is
considered the final premium, as these bids are not affected by the Part D national average
calculation or the MA regional plan benchmark calculations. Local MA-only plans will not be
given an opportunity to round the premiums after the initial June bid submission. If a local
MA-only Plan sponsor wishes to offer a “whole-dollar” premium, the initial June bid
submission must reflect a total premium that is rounded to the nearest dollar. The bid
assumptions (such as gain/loss margin) must support the desired plan premium and the desired
level of premium rounding.
Rule 3 – Local MA-PD Plans (excluding EGWPs) and RPPOs

Regional plans and local MA-PD plans (excluding local EGWPs) may participate in the rebate
reallocation process. During rebate reallocation, MA organizations may round the total plan
premium to the nearest dollar (up or down) by slightly increasing or reducing the gain/loss
margin in the MA bid, as long as the change in margin results in a total plan premium change
of less than $0.50. (The total plan premium is defined at 42 CFR §422.262(b) as the
consolidated monthly premium consisting of the combination of the MA basic and mandatory
supplemental premiums and the Part D basic and supplemental premiums.)
If the plan has rebate dollars, then the MA organization may make a small change in the
gain/loss margin to result in an increase or decrease in rebate dollars of no more than $0.50.
Note that, in order to account for the proportional allocation of the total gain/loss margin to
Medicare-covered and A/B mandatory supplemental in the BPT, and also to account for the
savings retained by Medicare, the total margin may change by slightly more than $0.50.
Specifically, the Medicare-covered margin (Worksheet 4, cell Q107) would be limited to:
•

At the 71⅔% rebate level: limited to a $0.70 Medicare-covered margin change, to result
in a $0.50 change in rebates ($0.70 × 71⅔% = $0.50).

•

At the 68⅓% rebate level: limited to a $0.73 Medicare-covered margin change, to result
in a $0.50 change in rebates ($0.73 × 68⅓% = $0.50).

•

At the 58⅓% rebate level: limited to a $0.86 Medicare-covered margin change, to result
in a $0.50 change in rebates ($0.86 × 58⅓% = $0.50).

If the plan A/B bid is equal to or greater than the A/B benchmark, the MA organization may
make a small change in the gain/loss margin resulting in a premium increase or decrease of up
to $0.50.
Examples of rounding.
Example (a). An MA-PD plan has no premium for Medicare-covered or A/B mandatory

supplemental benefits, and an initial basic Part D premium (target premium) of $30.
(This situation could occur if (i) the bid equals the benchmark, and no A/B mandatory
supplemental benefits are offered, or (ii) the bid is less than the benchmark, and the plan

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APPENDIX E

has A/B mandatory supplemental benefits and applies rebates to reduce the A/B
mandatory supplemental premium to zero.) If the post-Part D benchmark
announcement total plan premium is $30.42, the MA organization could round the plan
premium to $30.00 by generating $0.42 of additional rebates to allocate to the basic
Part D premium by slightly reducing the gain/loss margin for MA benefits. (The
gain/loss margin for Part D benefits must not change.)
Example (b1). An MA-PD plan has no premium for Medicare-covered or A/B

mandatory supplemental benefits, and an initial basic Part D premium (target premium)
of $30. (This situation could occur if (i) the bid equals the benchmark, and no
A/B supplemental benefits are offered, or (ii) the plan applies rebates to reduce the A/B
mandatory supplemental premium to zero.) If the post-Part D benchmark
announcement bid results in a total plan premium of $32.42, the MA organization could
opt to generate $0.42 of additional rebates to allocate to the basic Part D premium by
making a slight reduction in the gain/loss margin for MA benefits that would result in a
premium of $32.00.
The MA organization could not use the rounding rules to adjust the premium to
anything lower than $32. For example, the organization could not round to a combined
premium of $30 by reducing the gain/loss margin to result in a premium change of
$2.42. To return to the premium of $30, the MA organization would have to engage in
rebate reallocation. See earlier sections of this appendix for guidance on rebate
reallocation.
Example (b2). An MA-PD plan has A/B mandatory supplemental benefits, an initial

basic Part D premium (target premium) of $30, and a total plan premium of $70.00. If
the post-Part D benchmark announcement bid results in a basic Part D premium of
$28.55 and a total plan premium of $68.55, the MA organization could opt to make a
slight change in the gain/loss margin for MA benefits in order to achieve a $0.45
increase in premium for A/B mandatory supplemental benefits, resulting in a total plan
premium of $69.00.
The MA organization could not use the rounding rules to adjust the premium to
anything higher than $69. For example, the organization could not round to a combined
premium of $70 by increasing the gain/loss margin to result in a premium change of
$1.45. To return to the target premium of $30, the MA organization would have to
engage in rebate reallocation. See earlier sections of this appendix for guidance on
rebate reallocation.
Example (c). An MA-PD plan has no rebates and an initial total plan premium of $25.

