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INSTRUCTIONS FOR COMPLETING
THE PRESCRIPTION DRUG PLAN
BID PRICING TOOL
FOR CONTRACT YEAR 2016
April 3, 2015
CMS-10142 (07/29/2014)
TABLE OF CONTENTS
I. Introduction.................................................................................................................................................... 4
Background .................................................................................................................................................... 4
Document Overview ...................................................................................................................................... 4
New for Contract Year 2016 (CY2016) ......................................................................................................... 4
Bidding Resources ......................................................................................................................................... 5
II. Pricing Considerations.................................................................................................................................. 6
Bidding/Pricing Approach ............................................................................................................................. 6
Specific Topics............................................................................................................................................... 6
III. Data Entry and Formulas .......................................................................................................................... 27
Prescription Drug ......................................................................................................................................... 27
PD Worksheet 1 – Rx Base Period Experience................................................................................................ 30
Section I – General Information................................................................................................................... 30
Section II – Base Period Background Information ...................................................................................... 33
Section III – Part D Claims Experience ....................................................................................................... 34
Section IV – PMPM Non-Benefit Expenses ................................................................................................ 37
Section V – PMPM Premium Revenue ........................................................................................................ 37
Section VI – PMPM Income Statement Summary....................................................................................... 37
PD Worksheet 2 – Rx PDP Projection of Allowed/Non-Benefit ..................................................................... 39
Section I – General Information................................................................................................................... 39
Section II – Utilization for Covered Part D Drugs ....................................................................................... 39
Section III – Cost for Covered Part D Drugs ............................................................................................... 40
Section IV – Projected Allowed PMPM ...................................................................................................... 41
Section V – PMPM Non-Benefit Expense ................................................................................................... 42
Section VI – Development of Manual Rate ................................................................................................. 43
Section VII – Percentage of Revenue .......................................................................................................... 43
PD Worksheet 3 – Rx Contract Period Projection for Defined Standard Coverage ........................................ 44
Section I – General Information................................................................................................................... 44
Section II – Projection Data ......................................................................................................................... 44
Section III – Part D Covered Drug Claims .................................................................................................. 44
Section IV – PMPM Non-Benefit Expense and Gain/Loss ......................................................................... 47
Section V – Defined Standard Coverage Bid Development ........................................................................ 48
PD Worksheet 4 – Rx Standard Coverage with Actuarially Equivalent Cost Sharing .................................... 49
Considerations for Actuarially Equivalent Coverage................................................................................... 49
Section I – General Information................................................................................................................... 49
Section II – Projection Data ......................................................................................................................... 49
Section III – Development of Bid for Defined Standard Coverage ............................................................. 49
Section IV – Development of Bid Components and Tests for Actuarial Equivalence................................. 50
Section V – Standard Coverage Bid Development with Actuarially Equivalent Cost Sharing ................... 50
PD Worksheet 5 – Rx Alternative Coverage.................................................................................................... 51
Considerations for Basic Alternative and Enhanced Alternative Coverage ................................................. 51
Section I – General Information................................................................................................................... 51
Section II – Projection Data ......................................................................................................................... 52
Section III – Development of Bid for Defined Standard Coverage ............................................................. 52
Section IV – Development of Bid Components ........................................................................................... 52
Section V – Development of Actuarial Equivalence Test............................................................................ 53
Section VI – Tests for Alternative Coverage ............................................................................................... 54
Section VII – Development of Supplemental Premium ............................................................................... 54
Section VIII – Development of Induced Utilization Adjustment................................................................. 54
CY2016 Part D BPT Instructions
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PD Worksheet 6 – Script Projections for Defined Standard, Actuarially Equivalent or Alternative
Coverage .................................................................................................................................................. 55
Considerations.............................................................................................................................................. 55
Section I – General Information................................................................................................................... 55
Section II – Projections for Equivalence Tests ............................................................................................ 55
PD Worksheet 6A – Coverage in the Gap for Defined Standard, Actuarially Equivalent or Alternative
Coverage .................................................................................................................................................. 62
Considerations.............................................................................................................................................. 62
Section I – General Information................................................................................................................... 62
Section II – Spending in the Coverage Gap ................................................................................................. 62
PD Worksheet 7 – Summary of Key Bid Elements ......................................................................................... 65
Section I – General Information................................................................................................................... 65
Section II – 2016 Defined Standard Benefit Parameters.............................................................................. 65
Section III – Summary of Key Bid Elements ............................................................................................... 65
Section IV – Part D Bid Pricing Tool Contacts and Date Prepared ............................................................. 67
Section V – Working Model Text Box ........................................................................................................ 67
IV. Appendices................................................................................................................................................ 68
Appendix A – Actuarial Certification .............................................................................................................. 68
Actuarial Standards of Practice and Other Considerations .......................................................................... 68
Appendix B – Supporting Documentation ....................................................................................................... 71
General ......................................................................................................................................................... 71
Submitting Supporting Documentation........................................................................................................ 72
Part D Checklist for Required Supporting Documentation .......................................................................... 80
Sample Cover Sheet – Submitted with Initial Bid Upload........................................................................... 82
Sample Cover Sheet – Submitted as a Subsequent Substantiation Upload ................................................. 83
Sample Format for Reliance on Information Supplied by Others ................................................................ 83
Appendix C – Employer/Union-Only Group (EGWP) Requirements ............................................................. 84
Appendix D – Calculation of National Average Monthly Bid Amount ........................................................... 85
Appendix E – Calculation of Low-Income Benchmark Premium Amounts .................................................... 86
Appendix F – Health Care Reform .................................................................................................................. 88
Provisions..................................................................................................................................................... 88
Appendix G – Trending Risk Scores................................................................................................................ 89
CY2016 Part D BPT Instructions
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INTRODUCTION
I. INTRODUCTION
BACKGROUND
Prescription Drug Plans (PDPs) and Medicare Advantage Prescription Drug Plans (MA-PDs)
must submit a separate bid to the Centers for Medicare & Medicaid Services (CMS) for each
prescription drug plan they intend to offer Medicare beneficiaries.
Organizations must submit the information via the CMS Health Plan Management System
(HPMS) in the CMS-approved electronic format – the Prescription Drug Bid Pricing Tool
(BPT). An actuarial certification and supporting documentation must be submitted for each bid
as described in Appendix A and Appendix B, respectively.
The submitted bids will be subject to review and audit by CMS or by any person or
organization that CMS designates. As part of the review and audit process, CMS or its
representative may request additional documentation supporting the information in the BPT.
Organizations must be prepared to provide this information in a timely manner.
DOCUMENT OVERVIEW
This document contains general pricing considerations and detailed instructions for completing
the BPT. Following are the contents of each section:
•
•
•
•
Section I, “Introduction”: contains a list of key changes from the CY2015 BPT and
Instructions and provides sources of information that can be accessed for assistance
during the bid submission process.
Section II, “Pricing Considerations”: contains guidance for preparing bids and
presenting pricing results in the BPT.
Section III, “Data Entry and Formulas”: contains directions for completing the eight
worksheets in the BPT and explains the formulas for calculated cells.
Section IV, Appendices A through G: contains requirements for Actuarial Certification
(Appendix A), Supporting Documentation (Appendix B), Employer/Union-Only Group
Waiver Plans (Appendix C), Calculation of the National Average Monthly Bid Amount
(Appendix D), Calculation of the Low-Income Benchmark Premium Amounts
(Appendix E), Health Care Reform (Appendix F) and Trending Risk Scores (Appendix
G).
NEW FOR CONTRACT YEAR 2016 (CY2016)
The key changes between the CY2016 BPT and CY2015 BPT are highlighted below. The
changes improve the usability and functionality of the BPT and reflect updated regulatory
guidance.
CY2016 Part D BPT Instructions
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INTRODUCTION
BIDDING RESOURCES
•
The CY2016 Advance Notice and draft CY2016 Call Letter may be found at
6http://www.cms.gov/Medicare/Health-Plans/MedicareAdvtgSpecRateStats/Downloads/
Advance2016.pdf.
• The CY2016 Call Letter and CY2016 Rate Announcement may be found at
http://www.cms.gov/Medicare/Health-Plans/MedicareAdvtgSpecRateStats/Downloads/
Announcement2015.pdf.
• The CY2016 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/
BidTraining2016.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
CY2016 bidding process. The conference calls will include live Question and Answer
sessions with CMS actuaries.
• For technical questions about the BPT, BPT Batch Tools, HPMS, or the upload process,
refer to the following resources:
◦ The Technical Instructions located in HPMS, under HPMS Home > Plan Bids >
Bid Submission > CY2016 > Documentation > BPT Technical Instructions
◦ The Bid Submission User’s Manual, also available in HPMS
◦ HPMS Help Desk: 1-800-220-2028 or [email protected]
CY2016 Part D BPT Instructions
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PRICING CONSIDERATIONS
II. PRICING CONSIDERATIONS
BIDDING/PRICING APPROACH
By statute, the bid must represent the revenue requirement of the expected population.
Therefore, in most circumstances, Part D sponsors must use credible bid-specific experience in
the development of projected allowed costs. This approach does not preclude Part D sponsors
from reaching specific benefit and premium goals; the gain/loss margin guidance allows
sufficient flexibility to achieve pricing targets provided that the overall margin meets the
requirements in the guidance and that anti-competitive practices are not used.
It is important to note the distinction between reporting base period experience data in
Worksheet 1 and projecting credible data for pricing. Base period experience must be reported
at the plan level if the plan existed in CY2014, regardless of the level of enrollment. This
experience must also be projected in Worksheet 2 and assigned an appropriate level of
credibility by the certifying actuary. Data may be aggregated for determining manual rates to
blend with partially credible projected experience rates or to account for significant changes in
enrollment from the base period to the contract year.