The post-Part D benchmark announcement total plan premium is $26.52. The MA
organization could round the plan premium to the nearest dollar (that is, $27.00) by
increasing the gain/loss margin to generate a $0.48 MA premium.
Example (d). The target Part D basic premium is the low-income premium subsidy

amount. After the Part D national average monthly bid amount is calculated, the Part D
basic premium is $32.00, and the low-income premium subsidy amount is $31.60. The
plan has the following three options:

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APPENDIX E
Option 1. The plan can maintain its Part D basic premium of $32.00. The plan’s

beneficiaries eligible for the full subsidy will pay a Part D basic premium of
$0.40.
Option 2. The MA-PD plan can reallocate $.40 of the rebates that were allocated

to the A/B mandatory supplemental premium to its Part D basic premium, thus
reducing the premium to the low-income premium subsidy amount of $31.60.
To account for the reduction in rebates applied to the A/B mandatory
supplemental premium, the MA-PD plan may either increase its A/B mandatory
supplemental premium by $0.40 or reduce its gain/loss margin appropriately to
eliminate the premium increase. Enrollees not eligible for the low-income
subsidy would pay a Part D basic premium of $31.60.
Option 3. In order to be able to offer a rounded Part D basic premium to

enrollees not eligible for the low-income subsidy, MA-PD plans are permitted in
this situation to reallocate A/B mandatory supplemental rebates to reduce their
Part D basic premium to the nearest whole-dollar amount below the regional
low-income premium subsidy amount. Therefore, the MA-PD plan can
reallocate $1.00 of its A/B mandatory supplemental rebates to its Part D basic
premium, reducing the Part D basic premium to $31.00, which is the nearest
whole-dollar amount below the regional low-income premium subsidy of
$31.60. To account for the reduction in A/B mandatory supplemental rebates
applied to MA, the MA-PD plan must increase its A/B mandatory supplemental
premium by $1.00 and cannot offset the reduction by a change in the gain/loss
margin. Please note that in this option, the MA-PD plan forgoes $0.60 in
potential low-income premium subsidy dollars per each beneficiary eligible for
the full subsidy.
Example (e). The target Part D basic premium is the LIPSA. After the Part D national

average monthly bid amount is calculated, the low-income premium subsidy amount is
$31.76. Since Part D premiums must be rounded to one decimal, it is acceptable for the
plan to round the Part D basic premium to $31.70 or to $31.80, as follows:
Option 1. If the plan were to round the Part D basic premium to $31.70, then it

would receive $31.70 as the 100-percent subsidy. The plan’s beneficiaries
eligible for the full subsidy would not pay a Part D basic premium, since the
premium is lower than the LIPSA.
Option 2. If the plan were to round the Part D basic premium to $31.80, then it

would receive $31.80 as the 100-percent subsidy. In this case, the plan’s
beneficiaries eligible for the full subsidy would not pay a Part D basic premium,
since the $0.04 difference (that is, $31.80 less $31.76) rounds to zero when the
premiums are rounded to one decimal.
Example (f). An MA-PD plan has three segments, with MA premiums of $51, $76, and

$110. The Part D basic premium after the benchmark announcement is $37.90. To
ultimately achieve whole-dollar total plan premiums, the MA organization could
increase the MA gain/loss margin requirements to increase each MA premium by $0.10.
When added to the $37.90 Part D premium, the total plan premium for each segment
becomes a whole-dollar amount: $89, $114, and $148.

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APPENDIX E
Example (g). The initial June bid submission for a local MA-only plan includes a $0

basic MA premium and a $61.30 mandatory supplemental MA premium. The Plan
sponsor would like to offer a whole-dollar premium to the plan’s enrollees. Before
submitting the initial BPT to CMS (via HPMS upload), the actuary would slightly
revise the gain/loss margin to accomplish the rounded premium. For example, the
actuary could reduce the gain/loss margin by $0.30 to achieve the $61.00 rounded
premium. This adjustment must be completed before the BPT is submitted to CMS in
early June. Note that Plan sponsors are not allowed to make significant changes to the
BPT in order to round premiums. Local MA-only plans do not participate in rebate
reallocation.

V. SUMMARY OF CONSIDERATIONS FOR REBATE REALLOCATION RESUBMISSIONS
When preparing resubmissions during the rebate reallocation period, plans should review the
following considerations:
•
•
•
•
•
•
•
•

All RPPOs (including EGWPs) must resubmit during the rebate reallocation period, in
order to reflect the published regional MA benchmarks.
If the national average monthly bid amount (NAMBA) and base beneficiary premium
(BBP) result in a Part D basic premium that is lower than the rebates allocated to Part D
basic, then the bid must be resubmitted.
When resubmitting bids during the rebate reallocation period, plans must update the
NAMBA and BBP in the Part D BPT.
The Part D bid must be unchanged.
The Part D basic premium net of rebates must equal the target.
If the LIPSA is targeted, the resubmitted Part D basic premium net of rebates must be
equal to the plan’s LIPSA (rounded to the nearest dime or rounded down to the nearest
dollar).
The “plan’s intention for the target premium” in the MA BPT must be unchanged.
Changes to MA pricing assumptions (benefit/non-benefit /gain/loss) must be consistent
with these instructions.

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APPENDIX F

APPENDIX F – SUGGESTED MAPPING OF MA PBP CATEGORIES TO
BPT CATEGORIES
The Medicare Advantage (MA) Bid Pricing Tool (BPT) contains benefit categories that do not
correlate line-by-line with the MA Plan Benefit Package (PBP). The BPT was developed to
include a reasonable number of benefit categories for pricing purposes and to provide benefit
groupings that are consistent with organizations’ accounting and claims systems.
The chart below provides a suggested mapping of the PBP and BPT benefit categories. This
mapping is not intended to represent the only method of reporting benefits in the BPT; rather, it
contains one suggested method that may be used. Other reasonable mappings may also be used
at the actuary’s discretion. The cost sharing reported on Worksheet 3 must clearly identify
where PBP benefit service categories are priced within the BPT service categories (see
Worksheet 3 instructions for more details).
HPMS contains a “Medicare Benefit Description Report” with further information regarding
the PBP service categories and a list of PBP/SB software changes. In addition, the Medicare
Managed Care Manual may be a helpful resource regarding benefit design.
PBP
line #
1a
1b
2
3
4a
4b
5

PBP Category
Inpatient Hospital – Acute
Inpatient Hospital - Psychiatric
Skilled Nursing Facility
Cardiac and Pulmonary Rehabilitation
Srvces
Emergency Care
Urgently Needed Care
Partial Hospitalization

6
7a
7b

Home Health Services
Primary Care Physician Services
Chiropractic Services

7c
7d

7f

Occupational Therapy Services
Physician Specialist Services Excluding
Psychiatric Services (exclude Radiology)
Physician Specialist Services Excluding
Psychiatric (Radiology only)
Mental Health Specialty Services – NonPhysician
Podiatry Services

7g

Other Health Care Professional Services

7h
7i

Psychiatric Services
Physical Therapy and Speech Language
Pathology Services

7d
7e

CY2014 MA BPT Instructions

BPT
line #
a1
a2
b
h5

Corresponding BPT Category:
Description/Note (Worksheet 3)
Inpatient Facility: Acute
Inpatient Facility: Mental Health
Skilled Nursing Facility
Outpatient Facility - Other: Other

f
f
h3
h5
c
i1
i2
i6
i4
i2
i6
i5

Outpatient Facility - Emergency
Outpatient Facility - Emergency
OP Facility - Other: Mental Health; or
OP Facility - Other: Other
Home Health
Professional: PCP
Professional: Specialist excl. MH; or
Professional: Other
Professional: Therapy (PT/OT/ST)
Professional: Specialist excl. MH; or
Professional: Other
Professional: Radiology

i3

Professional: Mental Health

i2
i6
i2
i6
i3
i4

Professional: Specialist excl. MH;
or Professional: Other
Professional: Specialist excl. MH; or
Professional: Other
Professional: Mental Health
Professional: Therapy (PT/OT/ST)

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APPENDIX F

PBP
line #
8a

BPT
line #
h1

Corresponding BPT Category:
Description/Note (Worksheet 3)
OP Facility - Other: Lab

h2

OP Facility - Other: Radiology

g or h

9a

PBP Category
Outpatient Diagnostic Procedures/Tests/Lab
Services
Outpatient Diagnostic/Therapeutic
Radiological Services
Outpatient Hospital Services

9b
9c
9d

Ambulatory Surgical Center (ASC) Services
Outpatient Substance Abuse
Outpatient Blood Services