SPECIFIC TOPICS
Actuarial Equivalence
Actuarial equivalence must be demonstrated for plan benefit types other than Defined Standard
(DS).
When the plan benefit type is Actuarially Equivalent (AE), three tests must be satisfied on
Worksheet 4, Section IV, lines 16 through 18 to demonstrate actuarial equivalence:
•
•
•
The average coinsurance percentage for amounts between the deductible and the initial
coverage limit (ICL) must be actuarially equivalent to 25 percent.
The average coinsurance percentage above the catastrophic limit must be actuarially
equivalent to the percentage for DS coverage.
The average coinsurance percentage for amounts between the ICL and catastrophic
limit must be actuarially equivalent to the percentage for DS coverage.
When the plan benefit type is Basic Alternative (BA) or Enhanced Alternative (EA), six tests
must be satisfied to demonstrate actuarial equivalence on Worksheet 5, Section VI, lines 1
through 6:
•
•
•
•
The value of total coverage is at least actuarially equivalent to DS coverage.
The alternative unsubsidized value of coverage is no less than the DS unsubsidized
value of coverage.
The average alternative benefits for beneficiaries with allowed drug costs at the ICL are
not less than the average DS benefits at the ICL.
The deductible is not greater than the DS deductible.
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PRICING CONSIDERATIONS
•
•
The average alternative catastrophic cost sharing is not greater than the average DS
catastrophic cost sharing.
The average coinsurance percentage for amounts between the ICL and catastrophic
limit is at least actuarially equivalent to DS coverage.
Base Period Experience
The experience data must be based on a calendar year 2014 incurred period with at least
30 days of paid claim run-out; 2-3 months of paid claim run-out is preferable.
Worksheet 1 must be completed with data for the plan ID. Note that these data—
•
•
•
•
•
•
•
•
•
Must be submitted in Worksheet 1 for all plans with experience data for 2014,
regardless of the level of enrollment.
Must reconcile in an auditable manner to the plan-level Prescription Drug Event (PDE)
data submitted to CMS for payment and reconciliation and the Part D sponsor’s audited
financial statements.
Must include accepted PDEs, rejected PDEs that are expected to be accepted by CMS
upon resubmission, adjustments for Plan-to-Plan (P2P) transactions and, if appropriate,
transfer of over-the-counter (OTC) drug data from the base period experience to the
non-benefit expense component. The impacts of each of these considerations must be
quantifiable and must not be included in the completion factor.
Must be reported without adjustment. Adjustments may be made in Worksheet 2,
Sections II and III to accommodate population, benefit design or other changes from the
base period to the contract period.
May be reported in aggregate for a number of plans only when there are enrollment
changes associated with the dissolution of a plan and the retained members are crosswalked into existing plans in the same contract or across contracts. Each contract-plan
ID must be identified in Section II, line 6.
Must be provided for plans acquired by the Part D sponsor.
May not be used to aggregate data from a number of plans in order to achieve
credibility.
Must be reported in total at the plan level for every contract-plan ID when plans are
aggregated; do not include partial plan experience on Worksheet 1.
May be reported on more than one bid when plans are aggregated, depending upon how
enrollment changes are processed.
Data Aggregation
The requirements for reporting base period data for plan consolidations and enrollment
shifts depend on—
• How enrollment changes are processed.
o
In these Instructions, the term “formal cross-walk” refers to the cross-walk
process submitted in HPMS for plan consolidations (that is, consolidated
renewals), whereby members are automatically moved from one plan to
another (that is, one plan only). Without an HPMS cross-walk in place,
CY2016 Part D BPT Instructions
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PRICING CONSIDERATIONS
members are dis-enrolled from the terminating plan and must actively select
to enroll in a new plan of their choosing.
o
MARx enrollment transactions are used to automatically move members
from one plan to more than one plan, for example, when the service area of
one or more plans is redefined.
o
For more information, see section 140 in Chapter 4 of the Medicare
Managed Care Manual at http://www.cms.hhs.gov/Regulations-andGuidance/Guidance/Manuals/downloads/mc86c04.pdf.
• Whether or not enrollment changes that are processed via MARx enrollment
transactions apply to a significant percentage of members in the plan from which the
members are moving, as determined by the certifying actuary.
The requirements for reporting base period data for plan consolidations and enrollment
shifts are described below.
✓ Rule 1 – Plan Consolidations (Consolidated Renewals)
Base period data for more than one plan must be aggregated and reported on Worksheet
1 of the plan into which the members are cross-walked only in the following
circumstances:
•
When two or more plans are consolidated and the members are cross-walked into an
existing or new plan under a formal cross-walk.
• When a significant proportion of members (as determined by the certifying actuary)
in a plan are cross-walked into existing or new plans through MARx enrollment
transactions.
Note the following:
•
Members may be cross-walked each contract year. For BPT reporting purposes, the
actuary must consider the cross-walks from the base period to the contract year (that
is, from CY2014 to CY2015 and from CY2015 to CY2016).
• This rule applies when members are cross-walked within the same contract and
when members are cross-walked between contracts in accord with limited
exceptions described in CMS annual renewal and non-renewal guidance.
✓ Rule 2 – Enrollment Shifts
Base period data for more than one plan cannot be aggregated and reported on
Worksheet 1 in the following circumstances:
• When an existing member chooses to enroll in different plans.
• When an insignificant proportion of members (as determined by the certifying
actuary) in a plan are cross-walked into existing or new plans through MARx
enrollment transactions.
• When enrollment changes do not involve a cross-walk whether or not a plan is
terminated.
CY2016 Part D BPT Instructions
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PRICING CONSIDERATIONS
✓ Rule 3 – Partial Experience
Base period experience must be reported in total at the plan level for every contract-plan
ID; do not include partial plan experience on Worksheet 1.
Example 1
A PDP offers plans 001 and 002 in CY2014 and plans 002 and 003 (a new plan) in
CY2016. Plan 001 is consolidated and the membership is formally cross-walked
into plan 003 for CY2016 in accord with limited exceptions described in CMS
annual renewal and non-renewal guidance. Base period experience must be
reported on Worksheet 1 of the CY2016 BPT as follows:
•
•
For plan 002, report aggregate base period experience for plan 002 (Rule 1 and
Rule 3).
For plan 003, report base period experience for plan 001 (Rule 1 and Rule 3).
Example 2
A PDP offers plans 001, 002 and 003 in CY2014 and plans 003 and 004 in CY2016.
Plan 001 is consolidated and the membership is formally cross-walked into plan 004
for CY2016 as submitted in HPMS. Plan 002 is terminated for CY2016 and the
certifying actuary expects the membership in plan 002 to enroll evenly between
plans 003 and 004; however, there is no formal cross-walk or approved cross-walk
exception in place. Base period experience must be reported on Worksheet 1 of the
CY2016 BPT as follows:
•
•
For plan 003, report base period experience for plan 003 (Rule 2 and Rule 3).
Do not report base period experience for plan 002 (Rule 2).
For plan 004, report base period experience for plan 001 (Rule 1). Do not report
base period experience for plan 002 (Rule 2).
Example 3
A PDP offers plans 001, 002, 003 and 004 in CY2014 and plans 003 and 004 in
CY2016. Plan 001 is consolidated and the membership is formally cross-walked
into plan 002 for CY2015. Plan 002 is consolidated and the membership is formally
cross-walked to plan 003 for CY2016. Base period experience must be reported on
Worksheet 1 of the CY2016 BPT as follows:
•
•
For plan 003, report base period experience for plans 001, 002 and 003 (Rule 1
and Rule 3).
For plan 004, report base period experience for plan 004.
CY2016 Part D BPT Instructions
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PRICING CONSIDERATIONS
PDE Mapping
A mapping of PDE fields to required BPT inputs is provided in the following table.
Column
(f)
(g)
(i)
(j)
(k)
(l)
(m)
Mapping of Prescription Drug Events to Part D Claims Experience
in Worksheet 1, Section III
Field Name
PDE Reference Information
Total Number of Scripts
Count # of PDEs where (Ingredient
Cost + Dispensing Fee + Sales Tax +
Vaccine Administration Fee) > Zero
Total Allowed Dollars
Σ (Ingredient Cost + Dispensing Fee +
Sales Tax + Vaccine Administration
Fee)
Average Paid Amount per Member
Σ [Covered Plan Paid Amount (CPP)
+ Non-Covered Plan Paid Amount
(NPP) + Low-Income Cost Sharing
(LICS)] / Members
Average Cost Sharing per Member
Σ [Patient Pay Amount + Other
TrOOP Amount + Reported Gap
Discount + Patient Liability Reduction
due to other Payer Amount (PLRO)] /
Members
Supplemental Cost-Share Reduction per
Σ [Non-Covered Plan Paid Amount
Member
(NPP)] / Members
Reimbursement for LIS per Member
Σ [Low-Income Cost Share (LICS)] /
Members
Reimbursement for Federal Reinsurance per
Σ {[Gross Drug Cost above Out-ofMember
Pocket Threshold (GDCA) with
Catastrophic Coverage Codes A or
C]* 0.8} / Members
When using PDE data, actuaries must be familiar with the process by which the
PDE transactions are developed from claims data and with the timing of the
adjustment and deletion processes to ensure that the final transaction is accurately
summarized. This process includes, but is not limited to, consideration of rejected
PDEs that are expected to be accepted by CMS upon resubmission, adjustments for
Plan-to-Plan transactions and, if appropriate, transfer of over-the-counter drug data
from the base period experience to the non-benefit expense component. It is
important to note that a PDE maps to one script throughout the BPT regardless of
the number of days for which the prescription is dispensed.
Coverage in the Gap
Medicare Coverage Gap Discount Program (CGDP)
The following guidelines apply to all Part D bids:
CY2016 Part D BPT Instructions
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PRICING CONSIDERATIONS
•
•
•
•
•
•
•
Applicable drugs under the Medicare CGDP are defined as those that are on the
plan’s formulary or are treated as if on formulary through the exceptions process
and are approved under a new drug application (NDA) under Section 505(b) of the
Federal Food, Drug and Cosmetic Act or, in the case of a biologic, licensed under
Section 351 of the Public Health Service Act. In general, this definition applies
regardless of the drug’s placement on the plan-specific formulary.
Only those applicable Part D drugs covered by a manufacturer discount agreement
are eligible for coverage under the program.
In CY2015, beneficiary cost sharing for applicable drugs is 45 percent of the
negotiated price plus 45 percent of the dispensing and vaccine administration fees, if
any; the Part D sponsor’s liability is 5 percent of the negotiated price plus 55
percent of the dispensing fee and vaccine administration, if any. Ninety-five (95)
percent of the negotiated price of the applicable drug and 45 percent of the
dispensing fee and vaccine administration fee, if any, must be reported as
beneficiary cost sharing in the bid.
Coverage gap discounts begin when the beneficiary exceeds the plan-specific ICL.
The administrative costs associated with administering the program must be
included in the non-benefit expense component of the bid.
The manufacturer discount amounts received under this program are not direct and
indirect remuneration because they do not decrease the drug costs incurred by the
Part D sponsor. Therefore, the manufacturer discounts must not be reported as
rebate amounts in the bid.
Applicable drugs must be reported as brand drugs in the bid.
Generic Drugs
The following guidelines apply to all Part D bids:
•
•
•
•
In the coverage gap, a drug is considered a generic drug, or non-applicable drug, if it
is not defined as an applicable drug under the Medicare CGDP. In general, this
definition applies regardless of the drug’s placement on the plan-specific formulary.
In CY2015, beneficiary cost sharing is reduced to 65 percent and the Part D
sponsor’s liability is increased to 35 percent.
Generic (non-applicable) drug coverage in the gap begins when the beneficiary
exceeds the plan-specific ICL.
Non-applicable drugs must be reported as generic drugs in the bid.
Pricing Considerations
Part D sponsors must model the impact of coverage in the gap on the DS benefit and
alternative benefit (AE, BA or EA), if applicable.
•
While coverage in the gap does not change the TrOOP threshold, it will affect the
point at which the beneficiary reaches the TrOOP threshold for catastrophic
coverage.
CY2016 Part D BPT Instructions
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PRICING CONSIDERATIONS
•
•
The changes to projected average allowed amounts from the base period to the
contract year that are expected to occur as a result of reduced beneficiary cost
sharing must be reflected in the “Other Change” components of utilization and unit
cost trend factors on Worksheet 2.
The impact on the Federal Reinsurance PMPM must be reflected in line 5, column
m of Worksheet 3.
The following guideline applies when the type of coverage is AE, BA or EA:
•
When an alternative coverage is modeled, members must be reported in the claims
interval in which they were reported under DS coverage even though their total drug
spending may be different because of the impact of the alternative benefits.
The following guideline applies when the type of coverage is EA:
•
When an EA plan offers coverage in the gap that exceeds the DS coverage:
◦ Reflect the projected value of the DS coverage and the additional partial or
full coverage in Worksheet 5, Section IV cells K37 and K47, “Amounts in
the Gap PMPM” and “Coinsurance Percentage in Gap”, respectively.
◦ Report the drugs on the “enhanced” tiers based on the plan-specific
formulary.
◦ Report all other drugs based on the definition of applicable and nonapplicable drugs.
Credibility
Claims Credibility
This section pertains to the experience credibility percentages on Worksheet 2.
Based on an application of classical credibility theory to Medicare Part D experience,
CMS has established a guideline for full credibility of 18,000 base period member
months. The formula for partial credibility is the square root of the result of actual base
period member months divided by 18,000. This formula is a guideline. Part D sponsors
may use a different credibility methodology but any method must be consistently
applied among all bids in the contract.
The certifying actuary must adhere to the following rules of overriding the CMS
formula for partial credibility:
•
If the CMS formula for partial credibility is applied to base period member months
and the resulting credibility is—
◦ Less than or equal to 20 percent (that is, 720 or fewer Part D member
months), then the actuary may override the computed credibility with 0
percent.
◦ Greater than or equal to 90 percent (that is, 14,580 or more Part D member
months), than the actuary may override the computed credibility with
100 percent.
CY2016 Part D BPT Instructions
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PRICING CONSIDERATIONS
•
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.
Risk Score Credibility
This section pertains to the application of credibility in developing projected risk scores.
The use of CMS claims credibility guideline above is not permitted for risk scores. The
certifying actuary must use actuarial judgment in developing a credibility guideline for
risk scores. CMS has not developed a separate credibility guideline for risk scores.
Decreased Initial Coverage Limit
Part D sponsors that are decreasing the ICL must modify the pricing of the benefit in the BPT.
Specifically:
✓ Worksheet 6, column k, lines 1 through 8 and 19 through 26
Enter the total cost sharing for allowed costs up to the DS ICL of $320 by point-of-sale
(retail or mail order as defined by the PBP) and type of drug for each line. Total cost
sharing is the sum of (i) the amounts calculated based on the cost-sharing structure of
the alternative coverage up to the decreased ICL and (ii) 65 percent of the allowed costs
of non-applicable (generic) drugs and 95 percent of the negotiated price of applicable
(brand) drugs plus 45 percent of dispensing fees and vaccine administration, if any, for
applicable (brand) drugs between the decreased ICL and standard ICL.
Direct and Indirect Remuneration (DIR)
Part D sponsors must include all expected amounts that will be reported as DIR under “Rebate”
in the BPT. The DIR reported under “Rebate” represents the Part D sponsors’ best estimate of
all DIR categories and amounts that they expect to report under the Part D payment
reconciliation process for the respective contract year.
Definition of Direct and Indirect Remuneration
Per 42 CFR Section 423.308, direct and indirect remuneration (DIR) comprises any and
all rebates, subsidies, or other price concessions from any source (including
manufacturers, pharmacies, enrollees, or any other person or entity) that serve to
decrease the costs incurred by the Part D sponsor (whether directly or indirectly) for the
Part D drug. DIR includes discounts, charge-backs, average percentage rebates, cash
discounts, free goods contingent on a purchase agreement, up-front payments, coupons,
goods in kind, free or reduced-price services, grants, or other price concessions or
similar benefits. DIR does not include the manufacturer discount amounts received
under the Medicare CGDP.
DIR also includes price concessions from pharmaceutical manufacturers for purchases
under the Medicare prescription drug benefit that are received by subcontractors of
Part D sponsors, such as pharmacy benefit managers (PBM), even if the price
concessions are retained in lieu of higher service fees. CMS must assume that if a PBM
CY2016 Part D BPT Instructions
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PRICING CONSIDERATIONS
retains a portion of the manufacturer rebates that it negotiates on behalf of a Part D
sponsor, the direct payment that the PBM receives from the sponsor for its services will
be less, since the sponsor will have received a price concession from the PBM. This
price concession is a retained rebate and thus must be reported as DIR for payment
purposes.
In accordance with CMS guidance, Part D sponsors may enter into risk-sharing
arrangements with entities other than CMS by sharing risk only around the cost of the
drug as reflected on claims data, not around administrative services, professional
services or other disallowed fees. Any gains or losses that the Part D sponsor may
experience as a result of these risk-sharing arrangements also constitute DIR that must
be reported to CMS. As with other types of DIR, the value can be negative.
Generic dispensing incentive payments, and any adjustments to generic dispensing
incentive payments made to pharmacies after the point-of-sale dispensing event, are
also considered DIR. Please note that generic dispensing incentive payments made to
the pharmacy at the point-of-sale are part of the dispensing fee reported on the PDE
record and therefore are not included in the DIR Report for Payment Reconciliation.
Enrollment
The projected enrollment for the Part D bid in an MA-PD plan must be consistent with that for
the corresponding MA bid and must reflect the same underlying population.
Gain/Loss Margin
Gain/loss margin refers to the additional revenue requirement beyond allowed prescription drug
costs and non-benefit expenses. The gain/loss requirements ensure that gain/loss margins are
reasonable and that a Part D organization’s Part D business is not used to subsidize its other
insurance lines of business.
The gain/loss margin entered in the bid must be determined in consideration of other CMS
requirements such as Total Beneficiary Costs (TBC) and Medical Loss Ratio (MLR). CMS
expects that the gain/loss margin will be set with appropriate consideration for the need to remit
funds to CMS if the Part D sponsor’s actual claims experience fails to meet the minimum MLR
requirements. Further, if there is a conflict between satisfying gain/loss margin requirements
and other CMS requirements, flexibility will be given to the gain/loss margin requirements only
to the extent necessary to meet the other CMS requirements. Such modifications to the
gain/loss margin requirements must be fully explained and supported.
Requirements apply at two levels—the bid (PBP) level and an aggregate level; both sets of
requirements must be met in the initial bid submission and following bid resubmission or
withdrawal.
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;
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• The bid margin is non-negative or the special rules for bids with negative
margins outlined below are followed; and
• All aggregate-level margin requirements described below are met.
Benefit Value
The bid must provide benefit value in relation to the margin level.
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 Part D sponsor must
develop, submit and follow a bid-specific business plan that is to achieve
profitability within 5 years. Exceptions to the 5-year period for unique situations
must be fully explained and supported. CMS expects that in subsequent years, Part
D projected gain/loss margins for the plan will meet or exceed the year-by-year Part
D 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 multiple Part D
products are offered in a given service area and the pricing reflects implicit
“subsidies” across benefit or service area offerings. The plans in the product
offering must—
• Have identical service areas; and
• Have a positive combined gain/loss margin for CY2016.