10a
10b
11a
11b

Ambulance Services
Transportation Services
Durable Medical Equipment (DME)
Prosthetics/Medical Supplies

g
h5
h5 or
k
d
l
e1
e2

11c

Diabetes Supplies and Services

e2

12
13a
13b
13c
13d
13e
13f
13g
14a

End-Stage Renal Disease
Acupuncture
Over-the-counter Rx
Meal Benefit
Other 1
Other 2
Other 3
Highly integrated D-SNP
Medicare-covered Preventive Services

14b

Annual Physical Exam

h4
q
q
q
q
q
q
q
k, i1,
i2 or
i6
i1, i2
or i6

14c
14d

Supplemental Education/Wellness Programs
Kidney Disease Education Services

p
i1, i2
or i6

14e

Diabetes Self-Management Training

i1, i2
or i6

15

Medicare Part B Rx Drugs (includes Part D
home infusion drugs included in bundled
services)
Preventive Dental
Comprehensive Dental
Eye Exams
Eye Wear
Hearing Exams
Hearing Aids

j

OP Facility - Surgery; or
OP - Facility - Other (all sub-categories)
OP Facility - Surgery
OP Facility - Other: Other
OP Facility - Other: Other or Other
Medicare Part B
Ambulance
Transportation (Non-Covered)
DME/Prosthetics/Supplies: DME
DME/Prosthetics/Supplies:
Prosthetics/Supplies
DME/Prosthetics/Supplies:
Prosthetics/Supplies
OP Facility - Other: Renal Dialysis
Other Non-Covered
Other Non-Covered
Other Non-Covered
Other Non-Covered
Other Non-Covered
Other Non-Covered
Other Non-Covered
Other Medicare Part B; Professional:
PCP; Professional: Specialist excluding
MH; or Professional: Other
Professional: PCP; Professional:
Specialist excluding MH; or
Professional: Other
Health & Education (Non-Covered)
Professional: PCP;
Professional: Specialist excluding MH;
or Professional: Other
Professional: PCP;
Professional: Specialist excluding MH;
or Professional: Other
Part B Rx

m
m
n1
n2
o1
o2

Dental (Non-Covered)
Dental (Non-Covered)
Vision (Non-Covered): Professional
Vision (Non-Covered): Hardware
Hearing (Non-Covered): Professional
Hearing (Non-Covered): Hardware

8b

16a
16b
17a
17b
18a
18b

CY2014 MA BPT Instructions

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APPENDIX G

APPENDIX G – DE# SUMMARY
Medicaid Eligibility Data

The Medicaid status codes in the beneficiary-level file provided by CMS indicate the Medicaid
eligibility status of the beneficiary as reported by the respective state Medicaid agency. These
codes are shown in the table below. For descriptions of the dual-eligible beneficiary categories,
and of the types of Medicaid benefits to which these beneficiaries are entitled, see
http://www.cms.gov/Medicare-Medicaid-Coordination/Medicare-and-Medicaid-Coordination/
Medicare-Medicaid-Coordination-Office/index.html.
Medicaid
Status Code
01
02
03
04
05
06
08
09

Medicaid State-Reported Code (Dual-Eligible Category)
QMB only
QMB + full Medicaid benefits
SLMB only
SLMB + full Medicaid benefits
QDWI (Qualified Disabled and Working Individual)
QI (Qualified Individual)
Full-benefit dual-eligible beneficiaries who do not have QMB or SLMB
status
Other dual-eligible beneficiaries without full Medicaid benefits—for
example, those in Pharmacy Plus and 1115 drug-only demonstrations
Unknown, including Medicaid-eligible beneficiaries reported by plans and
territories

99
Blank

Non-Medicaid

Classifying Dual-Eligible Data

The HPMS plan-level data also include a Medicaid grouping indicator as shown in the table
below. This table illustrates how the data for dual-eligible beneficiaries are classified as DE#
or non-DE#. The certifying actuary must consider the Medicaid cost-sharing policy for the
states or territories in the plan’s service area when determining which beneficiaries in Medicaid
grouping B are in the DE# population.
Medicaid
Grouping
A

Dual
Eligible
Dual
Dual

B

Category of Dual
Eligible
QMB and QMB+

Other Medicaid

Medicaid
Status Code
01, 02
03, 04, 05,
06, 08, 09,
99
03, 04, 05,
06, 08, 09,
99

Non-Medicaid

Blank

Other Medicaid
Dual

B
C

Nondual

CY2014 MA BPT Instructions

Medicare Cost-Sharing
Liability
None

DE#
Status
DE#

Reduced (as determined by
the certifying actuary)

DE#

Full (as determined by the
certifying actuary)

Non-DE#

Full

Non-DE#

Page 123 of 134

APPENDIX G

The following table outlines the requirements for classifying dual-eligible beneficiaries that are
not QMB or QMB+ (that is, Medicaid Indicator B: Other Medicaid) as DE# or non-DE#. The
percentages in the table below represent the number of total dual-eligible beneficiaries relative
to total members per the HPMS plan-level data.
Medicaid
Grouping/Status Code
A: 01, 02
B: 03, 04, 05, 06, 08, 09, 99
B: 03, 04, 05, 06, 08, 09, 99

Condition

DE# Determination
for Base Period Data

None

DE#

<10% total dual-eligible
beneficiaries
10% to 100% total dualeligible beneficiaries

May consider as non-DE# or
determine actual classification

C: Blank

Must determine actual classification

None

Non-DE#

BPT Values

The following table outlines the determination of certain BPT values when the certifying
actuary chooses to set the projected DE#, non-DE#, and total allowed costs all equal on
Worksheet 2.
BPT Area
WS3
WS4 IIB
WS5 II

Input Item
Utilization and PMPM
values
State Medicaid required
beneficiary cost sharing
(column k)

<10% DE#
Enter non-DE# or
total values
Enter zero or
appropriate values2

>90% DE#
Enter non-DE# or
total values1
Enter appropriate
values3

Non-DE# risk factor

Enter total values

Enter total values

1

Enter total values if DE# projected member months equal total projected member months.

2

Plus plan cost sharing for non-covered, non-Medicaid benefits.

3

Plus plan cost sharing for non-covered, non-Medicaid benefits.

CY2014 MA BPT Instructions

10% to
90% DE#
N/A
N/A
N/A

Page 124 of 134

APPENDIX G

The next table summarizes the determination of certain BPT values when (1) the value for the
DE# projected member months is less than 10 percent, or greater than 90 percent, of the total
projected member months and the certifying actuary chooses to separately calculate DE# and
non-DE# projected allowed costs; or (2) the value for the DE# projected member months is
between 10 percent and 90 percent inclusive of the total projected member months.
BPT Area
WS3
WS4 IIB
WS5 II

Input Item
Utilization and PMPM values

Determination of BPT Values

State Medicaid required beneficiary
cost sharing (column k)

Determine appropriate values
(including zero)4
Determine distinct non-DE#
and DE# values

Non-DE# risk factor

Enter non-DE# values

The table below outlines the determination of BPT values in which the requirements are the
same for all bids regardless of the percentage of DE# members.

4

BPT Area

Input Item

Determination of BPT Values

WS3

Cost-sharing values and description

Reflect PBP package

WS4 IIB

Plan cost sharing (column f)

Default to non-DE# ratio of plan
cost sharing or override formulas

WS4 V

DE# Medicaid data

Determine appropriate values

WS5 II

Non-DE# member months

Determine distinct non-DE# and
DE# values

Plus plan cost sharing for non-covered, non-Medicaid benefits.

CY2014 MA BPT Instructions

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APPENDIX H

APPENDIX H – MEDICAL SAVINGS ACCOUNT BPT
This appendix provides guidance for completing the Medical Savings Account Bid Pricing
Tool for Medical Savings Account (MSA) plans offered to Medicare beneficiaries. This
appendix highlights only the differences between the MSA BPT and the MA BPT.
The MSA bid form is organized as outlined below:
Worksheet 1 – MSA Base Period Experience and Projection Assumptions
Worksheet 2 – MSA Total Projected Allowed Costs PMPM
Worksheet 3 – MSA Benchmark PMPM
Worksheet 4 – Enrollee Deposit and Plan Payment PMPM
Worksheet 5 – Optional Supplemental Benefits

WORKSHEET 1 – MSA BASE PERIOD EXPERIENCE AND PROJECTION ASSUMPTIONS
(CORRESPONDING TO MA WORKSHEET 1)
SECTION I – GENERAL INFORMATION
Line 7 – Plan Type

MSA is the only valid plan type.
Line 8 – Deductible Amount

Enter the deductible amount that each beneficiary will pay for Medicare-covered benefits. The
maximum deductible for CY2014 for MSA plans is $10,900.
Line 9 – Enrollee Type

This cell is pre-populated with “A/B”.

SECTIONS II, III, IV, AND V
Base period data in Sections II, III, IV, and V must include only Medicare-covered medical
expenses.

WORKSHEET 2 – MSA TOTAL PROJECTED ALLOWED COSTS PMPM
(CORRESPONDING TO MA WORKSHEET 2)
SECTION II – PROJECTED ALLOWED COSTS
Data in Section II must include only Medicare-covered medical expenses.