An example is a low-benefit plan with a positive margin paired with a rich-benefit
plan with a negative margin.
Aggregate-Level Requirements (Overall Margin)
In these Instructions, the term “non-Medicare” business refers to all health insurance
business that is not Medicare Advantage or Part D. Non-Medicare business includes,
but is not limited to, the following lines of business: Medicare-Medicaid, Medicaresupplemental, Medicaid and commercial.
The aggregate gain/loss margin levels in the BPT for Part D plans—
• Must be determined at one of the following three levels: the contract level,
organization level (that is, the legal entity that contracts with CMS to provide
Part D benefits) or parent organization level. The Part D sponsor must enter the
chosen level of aggregation in Worksheet 3, cell D46 of the BPT.
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PRICING CONSIDERATIONS
• Must be consistent from year to year.
• Must be within 1.5 percent of the Part D sponsor’s margin for all non-Medicare
business, as measured by percentage of revenue. If the volume of the Part D
sponsor’s commercial non-Medicare business for which it has discretion in rate
setting is less than 10% of the Part D sponsor’s total non-Medicare business or
the Part D sponsor has no non-Medicare business, then the aggregate margin
must be consistent with the Part D sponsor’s corporate return requirement set by
taking into account the degree of risk and capital and surplus requirements of
the 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.
The individual Part D margin of an MA-PD bid may either be the same for all plans or
vary by plan in relation to the MA margin. The certifying actuary may not satisfy the
gain/loss margin requirements by combining margins for the MA and Part D
components of the MA-PDs. See the “Instructions for Completing the Medicare
Advantage Bid Pricing Tool for Contract Year 2016” for options in setting the margin
for the MA and Part D components of MA-PD bids.
For bids participating in the Minnesota Senior Health Options program, additional
aggregate-level margin requirements may be found at http://www.cms.gov/MedicareMedicaid-Coordination/Medicare-and-Medicaid-Coordination/Medicare-MedicaidCoordination-Office/FinancialAlignmentInitiative/Downloads/MNMOU.pdf.
Exclusions
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.
Health Care Reform
See Appendix F for information concerning the provisions of the Patient Protection and
Affordable Care Act as amended by the Health Care and Education Reconciliation Act of 2010,
known collectively as the Affordable Care Act.
Non-Benefit Expenses
Non-benefit expenses are all of the bid-specific administrative costs incurred in the operation of
the Medicare Prescription Drug Plan.
The non-benefit expenses must be entered separately on the BPT for the following categories:
•
Sales & Marketing
◦ Examples include, but are not limited to the cost of—
‣ Marketing materials;
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PRICING CONSIDERATIONS
•
•
‣ Commissions;
‣ Enrollment packages;
‣ Identification cards; and
‣ Salaries of sales and marketing staff.
Direct Administration
◦ Examples include, but are not limited to—
‣ Customer service;
‣ Billing and enrollment;
‣ Claims administration;
‣ True out-of-pocket (TrOOP) administration;
‣ Pharmacy benefit management administration, which includes all of the
costs for performing call center, claims, formulary management, network
development and rebate management functions incurred by the plan or
through a subcontractor;
‣ Medicare CGDP administration;
‣ Medicare Part D user fees, which are $1.22 per-member per-year (pmpy) or
$0.102 per-member-per-month (pmpm) on a national basis for CY2015. The
COB user fee will be collected at a monthly rate of $0.136 pmpm for the
first nine months of the coverage year;
‣ Part D National Medicare Education Campaign (NMEC) user fees. CMS
collects NMEC user fees based on a percentage of revenue; however, the
BPT entry is a pmpm equivalent value consistent with the calculation of
other BPT values. Part D sponsor may use the CMS estimate, which is
$0.60 pmpy or $0.05 pmpm on a national basis for CY2015, or develop an
alternative estimate that is consistently applied to all plans in the contract—
for example, the Part D sponsor’s historical amount relative to the CMS
annual national estimate;
‣ Uncollected enrollee premium;
‣ Uncollected cost sharing, which includes plan liability resulting from cost
sharing not recovered in state-to-plan or plan-to-plan transactions;
‣ Medication therapy management programs;
‣ Disease management functions such as patient education and disease
monitoring; and
‣ Over-the-counter drugs.
Indirect Administration
◦ Examples include, but are not limited to, functions that may be considered
“corporate services,” such as—
‣ The position of CEO;
‣ Accounting operations;
‣ Actuarial services;
‣ Legal services; and
‣ Human resources.
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PRICING CONSIDERATIONS
•
•
Net Cost of Private Reinsurance (that is, reinsurance premium less projected
reinsurance recoveries)
Insurer Fees
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 is promulgated by the Financial Accounting Standards Board
(FASB). Of particular applicability is FASB’s Statement of Financial Accounting No. 60,
Accounting and Reporting by Insurance Enterprises.
Costs not pertaining to administrative activities must be excluded from non-benefit expenses.
Such costs include goodwill amortization, income taxes, changes in statutory surplus,
investment expenses and the cost of lobbying activities. See the Gain/Loss Margin section of
Pricing Considerations for more information.
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,
non-benefit expenses must be allocated proportionately between the Medicare revenue and the
other revenue source.
Non-Uniform Deductible
Part D sponsors that are implementing a deductible that is not applied consistently among all
formulary tiers (for example, $0 deductible for Tier 1 – Generics and $320 deductible for all
other tiers) must modify the pricing of the benefit in the BPT. Specifically:
✓ Worksheet 5
Enter “$0” in cells D39 and F41.
✓ Worksheet 6
Reflect the impact of the non-uniform deductible in addition to the cost sharing required
after the deductible is met in the applicable cost-sharing categories by point-of-sale
(retail or mail order as defined by the PBP) and type of drug.
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PBM Pricing
For CY2016, Part D sponsors must develop their Part D bids using the pass-through price or
negotiated amount paid to the dispensing provider at the point-of-sale as the basis for drug
costs. For Part D sponsors that are contracted with a PBM, the following provisions apply:
(i) when contracted under a lock-in pricing approach, the administrative expense component of
the bid must reflect the expected difference between the lock-in price, or amount negotiated
with the PBM, and the pass-through price (this difference is referred to as the risk premium or
PBM spread); and (ii) when the PBM retains a portion of the rebates, the administrative
expense component of the bid must include these costs.
Related-Party Arrangements
The related-party requirements apply to all Part D sponsors that enter into any type of
arrangement with or receive services from an entity that is associated with the Part D sponsor
by any form of common, privately-held ownership, control or investment. This includes any
arrangement where the Part D sponsor does business with a related party through one or more
unrelated parties, such as a pharmacy or a pharmacy benefit manager. The requirements apply
to all related-party arrangements supporting the bid which are in effect during the base period
and/or contract year.
The objective of the requirements for related-party arrangements is to ensure that financial
arrangements between the Part D sponsor and related parties (i) are not significantly different
from the financial arrangements that would have been achieved in the absence of the
relationship and (ii) do not provide the opportunity to over- or under- subsidize the bid.
CMS requires all Part D sponsors to disclose whether or not they are in a business arrangement
with a related party. Part D sponsors in a business arrangement with a related party must
disclose and support each and every related-party arrangement at the time of the initial bid
submission and prepare the bid and documentation in accord with the requirements in this
section and Appendix B of these Instructions for each identified related party.
A Part D sponsor in a related-party arrangement must—
•
•
•
Declare the related-party arrangement(s) to CMS at the time of the initial bid
submission.
Disclose all services that are covered in the arrangement(s). These include, but are not
limited to:
◦ Claims processing
◦ Network (retail and mail order pharmacy) access
◦ Clinical services, such as Utilization Management
◦ Formulary management
◦ Rebate contracting
◦ Drugs at related-party retail and/or mail order pharmacies
◦ Marketing materials and ID cards
◦ Call center operations
Select one of the following methods for entering costs associated with the related-party
arrangement into the BPT.
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◦
◦
◦
◦
Actual Cost Method for Administrative Services,
Actual Cost Method for Benefit Costs,
Market Comparison through Part D Sponsor, or
Market Comparison through Related Party
Part D sponsors always have the option to use the Actual Cost Method in bid preparation. Part
D sponsors only have the option to use the Market Comparison through Part D Sponsor Method
when the Part D sponsor has a comparable arrangement with an unrelated party. Part D
sponsors only have the option to use the Market Comparison through Related Party Method
when the related party has a comparable arrangement with an unrelated party. For comparison
purposes, the unrelated party must be a Part D organization for benefit costs arrangements and
may be a Part D or non-Medicare organization for administrative services arrangements.
Comparable rate demonstrations must be based on actual contracts which must be available for
review upon request by CMS. When supporting comparable rates through the related party, the
analysis must be accompanied by a signed attestation from the related party stating that the
actual contracts will be available for review upon request by CMS.
Actual Cost Method for Administrative Services
A Part D sponsor using the actual cost method for administrative services must prepare
the BPT in a manner that does not recognize the independence of the related party.
Under this method, the BPT is prepared as follows:
• The related party’s costs are entered as if they are the Part D sponsor’s costs.
• The non-benefit expense and gain/loss margin of the related party are entered as
the non-benefit expense and gain/loss margin, respectively, of the Part D
sponsor.
Supporting documentation of the development of the actual cost method for
administrative services must be provided with the initial bid submission as required in
Appendix B of these Instructions.
Actual Cost Method for Benefit Costs
Under the actual cost method for benefit costs, the BPT is prepared as follows:
• All fees paid to the related party for benefit costs are entered as the benefit
expense of the Part D sponsor.
• The related-party benefit costs are consistent with the actual and projected PDE
experience of the plan.
• The gain or loss of the related party with respect to the Part D benefit costs is
provided in the supporting documentation.