WORKSHEET 3 – MSA BENCHMARK PMPM (CORRESPONDING TO MA
WORKSHEET 5)
Follow the instructions for MA Worksheets 5 and 6 for the appropriate inputs.

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APPENDIX H

WORKSHEET 4 – ENROLLEE DEPOSIT AND PLAN PAYMENT (NO CORRESPONDING
MA WORKSHEET)
This worksheet calculates the MSA monthly plan revenue requirement and enrollee deposit.
Consistent with other MSA worksheets, information provided on Worksheet 4 must exclude
ESRD enrollees.

SECTION II – DEVELOPMENT OF CLAIM INFORMATION INTERVALS (PLAN’S RISK
FACTOR AND EXCLUDE SERVICES COVERED WITHIN THE DEDUCTIBLE)
Column c – Annual Projected Claim Interval

The column is pre-populated with annual projected claim intervals.
Column d – Annual Average Claim Amount

Enter the annual average claim amount paid in each claim interval.
Column e – Percentage of Member Months (Use Only the Highest Claim Interval)

Allocate the total projected member months to the highest claim interval expected by
percentage.
For example, if 20 percent of the member months are expected to incur annual claims of
$11,500, and 10 percent are expected to incur annual claims of $4,400, then put 20 percent only
in the interval containing $11,500 and 10 percent only in the interval containing $4,400. The
sum of column e must equal 100 percent.
Column f – Gross Claims (PMPM)

This column calculates total allowed Medicare-covered claims on a PMPM basis for each claim
interval. No entry is required. The sum of column f must equal the total Medicare-covered
medical expenses shown in column o of Worksheet 2.
Column g – Gross Claims over Deductible (PMPM)

Enter the total allowed Medicare-covered claims on a PMPM basis over the deductible for each
claim interval expected to be paid by the MSA plan. Enter zero (0) for claim intervals below
the deductible.

SECTION III – DEVELOPMENT OF SUMMARY INFORMATION (PLAN’S RISK FACTOR)
Line a – Medicare-Covered Plan Medical Expenses PMPM

This cell displays the sum of column g of Section II.
Line b – Non-Benefit Expenses

Enter the non-benefit expense information. Please refer to the “Pricing Considerations” section
of these instructions for further guidance.
Do not leave a field blank to indicate a zero amount. If zero is the intended value, enter a 0 in
the cell.
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APPENDIX H
Line c – Gain/Loss Margin

Input the projected PMPM for the gain/loss margin for Medicare-covered services provided.
Please refer to the “Pricing Considerations” section of these instructions for further guidance.
Do not leave a field blank to indicate a zero amount. If zero is the intended value, enter a 0 in
the cell.
Line d – Total Plan Revenue Requirement

This cell is calculated automatically as the sum of projected Medicare-covered medical
expense, non-benefit expense, and gain/loss margin.
Line e – Projected Plan Benchmark

This cell displays the value from Section III, column h, line 1 of Worksheet 3—the weighted
average for the service area of the risk-adjusted ratebook values.
Line f – Projected Monthly Enrollee Deposit

This cell calculates the monthly enrollee deposit by subtracting the total plan revenue
requirement from the projected plan benchmark.
Line g – Percent of Plan Revenue Ratios

These cells calculate the ratio of medical expense, non-benefit expense, and gain/loss margin as
a percentage of revenue.
Line h – Standardized Plan Benchmark

This cell displays the value from Section III, column g, line 1 of Worksheet 3—the weighted
average for the service area of the unadjusted ratebook values.
Lines i, j, k and l – Adjusted MLR fields

Follow the instructions for MA Worksheet 4 for the appropriate inputs.

WORKSHEET 5 – OPTIONAL SUPPLEMENTAL BENEFITS (CORRESPONDING TO MA
WORKSHEET 7)
Follow the instructions for MA Worksheet 7 for the appropriate inputs.

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APPENDIX I

APPENDIX I – END–STAGE RENAL DISEASE–ONLY SPECIAL
NEEDS PLANS BPT
This appendix provides guidance for completing the ESRD-SNP BPT for ESRD-C-SNP plans
offered to Medicare beneficiaries. This appendix highlights only the differences between the
ESRD-SNP BPT and the MA BPT.
The ESRD-SNP bid form is organized as outlined below:
Worksheet 1 – Enrollment and PMPM Revenue Projection
Worksheet 2 – Projection of benefit cost, non-benefit expenses, and gain/loss margin PMPM
Worksheet 3 – Program Experience for Calendar Years 2011 and 2012
Worksheet 4 – Optional Supplemental Benefits

WORKSHEET 1 – ENROLLMENT AND PMPM REVENUE PROJECTION
SECTION I – GENERAL INFORMATION
Follow the instructions for MA Worksheet 1 for the appropriate inputs.
Line 2 – Contract-Plan-Segment

This field concatenates the contract ID, plan ID and segment ID.
Line 4 – Service Area

Enter a brief description of the service area.
Line 5 – Plan Type

ESRD-SNP is pre-populated.

SECTION II – SERVICE AREA SUMMARY
Follow the instructions for MA Worksheet 5 for the appropriate inputs.

CY2014 MA BPT Instructions

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APPENDIX I
✔ Column a – State/County Code

Similar to MA BPT Worksheet 5, enter the county codes associated with the plan’s
service area.
Technical note regarding the ESRD-SNP BPT: the rates populated in column (g) are
“state-wide” rates for Dialysis and Transplant statuses. Therefore, plans may enter one
county code (example: entering 05430 for California) and report the Dialysis member
months and risk scores for the state in that row. Similarly, one county code may be
entered for the state-wide Transplant information. In other words, the Dialysis and
Transplant member months and risk scores do not need to be reported at the county
level. Functioning Graft rates are “county-specific”, and therefore member months and
risk scores must be reported at the county level for Functioning Graft status.
✔ Column d – ESRD Status (D /T /F)

Enter the ESRD status: “D” for dialysis, “T” for transplant, or “F” for functioning graft
(that is, postgraft).
✔ Column f – Projected Risk Score

Projected risk scores must:
•
•
•
•

Be based on the CMS-HCC ESRD Model.
Reflect appropriate projection factors.
Be adjusted for FFS normalization.
Reflect the MA coding pattern differences adjustment factor as follows: postgraft
risk scores must reflect the MA coding adjustment factor in the Announcement of
Calendar Year (CY) 2014 Medicare Advantage Capitation Rates and Medicare
Advantage and Part D Payment Policies. Dialysis risk scores and transplant factors
should not incorporate the MA coding adjustment.

✔ Column h – Percentage of MSP Member Months

Enter the percentage of Medicare Secondary Payer (MSP) member months applicable
for the ESRD status and county/state indicated.
✔ Column i – Projected CMS Monthly Capitation

This field is calculated automatically.

SECTION III – ESRD MSP ADJUSTMENT FACTORS FOR CY (FROM APRIL RATE
ANNOUNCEMENT)
This section contains the adjustment factors released by CMS in the Announcement of
Calendar Year (CY) 2014 Medicare Advantage Capitation Rates and Medicare Advantage and
Part D Payment Policies. Line 1 contains the MSP factor for Functioning Graft, and line 2
contains the MSP factor for dialysis/transplant.

SECTION IV – SUMMARY DATA
Line 1 – Part C Mandatory Monthly Enrollee Premium

This amount is obtained from Worksheet 2.

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Line 2 – Part C Monthly Plan Revenue

This field is calculated automatically.
Line 3 – Part D Premium (Basic + Supplemental) net of MA “rebates”

Data entry is required.
Line 4 – Plan intention for target Part D basic premium

Enter the plan intention for target Part D basic premium. This should reflect either:
•
•

the PMPM targeted amount of Part D basic premium after reduction (that is, the
rounded Part D basic premium from the Part D BPT Worksheet 7 cell F21 minus the
Part D basic premium reduction from Worksheet 2 cell D35) or
“Low income premium subsidy amount”.

After CMS’ release of the Part D National Average Monthly Bid Amount, the Medicare Part D
Base Beneficiary Premium, and the Part D Regional Low-Income Premium Subsidy Amounts,
CMS will allow plans to return to their target Part D basic premium by reallocating “excess
funds” allocated in the initial submission to the supplemental benefit items in rows 56 through
60 of Worksheet 2. Here, the term “excess funds” refers to the difference between the CMS
capitation payment and the plan’s cost to provide Medicare-covered benefits. Generally, the
rules in effect for other MA-PD plans for changes to the funding of benefits during the rebate
reallocation period will apply to reallocation of excess funds (see Appendix E).
Line 5 – Quality Bonus Rating (per CMS)

Follow the instructions for MA Worksheet 5.
Line 6 – New/low indicator (per CMS)

Follow the instructions for MA Worksheet 5.