Supporting documentation of the development of the actual cost method for benefit
costs must be provided with the initial bid submission as required in Appendix B of
these Instructions.
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Market Comparison through Part D Sponsor Method
A Part D sponsor using the market comparison through Part D sponsor method must
prepare the BPT in a manner that recognizes the independence of the related party by
reporting all costs in the related-party agreement to non-benefit expense for
administrative services arrangements and to benefit expenses for benefit costs
arrangements. To demonstrate that the arrangement with the related party is
comparable, the Part D sponsor must–
• Provide an analysis that clearly explains how the financial results are not
significantly different from what is achieved in the absence of the related-party
relationship for the same services.
• Show that results from the same utilization priced through the related and
unrelated party contracts are within plus or minus five percent.
• Show that both contracts in the comparison are associated with sufficient costs
to be considered valid contracts.
Supporting documentation for the market comparison through Part D sponsor method
must be provided with the initial bid submission as required in Appendix B of these
Instructions.
Market Comparison through Related Party Method
A Part D sponsor using the market comparison through related party method must
prepare the BPT in a manner that recognizes the independence of the related party by
reporting all costs in the related-party agreement to non-benefit expense for
administrative services arrangements and to benefit expenses for benefit costs
arrangements. To demonstrate that the arrangement with the Part D sponsor is
comparable to arrangements with unrelated parties, the related party must–
• Provide an analysis that clearly explains how the financial results are not
significantly different from what is achieved in the absence of the related-party
relationship for the same services.
• Show that results from the same utilization priced through the related and
unrelated party contracts are within plus or minus five percent.
• Show that both contracts in the comparison are associated with sufficient costs
to be considered valid contracts.
Supporting documentation for the market comparison through related party method
must be provided with the initial bid submission as required in Appendix B of these
Instructions.
Risk Score Development for CY2015
The projected CY2015 risk score must—
•
•
Be based on the Part D RxHCC model used in payment year 2015;
Reflect plan-specific coding trend;
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PRICING CONSIDERATIONS
•
•
Be appropriate for the expected population; and
Be adjusted for normalization.
Risk Score Definitions and Information Sources
Part D RxHCC Risk Model
CMS will continue to use the same RxHCC risk model for CY2015 that it is using for
CY2014 payment. Diagnosis data from CY2010 were used to predict CY2011
expenditures; the denominator year is CY2011. Additional information, including the
CY2015 normalization factor, is contained in the CY2015 Rate Announcement,
published April 7, 2014.
Normalization Factor
At time of payment, the risk scores for each plan enrollee will be adjusted by the Part D
normalization factor, which is 0.961 for CY2015. This adjustment accounts for the
actual program risk score experience and the expected increase in risk scores between
the contract year (2015) and the denominator year (2011). Accordingly, the projected
risk scores for CY2015 bids must reflect the normalization factor.
Risk Adjustment Information Sources
The following materials can be found through the “Announcements & Documents” link
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) 2015 Medicare Advantage Capitation Rates
and Medicare Advantage and Part D Payment Policies”
• “Advance Notice of Methodological Changes for Calendar Year (CY) 2015 for
Medicare Advantage (MA) Capitation Rates, Part C and Part D Payment Policies
and 2015 Call Letter”
See also the links under “Risk Adjustment” 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 CY2015 risk scores is to start with the Part D
RxHCC risk scores that are provided by CMS in—
•
•
The plan-level data for the July 2013 enrollee cohort with retroactive enrollment and
status adjustments; or
The beneficiary-level file containing 12 months of 2013 membership with
retroactive enrollment adjustments and status adjustments.
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PRICING CONSIDERATIONS
The plan-level data will be available after the publication of the 2015 Rate
Announcement under the “Risk Adjustment” link on the HPMS Home page. The risk
score data posted in HPMS are calculated using the model that will be used for 2015
and are accompanied by technical notes to assist actuaries with understanding the
material presented. The beneficiary-level data provide the 2013 risk scores calculated
using both the risk model used for 2013 payment and the model to be used for 2015.
These data are sent electronically to Part D sponsors at about the same time.
There are several advantages to using these 2013 Part D RxHCC risk scores in the
projection of the CY2015 risk score:
•
•
•
•
•
They are consistent with the base-period prescription drug expenses.
They require no adjustment for seasonality.
They reflect the most complete MA diagnosis data for 2012 dates of service
submitted through January 31, 2014, which is the final reporting deadline for this
period.
They require no adjustment for a risk model change.
In the beneficiary-level file, they are based on both the model used in 2013 and the
RxHCC model to be used in 2015. In the plan-level data, they are based on the
latest model.
Please note that since the HPMS plan-level risk scores are based on a mid-year
cohort with full calendar year data and 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 2013 to 2015 with explicit adjustment for the
following factors, as appropriate:
◦
◦
◦
Plan-specific coding trend.
Changes in plan population.
Other appropriate factors.
Finally, the projected risk scores must be normalized by dividing by the 2015 Part D
normalization factor.
Alternate Approaches
An alternate method for the development of risk scores may be appropriate if the plan
was first offered in 2014, if there was limited enrollment in 2013, or if there were
significant changes in plan or enrollment characteristics between 2013 and 2014.
If a Part D 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.
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PRICING CONSIDERATIONS
•
•
•
•
•
•
•
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
2014 MMR data, which contain risk scores based on the July 2012 to June
2013 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.
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 CY2015 payments, then an adjustment for the risk model change
must be made. The adjustment must include accounting for diagnoses that
are not included in the older risk models, but are included in the updated
model.
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 CY2015, the scores must be normalized by dividing by the 2015
Part D normalization factor. Note that, if a nominal or actual risk score associated with
a different model calibration year is being normalized, the CY2015 Part D
normalization factor is not appropriate.
Supporting documentation that clearly demonstrates consistency with the preferred
approach is required.
See the credibility pricing consideration for more information about the projection of risk
scores.
Sequestration
Pricing assumptions must consistently reflect the certifying actuary’s best estimate of the
likelihood that sequestration will occur in CY2016.
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PRICING CONSIDERATIONS
CMS recognizes that under sequestration the gain/loss margin entered in the BPT is not the
gain/loss margin that the Plan sponsor will actually achieve; however, margin requirements
must be met with the gain/loss margin entered in the BPT.
Supporting Documentation
In addition to the BPT and actuarial certification, organizations must submit supporting
documentation for every bid. See Appendix B for a description of the supporting
documentation requirements, including content, quality and timing.
Types of Part D-Covered Drugs
Brand Drugs
Brand drugs consist of (i) single-source drugs with no generic equivalent that were
FDA-approved under an original new drug application (NDA) and (ii) innovator multisource drugs that were originally marketed under an original NDA and that now have
generic equivalents.
Preferred/Non-Preferred Brand Drugs
Brand drugs that are placed in the most favorable position on the formulary in
comparison to other similar brand drugs should be allocated to the preferred brand drug
category. Brand drugs that are positioned in a less favorable position on the formulary
should be allocated to the non-preferred brand category in the BPT.
Generic Drugs
Non-innovator multi-source drugs are generic drugs.
Specialty Drugs
Specialty drugs are reported separately only when a plan utilizes a designated Specialty
tier in the formulary and PBP in accord with CMS guidelines. The CMS guidelines
require that (i) only one tier be designated a Specialty tier, (ii) only Part D-covered
drugs with plan-negotiated prices greater than $600 per month supply be placed in the
tier, and (iii) cost sharing associated with that tier be limited to 25 percent in the initial
coverage range when the plan has the standard deductible, which is $320 for CY2015.
When the plan has a decreased or no deductible, then an actuarially equivalent
coinsurance is permitted.
When a designated Specialty tier is used, all drugs in that tier must be reported by pointof-sale (retail or mail order as defined by the PBP) in Worksheets 2, 6 and 6A of the
BPT. The drugs in the Specialty tier must not be sorted by type of drug status and must
not be reported as a component of the generic, preferred brand and non-preferred brand
drugs in the non-Specialty tiers.
When a designated Specialty drug tier is not used in the formulary and PBP, Specialty
drugs must be sorted by generic, preferred brand and non-preferred brand status and
must be reported in these categories by point-of-sale (retail or mail order as defined by
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PRICING CONSIDERATIONS
the PBP). In this situation, the Specialty categories in Worksheet 2, 6 and 6A are not
completed.
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DATA ENTRY & FORMULAS
III. DATA ENTRY AND FORMULAS
This section includes line-by-line instructions for completing the Part D BPT. It also describes
the formulas for calculated cells.
PRESCRIPTION DRUG
To complete the Part D bid form, Part D sponsors must provide a series of data entries on the
appropriate BPT worksheets. The number of inputs depends on the type of plan being offered
and the length of time it has had a contract with CMS, among other factors.
The Part D bid form is organized as outlined below:
Worksheet 1 – Rx Base Period Experience
Worksheet 2 – PDP Projection of Allowed/Non-Benefit
Worksheet 3 – Rx Contract Period Projection for Defined Standard Coverage
Worksheet 4 – Rx Standard Coverage with Actuarially Equivalent Cost Sharing
Worksheet 5 – Rx Alternative Coverage
Worksheet 6 – Rx Script Projections for Defined Standard, Actuarially Equivalent or
Alternative Coverage
Worksheet 6A – Coverage in the Gap
Worksheet 7 – Summary of Key Bid Elements
All Part D sponsors must complete Section I of Worksheet 1; completion of subsequent
sections of the BPT is based on the plan benefit type being offered. The worksheets and
sections that must be completed for each plan benefit type are defined below.
Defined Standard Coverage
✓ Worksheet 1
For all plans, complete Section I; for plans with claims experience in CY2014, complete
all sections.
✓ Worksheet 2
For plans with fully credible claims experience in CY2014, complete Sections II, III, IV
Column O, V and VII; for plans with partially credible claims experience in CY2014,
complete all sections. For new plans in CY2015 and CY2016, complete Sections IV, V,
VI and VII.
✓ Worksheet 3
Complete all sections for all plans.
✓ Worksheet 6
Complete columns f, g, and h of Section II for all plans.
✓ Worksheet 6A
Complete columns f, g, and h of Section II for all plans.
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DATA ENTRY & FORMULAS
✓ Worksheet 7
Complete all sections for all plans.
Actuarially Equivalent Coverage
✓ Worksheet 1
For all plans, complete Section I; for plans with claims experience in CY2014, complete
all sections.
✓ Worksheet 2
For plans with fully credible claims experience in CY2014, complete Sections II, III, IV
Column O,V and VII; for plans with partially credible claims experience in CY2014,
complete all sections. For new plans in CY2015 and CY2016, complete Sections IV, V,
VI and VII.
✓ Worksheet 3
Complete all sections for all plans.
✓ Worksheet 4
Complete all sections for all plans.
✓ Worksheet 6
Complete all columns of Section II for all plans.
✓ Worksheet 6A
Complete all columns of Section II for all plans.
✓ Worksheet 7
Complete all sections for all plans.
Basic and Enhanced Alternative Coverage
✓ Worksheet 1
For all plans, complete Section I; for plans with claims experience in CY2014, complete
all sections.
✓ Worksheet 2
For plans with fully credible claims experience in CY2014, complete Sections II, III, IV
Column O, V and VI; for plans with partially credible claims experience in CY2014,
complete all sections. For new plans for CY2015 and CY2016, complete Sections IV,
V, VI and VII.
✓ Worksheet 3
Complete all sections for all plans.
✓ Worksheet 5
Complete all sections for all plans.
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DATA ENTRY & FORMULAS
✓ Worksheet 6
Complete all columns of Section II for all plans.
✓ Worksheet 6A
Complete all columns of Section II for all plans
✓ Worksheet 7
Complete all sections for all plans.
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.
CY2016 Part D BPT Instructions
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WORKSHEET 1
PD WORKSHEET 1 – RX BASE PERIOD EXPERIENCE
Worksheet 1 contains general information about the plan and summarizes the base period Rx
experience. Specifically, Section I collects general information about the plan that is displayed
on all Part D BPT worksheets. Section II collects base period background information;
Section III summarizes the base period Rx experience. Sections IV and V summarize
components of the base period non-benefit expense and premium revenue, respectively.
Section VI is an Income Statement Summary.
Section I must be fully completed for all plans. (Note that some fields may be pre-populated by
the Plan Benefit Package (PBP) software.) Sections II through VI must be completed for all
plans with experience data for 2014 regardless of the level of enrollment.
SECTION I – GENERAL INFORMATION
The fields of Section I have been formatted as the “General” format in Excel to support the link
functionality to other spreadsheets. Therefore, certain numeric fields, such as Plan ID,
Segment ID and Region Number, must be entered as text–that is, using a preceding
apostrophe–and must include any leading zeros.
Line 1 – Contract Number
Enter the contract number for the plan. The designation begins with a capital letter H (local
plan), R (regional Preferred Provider Organization plan), or S (Prescription Drug Plan) and
includes four Arabic numerals (for example, H9999, R9999, S9999). Include all leading zeros
(for example, H0001).
Line 2 – Plan ID
The plan ID and corresponding contract number form a unique identifier for the PBP being
priced in the bid form. Plan IDs contain three Arabic numerals. This field must be entered as a
text input and must include any leading zeros.
Line 3 – Segment ID
If the bid is for a “service area segment” of a local plan, enter the segment ID. This field must
be entered as a text input and must include any leading zeros.
Line 4 – Contract Year
The cell is pre-populated with the calendar year to which the contract applies.
Line 5 – Organization Name
Enter the organization’s legal entity name. This information also appears in HPMS and in the
PBP.
Line 6 – SNP
If the plan is a Special Needs Plan (SNP), enter “Y”. Otherwise, enter “N”.
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WORKSHEET 1
Line 7 – Plan Name
Enter the name of the PBP. This information also appears in HPMS.
Line 8 – Plan Type
Enter the type of Part D plan. The valid options are listed in the table below.
Type of Plan
Local Coordinated Care Plans:
Health Maintenance Organization (HMO)
Religious Fraternal Benefit HMO
Religious Fraternal Benefit HMO with a Point-of-Service (POS)
Option
HMO with a POS Option
Provider-Sponsored Organization (PSO) with a State License
Religious Fraternal Benefit with a State License
Preferred Provider Organization (PPO)
Religious Fraternal Benefit PPO
Regional Coordinated Care Plan:
Regional Preferred Provider Organization (RPPO)
Private Fee-for-Service Plans:
Private Fee-for-Service Plan (PFFS)
Religious Fraternal Benefit PFFS
Prescription Drug Plans:
Medicare Prescription Drug Plan (PDP)
Fallback Plan
Demonstration Plans:
National PACE
Cost Plans:
1876 Cost
1833 Cost
Plan Type Code
HMO
RFB HMO
RFB HMO POS
HMO POS
PSO State License
RFB PSO State License
LPPO
RFB LPPO
RPPO
PFFS
RFB PFFS
PDP
Fallback
PACE
1876 Cost
1833 Cost
Line 9 – Enrollee Type
If the plan covers enrollees eligible for both Part A and Part B of Medicare, enter “A/B”. If the
plan covers enrollees eligible for Part B only, enter “Part B Only”. When the plan type is
“PDP” or “Fallback”, then the enrollee type cell is white and locked; no input is required.
Line 10 – PD Region
When the plan type is “PDP”, enter the region number of the region the plan will cover. This
field must be entered as a text input and must include any leading zeros.
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WORKSHEET 1
The valid entries are shown in the following table:
Region
01
02
03
04
05
06
07
08
09
10
11
12
13
14
15
16
17
18
19
20
Description
Maine and New Hampshire
Connecticut, Massachusetts,
Rhode Island and Vermont
New York
New Jersey
Delaware, District of Columbia
and Maryland
Pennsylvania and West Virginia
Virginia
North Carolina
South Carolina
Georgia
Florida
Alabama and Tennessee
Michigan
Ohio
Indiana and Kentucky
Wisconsin
Illinois
Missouri
Arkansas
Mississippi
CY2016 Part D BPT Instructions
Region
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
Description
Louisiana
Texas
Oklahoma
Kansas
Iowa, Minnesota, Montana,
Nebraska, North Dakota, South
Dakota and Wyoming
New Mexico
Colorado
Arizona
Nevada
Oregon and Washington
Idaho and Utah
California
Hawaii
Alaska
American Samoa
Guam
Northern Mariana Islands
Puerto Rico
Virgin Islands
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WORKSHEET 2
Line 11 – Plan Benefit Type
Enter the plan benefit type that identifies the type of coverage in the PBP. The valid
options are “DS” for Defined Standard, “AE” for Actuarially Equivalent, “BA” for Basic
Alternative and “EA” for Enhanced Alternative.
Line 12 – SNP Type
If the plan is a SNP as indicated by “Y” on line 6, then enter the type of SNP. The valid
options are “Institutional”, “Dual-Eligible” and “Chronic or Disabling Condition”. The
selection must agree with the option identified in the MA BPT.
SECTION II – BASE PERIOD BACKGROUND INFORMATION
Line 1 – Time Period Definition
Enter the incurred dates of the base period data on the first two lines and the paid through
date on the third line. For example, if the data reflect claims paid through February 2015,
then the paid through date is 2/28/2015.
Line 2a – Total Member Months
The value is calculated automatically in the BPT from line 6 column e.
Line 2b – LIS Member Months
Enter the number of low-income subsidy (LIS) member months represented in the base
period experience based on CMS eligibility records.
Line 3 – Risk Score
Enter the normalized risk score, estimated to three decimal places, for the population
represented in the base period data using the Part D RxHCC risk model that was in place
for the payment year.
Line 4 – Completion Factor
Enter the factor used to adjust the paid data to an incurred basis. The base period data
must represent the best estimate of incurred claims for the time period, including any
unpaid claims as of the “paid through” date.
Line 5 – Mapping
Enter the contract and plan ID (in the format H9999-999) of the plan reported in Section
III in the first column. With the exception of plan ID changes and/or plan mergers, CMS
expects that the contract and plan ID for the base period experience will be the same as
that shown in Section I. Enter the corresponding number of member months in the
second column.
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WORKSHEET 2
Line 6 – Base Period Experience Description
Use the text box to briefly describe the base period data reported in Section III.
SECTION III – PART D CLAIMS EXPERIENCE
Lines 1 through 11 include experience relating to Part D-covered drugs only. Lines 12
through 14 include experience for drugs that are covered by the plan but are not Part Dcovered drugs at the time they are dispensed.
Lines 1 through 5:
✓ Column d – Number of Members
Enter the number of members with total allowed claims in the defined standard
allowed claim interval defined for each line. For example, if 7,000 members had
total allowed claims between $325 and $2,969, then enter “7,000” in line 3,
column d.
✓ Column e – Member Months
Enter the number of member months associated with the number of members in
column d for each line.
✓ Column f – Total Number of Scripts
Enter the number of prescriptions filled for Part D-covered drugs for the members
in column d for each line.
✓ Column g – Total Allowed Dollars
Enter the total allowed dollars for the prescriptions filled for the members in
column d for each line. Total allowed dollars are defined as ingredient cost plus
dispensing fee, plus sales tax where applicable, plus the vaccine administration
fees, prior to the application of any rebates recovered after the point-of-sale.
✓ Column h – Average Allowed Amount per Member
The value is calculated automatically in the BPT as column g divided by column
d for each line.