WORKSHEET 2 – PROJECTION OF BENEFIT COST, NON-BENEFIT EXPENSES, AND
GAIN/LOSS MARGIN PMPM
The medical expense projection is to be consistent with the population reflected in the revenue
projections on Worksheet 1. The medical expense projections may be based on a blend of
trended plan experience and other data sources.
The allowed costs in Rows 16-31 should include only Medicare-covered services. Additional
services such as inpatient coverage beyond lifetime reserve days and preventive services not
covered by original Medicare should be reflected in Additional Services on row 37.
The Supplemental Benefits columns are calculated automatically and reflect cost sharing
enhancements to the Medicare-covered benefit package.
The Part B and Part D (basic & supplemental) premium reductions should be entered as
positive amounts and must both be rounded to the nearest dime.
For guidance on reporting non-benefit expenses, gain/loss margin and related parties, see the
“Pricing Considerations” section and MA Worksheet 4 section of these instructions.

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APPENDIX I

For information on the Adjusted MLR fields, see the “Pricing Considerations” section and MA
Worksheet 4 section of these instructions.

WORKSHEET 3 – PROGRAM EXPERIENCE FOR CALENDAR YEARS 2011 AND 2012
SECTION II – CONTACT INFORMATION
Follow the instructions for MA Worksheet 6.

SECTION III – REVENUES
Enter member months, aggregate CMS payments, and aggregate enrollee premium for CY2011
and CY2012. All revenues are to be reported on an earned basis, including retroactive
adjustments. Revenues for 2012 are to include an estimate of the final risk adjustment
settlement to be received in mid-2013.

SECTION IV – MEDICAL BENEFITS
Enter claims incurred in each of the specified periods and paid through March 31, 2013.
Medical benefits are to be reported net of enrollee cost sharing.
Claim reserves as of March 31, 2013 are to be reported separately for 2011 and 2012.
Organizations may allocate claim reserves to appropriate categories in situations where
reserves are developed at a consolidated level.
For “Utilizers” column, follow the instructions for MA Worksheet 1.
For guidance on reporting non-benefit expenses and gain/loss margin, see the “Pricing
Considerations” section and MA Worksheet 4 section of these instructions.

WORKSHEET 4 – OPTIONAL SUPPLEMENTAL BENEFITS
Follow the instructions for MA Worksheet 7 for the appropriate inputs.

SUPPORTING DOCUMENTATION FOR ESRD-SNP BPTS
See Appendix B for general information regarding supporting documentation.
Initial June Bid Submission

•
•
•

A cover sheet (see Appendix B).
A product narrative (see Appendix B).
Support for the development of the projected allowed medical expenses for Medicarecovered benefits. The required elements for this documentation include:
◦ A description of the source data, including its relevance to the plan and the
precise name of any published tables used.
◦ Credibility standards applied to the data and corresponding adjustments, if
applicable.
◦ Consideration of any adjustments made for annual volatility of the source data.

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APPENDIX I

◦

•
•
•
•

•
•

Any applicable adjustments to source data, such as:
‣ Approach and factors applied to account for incomplete claim run-out and/or
expenditures that are not reflected in the source data;
‣ Addition of Medicare-covered benefits not reflected in the source data;
‣ Exclusion of non-covered benefits reflected in the source data;
‣ Techniques and factors used to reflect differences between the underlying
population and that expected of the plan;
‣ Techniques and factors used to adjust for differences in health care delivery
system and plan design of the source data as compared to the plan;
‣ Methodology and data used to gross-up reimbursements to an allowed-cost
basis.
◦ Data and methodology used to project the data from base period to contract year
(CY). The trends for utilization and unit cost should be demonstrated separately.
◦ All other applicable factors and/or adjustments
Support for non-benefit expense assumptions, including disclosure of related-party
agreements, if any. (See Appendix B for the required elements.)
Justification of the gain/loss margin. (See Appendix B for the required elements.)
Detailed support for the development of projected risk scores. (See Appendix B for the
required elements.)
Reconciliation of base period experience with company financial data. 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.
Contract-level optional supplemental experience for CY2012, including enrollment,
earned premiums, and incurred benefits.
Support for the benefit, non-benefit expense, and gain/loss margin for specific optional
supplemental benefit packages.

Upon Request by CMS Reviewers

•
•
•
•

Support for the development of claim reserves.
If applicable, a list of materials that were relied on and an accompanying reliance letter.
Support for the development of revenue assumptions including enrollment distribution.
Additional information (not specified in this list) may be requested by CMS reviewers,
as needed.

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According to the Paperwork Reduction Act of 1995, no persons are required to respond
to a collection of information unless it displays a valid OMB control number. The valid
OMB control number for this information collection is 0938-0944. The time required to
complete this information collection is estimated to average 30 hours per response,
including the time to review instructions, search existing data resources, gather the data
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please write to: CMS, 7500 Security Boulevard, Attn: PRA Reports Clearance Officer,
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