✓ Column i – Average Paid Amount per Member
Enter the result of dividing the total dollars paid by the plan for the members in
column d by the number of members in column d. Total paid dollars are defined
as basic and supplemental payments for Part D-covered drugs and are not net of
rebates, low-income subsidy payments or federal reinsurance.
✓ Column j – Average Cost Sharing per Member
Enter the average cost sharing per member for Part D-covered drugs for the
members in column d for each line.
✓ Column k – Supplemental Cost-Sharing Reduction per Member
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WORKSHEET 2
Enter the average value of supplemental cost sharing per member for Part Dcovered drugs for members in column d for each line.
✓ Column l – Reimbursement for Low-Income Cost-Sharing Subsidy per
Member
Enter the average low-income cost-sharing subsidy amount received and
receivable for the members in column d for each line.
✓ Column m – Reimbursement for Federal Reinsurance per Member
Enter the average federal reinsurance amount received and receivable for the
members in column d for each line.
✓ Column n – Net Plan Responsibility per Member
The value is calculated automatically in the BPT as column i minus the sum of
columns k through m for each line.
Line 6, columns d through n – Subtotal
The values are calculated automatically in the BPT as the sum of lines 1 through 5 for
columns d through g and as the weighted average based on the number of members in
column d of lines 1 through 5 for columns h through n.
Line 7 – Percentage OON
✓ Column g
Enter the percentage of total allowed dollars in line 6 for prescriptions filled at
out-of-network (OON) pharmacies.
✓ Column i
Enter the percentage of average paid dollars in line 6 for prescriptions filled at
OON pharmacies.
✓ Column j
Enter the percentage of average cost sharing per member in line 6 for
prescriptions filled at OON pharmacies.
Line 8, column i and columns k through n – PMPM Values
They are calculated automatically by the BPT as the result of the subtotal of the column
in line 6 divided by the number of member months in column d.
Line 9 – Minus Rebates
✓ Column g
Enter the total amount of rebates received as of the “Paid thru Date” in Section I
and expected to be received for the claims in lines 1 through 5. Total rebates
include all direct and indirect remuneration received after the point-of-sale
transaction. Report the rebates at the PBP level. If the Part D sponsor does not
receive rebates at the PBP level, then an allocation methodology may be used.
The methodology used for reporting rebates must be substantiated in the
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WORKSHEET 2
supporting documentation that is uploaded into HPMS with the initial bid
submission.
✓ Column i
The value is calculated automatically in the BPT as column g divided by line 6,
column e.
✓ Column m
Enter the amount of rebates attributable to the federal reinsurance amount in line
6.
✓ Column n
The value is calculated automatically in the BPT as column i minus column m.
Line 10 – Plus Part D as Secondary
✓ Column g
Enter the total amount of payments for Part D-covered drugs for which the Part D
plan is the secondary payer.
✓ Column i
The value is calculated automatically in the BPT as column g divided by line 6,
column e.
✓ Column n
The value is calculated automatically in the BPT as column i minus the sum of
columns k through m.
Line 11, columns i and k through n – Net Average Paid Amount PMPM
The values are calculated automatically in the BPT as line 8 minus line 9 plus line 10.
Line 12 – Non-Covered Supplemental Drugs
✓ Column g
Enter the total plan paid amount for prescription drugs that are covered by the
plan but are not Part D-covered drugs.
✓ Column i
The value is calculated automatically in the BPT as column g divided by line 6,
column e.
Line 13, column i – Rebates on Supplemental Drugs
Enter the total amount of rebates received as of the “Paid thru Date” in Section I
and expected to be received for the claims in line 12. Total rebates include all
direct and indirect remuneration received after the point-of-sale transaction.
Report the rebates at the PBP level. If the Part D sponsor does not receive rebates
at the PBP level, then an allocation methodology may be used. The methodology
used for reporting rebates must be substantiated in the supporting documentation
that is uploaded into HPMS with the initial bid submission.
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Line 14, columns I and n – Net PMPM on Supplemental Drugs
The value in column i is calculated automatically in the BPT as line 40 minus line 41 and
is carried to column n.
SECTION IV – PMPM NON-BENEFIT EXPENSES
Section IV summarizes all administrative expenses associated with the operation of the
prescription drug plan in the base period, including any expenses that were offset by
direct or indirect remuneration.
Lines 1 through 5, column g – Total
Enter the sales and marketing, direct administration, indirect administration, net cost of
private reinsurance and insurer fees average pmpm amounts for total coverage on lines 1
through 5, respectively. Include uncollected enrollee premium, uncollected cost sharing
and OTC drugs in direct administration.
Line 6, column g – Total Non-Benefit Expenses
The value is calculated automatically in the BPT as the sum of lines 1 through 5.
SECTION V – PMPM PREMIUM REVENUE
Section V summarizes the components of premium revenue of the prescription drug plan
for the base period.
Lines 1 through 4, column e – Basic
Enter the CMS Part D direct subsidy payment, low-income premium subsidy, member
premium and member penalty premium average pmpm amounts for basic coverage on
lines 1 through 4, respectively. The direct subsidy amount must account for the final
risk-adjusted reconciliation payment for CY2014 which will be received in mid-2015 and
include the impact of sequestration and PACE add-on, if applicable.
Line 3, column f – Supplemental
Enter the member premium average pmpm amount for supplemental coverage on line 3.
Lines 1 through 4, column g and line 5 – Total Premium
The values are calculated automatically in the BPT as the sums of columns e and f.
SECTION VI – PMPM INCOME STATEMENT SUMMARY
Section VI is a summary of the prescription drug plan’s income, including the amount of
MA rebate allocable to Part D when applicable, for the base period.
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WORKSHEET 2
Lines 1 through 9, column m
Enter in line 4 the average pmpm amount of the MA rebate dollars used to buy down the
Part D premium in line 4. The values in lines 1 through 3 and lines 5 through 9 are
carried from other sections in Worksheet 1 or are calculated automatically in the BPT as
sums or differences in column m.
Total Non-LI Brand Discount Amount
Enter in cell M60 the total non-LI brand discount amount received during or expected to
be received for the base period and reported in the “Reported Gap Discount” field on the
PDEs.
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WORKSHEET 2
PD WORKSHEET 2 – RX PDP PROJECTION OF ALLOWED/NONBENEFIT
Worksheet 2 projects the base period experience to the contract year, blending with a
manual rate when the base period experience is not fully credible, by point-of-sale (retail
or mail order as defined by the PBP) and type of drug. Specifically, Section I displays
general information about the plan. Sections II and III summarize the base period and
contract period utilization per 1,000 members and allowed costs per script and the
components of utilization and cost trends. Section IV blends the projected allowed costs
with a manual rate based on the plan’s credibility. Section V summarizes the
components of non-benefit expenses in the base and contract periods. Section VI is a text
box for entering a description of the development of the manual rate. Section VII
calculates the ratios of claims, non-benefit expenses and gain/(loss) to the total basic bid.
SECTION I – GENERAL INFORMATION
This section displays the information entered on Worksheet 1, Section I.
SECTION II – UTILIZATION FOR COVERED PART D DRUGS
Lines 1 through 8 – Base Period
✓ Column e – Number of Scripts/1000
Enter the number of prescriptions that were filled in the base period, expressed as
annual prescriptions per 1,000 members, by point-of-sale (retail or mail order as
defined by the PBP) and type of drug (generic, preferred brand, non-preferred
brand or Specialty) for each line.
✓ Column f – Allowed per Script
Enter the average allowed amount per script by type of script filled in the base
period for each line. Allowed amount is defined as the ingredient cost plus the
dispensing fee, plus state sales tax where applicable, plus the vaccine
administration fee, prior to the application of any rebates recovered after the
point-of-sale.
✓ Column g – PMPM
The value is calculated automatically in the BPT as column e times column f
divided by 12,000 for each line.
Lines 1 through 8 – Components of Utilization Change
✓ Column h – Trend in Scripts/1,000
Enter the utilization trend factor by type of script to project scripts/1,000 to the
contract period for each line.
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WORKSHEET 2
✓ Column I – Formulary Change
Enter the factor that represents the impact on utilization of changes in the
formulary, including the addition, deletion or reclassification of drugs by type of
script for each line.
✓
Column j – Risk Change
Enter the factor that represents the impact on utilization of the covered
population’s change in risk from the base period to the contract period by type of
script for each line.
✓ Column k – Induced Utilization
Enter the factor that adjusts for the utilization difference between the base period
type of benefit plan (DS, AE, BA or EA) and a DS plan by type of script for each
line.
✓ Column l – Other Change
Enter the factor that represents the impact on utilization of any differences
between the base period and contract period not included in the other components
of utilization change, columns h through k, by type of script for each line.
✓ Column m – Total Utilization Change
The value is calculated automatically in the BPT as the product of columns h
through l for each line.
Lines 1 through 8, column n – Projected Scripts/1000
The value is calculated automatically in the BPT as the product of columns e and m for
each line.
Lines 1 through 8, column o – Covariance
The value is calculated automatically in the BPT as projected allowed pmpm divided by
the product of base period allowed pmpm times total utilization change times total unit
cost change for each line.
Lines 9 through 14, columns e through o
The values are calculated automatically in the BPT using information entered on lines 1
through 8 for each column.
SECTION III – COST FOR COVERED PART D DRUGS
Lines 1 through 8 – Components of Unit Cost Change
✓ Column e – Inflation Trend
Enter the factor that represents the impact on cost between the base period and
contract period because of changes in drug prices by type of script for each line.
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WORKSHEET 2
✓ Column f – Discount Change
Enter the factor that represents the impact on cost between the base period and
contract period because of changes in point-of-sale network pricing, including
discounts off of average wholesale price (AWP) and dispensing fees, by type of
script for each line.
✓
Column g – Formulary Change
Enter the factor that represents the impact on cost because of changes in the
formulary, including the addition, deletion or reclassification of drugs by type of
script for each line.
✓ Column h – Other Change
Enter the factor that represents the impact on cost of any differences between the
base period and contract period not included in the other components of unit cost
change, columns e through j, by type of script for each line.
✓ Column i – Total Unit Cost Change
The value is calculated automatically in the BPT as the product of columns e
through h by type of script for each line.
Lines 1 through 8, column j – Projected Unit Cost
The value is calculated automatically in the BPT as the product of base period allowed
per script times total unit cost change for each line.
Lines 1 through 8, column k – Projected Allowed PMPM
The value is calculated automatically in the BPT as scripts/1,000 times projected unit cost
divided by 12,000 for each line.
Lines 9 through 14, columns e through k
The values are calculated automatically in the BPT using information entered on lines 1
through 8 for each column.
SECTION IV – PROJECTED ALLOWED PMPM
Lines 1 through 8
✓ Column l – Manual Utilization/1,000
When the base period experience is not fully credible, enter the projected
utilization per 1,000 members, based on a fully credible manual rate, by type of
script for each line.
✓ Column m – Manual Unit Cost
When the base period experience is not fully credible, enter the projected unit cost
per script, based on a fully credible manual rate, by type of script for each line.
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WORKSHEET 2
✓ Column n – Manual Rate PMPM
The value is calculated automatically in the BPT as column l times column m
divided by 12,000 by type of script for each line.
✓ Column o – Credibility
Enter the credibility percentage by point-of-sale and type of drug that is applied to
the projected pmpm allowed amount in Section IV and blended with the pmpm
manual rate to calculate the blended pmpm allowed amount for each line. The
credibility must be greater than or equal to 0 percent and less than or equal to 100
percent.
✓ Column p – Blended Allowed PMPM
The value is calculated automatically in the BPT as the sum of (column o times
column k) and [(1 minus column o) times column n] for each line.
Lines 9 through 14, columns l through p
The values are calculated automatically in the BPT using information entered on lines 1
through 8 for each column. Cell O57, CMS Guideline Credibility is calculated
automatically in the BPT as the square root of total member months from Worksheet 1
divided by 18,000, not to exceed 100 percent.
SECTION V – PMPM NON-BENEFIT EXPENSE
Section V summarizes the components of non-benefit expenses in the base period,
applies trends and blends with manual rate non-benefit expenses to project administrative
expenses in the contract period.
Lines 1 through 5
✓ Column e – Base Period
The value is carried from Worksheet 1, Section IV for each line.
✓ Column f – Trend
When the values in column e are greater than $0.00, enter the expected trend in
non-benefit expenses from the base to the contract period.
✓ Column g – Contract Period
The value is calculated automatically in the BPT as column e times column f for
each line.
✓ Column h – Manual Rate Expense
When the base period non-benefit expenses are not fully credible, enter the
projected non-benefit expense by component based on a fully credible source for
each line.
✓ Column i – Credibility
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WORKSHEET 2
Enter the credibility percentage by non-benefit expense component that is applied
to projected pmpm non-benefit expenses and blended with pmpm manual rate
expenses to calculate blended pmpm expenses for each line. The credibility must
be greater than or equal to 0 percent and less than or equal to 100 percent.
✓ Column j – Blended Non-Benefit Expense
The value is calculated automatically in the BPT as the sum of (column g times
column i) and [(1 minus column g) times column h] for each line.
Line 7, columns e, g and j – Total Non-Benefit Expenses
The values are calculated automatically in the BPT using information entered on lines 1
through 4 for each column.
SECTION VI – DEVELOPMENT OF MANUAL RATE
Provide a description of the source of the experience data used as the basis for the manual
rate, as well as other relevant information including, but not limited to, benefit design,
group size, group characteristics, utilization trends, pricing methodology, formulary
changes, induction and risk assumptions.
SECTION VII – PERCENTAGE OF REVENUE
Section VII summarizes the components of the total basic bid amount and calculates the
ratios of claims, non-benefit expenses and gain/(loss) to the total basic bid.
Lines 1 through 3, column e
The values are carried from Worksheets 3 through 5.
Line 4, column e
The value is calculated automatically in the BPT as the sum of lines 1 through 3.
Lines 5a through 5c, column e
The values are calculated automatically in the BPT as percentages of the total basic bid.
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WORKSHEET 3
PD WORKSHEET 3 – RX CONTRACT PERIOD PROJECTION FOR
DEFINED STANDARD COVERAGE
Worksheet 3 develops the defined standard bid amount. Specifically, Section I displays
general information about the plan. Section II collects contract period information;
Section III summarizes the contract period Rx experience. Sections IV and V summarize
components of the contract period non-benefit expenses and gain/loss margin and
components of the defined standard bid amount, respectively.
Sections II through V must be completed by all plans.
SECTION I – GENERAL INFORMATION
This section displays the information entered on Worksheet 1, Section I.
SECTION II – PROJECTION DATA
Line 1 – Projected Member Months
The value is carried from Section III, line 6, column e. For an MA-PD, Part D projected
member months are the sum of projected member months for MA, ESRD and hospice
members.
Line 2 – Projected Average Risk Score
Enter the estimated average Rx risk score for the population expected to enroll in the
contract period. Refer to the topic “Risk Scores” in the “Pricing Considerations” section
of the Instructions for information concerning the development of the CY2016 risk score.
Line 3 – Projected Low-Income Subsidy (LIS) Member Months
Enter the estimated number of member months for enrollees who will qualify for and
obtain LIS status in the contract period.
Line 4 – Projected non-LIS Member Months
The value is calculated automatically in the BPT as projected member months minus
projected low-income subsidy member months.
SECTION III – PART D COVERED DRUG CLAIMS
The projection of contract period Rx experience must reflect the risk score entered in
Section II, line 2.
Lines 1 through 5:
✓ Column d – Number of Members
Enter the number of members expected to have total allowed claims in the
allowed claim interval defined for each line. The “Total Covered Part D
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WORKSHEET 3
Spending at OOP Threshold for Non-Applicable Beneficiaries” and “Estimated
Total Covered Part D Spending at OOP Threshold for Applicable Beneficiaries”
for CY2016 may be used to approximate the point at which beneficiaries reach
catastrophic coverage. Do not include estimates for claims for which the Part D
plan is the secondary payer.
✓ Column e – Member Months
Enter the number of member months expected in the contract period associated
with the number of members in column d for each line.
✓ Column h – Average Amount Allowed PMPM
The value is calculated automatically in the BPT as column g divided by
projected member months for each line.
✓ Column n – Plan Liability PMPM
The value is calculated automatically in the BPT as column h minus the sum of
columns j through m for each line.
Lines 2 through 5
✓ Column f – Number of Scripts
Enter the estimated total number of prescriptions expected to be filled for Part Dcovered drugs for the members in column d for each line.
✓ Column g – Projected Allowed Amount
Enter the estimated total allowed dollars for prescriptions expected to be filled for
Part D-covered drugs for the members in column d for each line. Total allowed
dollars must reflect the price paid to the dispensing provider at the point-of-sale
and must be net of point-of-sale rebates and price concessions.
✓ Column i – Cost Sharing
The value is calculated automatically in the BPT as the sum of columns j through
l for each line.
✓ Column k – PMPM Deductible
Enter the projected pmpm value of the deductible for the members in column d
for each line.
✓ Column l – Other Cost Sharing PMPM
Enter the projected pmpm value of the 25 percent cost sharing between the
deductible and ICL and the catastrophic coinsurance above the catastrophic limit
for the members in column d for each line.
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✓ Column o – Federal LIS Cost Sharing PMPM
Enter the projected amount of low-income cost sharing subsidy that will be
received for the members in column d who are LIS-eligible divided by the total
projected member months entered in Section II, line 1 for each line.
Lines 4 through 5, column j – GAP PMPM
Enter the projected pmpm value corresponding to amounts between the ICL and
catastrophic limit for members in column d for each line. Reflect the impact of gap
coverage in this amount.
Line 5, column m – Federal Reinsurance PMPM
Enter the projected amount of federal reinsurance that will be received for the members
in column d divided by the total projected member months entered in Section II, line 1
for each line. Reflect the impact of gap coverage in this amount.
Line 6 – Subtotal
The value is calculated automatically in the BPT as the sum of lines 1 through 5 for each
column.
Line 7 – Minus Rebates
✓ Column g
Enter the total amount of rebates expected to be received for the claims in lines 1
through 5. Total rebates include all direct and indirect remuneration received
after the point-of-sale transaction. Point-of-sale rebates reported in “Column g –
Projected Allowed Amount” are not reported here. Report the rebates at the PBP
level. If the Part D sponsor does not receive rebates at the PBP level, then an
allocation methodology may be used. The methodology used for reporting
rebates and all other types of DIR must be substantiated in the supporting
documentation that is uploaded into HPMS with the initial bid submission.
✓ Column h
The value is calculated automatically in the BPT as column g divided by line 6,
column e.
✓ Columns m and n
The value in column h is allocated automatically to columns m and n in the BPT
based on the relative amount of federal reinsurance to the total allowed amount.
Line 8 – Minus Other Insurance
✓ Column g
Enter, as a positive value, the projected total reduction to the total allowed amount
attributable to other Rx insurance.
✓ Column h
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WORKSHEET 3
The value is calculated automatically in the BPT as column g divided by line 6,
column e.
✓ Column m
Enter, as a positive value, the projected pmpm reduction to federal reinsurance
attributable to other Rx insurance.
✓ Column n
The value is calculated automatically in the BPT as column h minus column m.
Line 9 – Plus Part D as Secondary
✓ Column g
Enter, as a positive value, the projected total plan liability for Part D-covered
drugs for which the Part D plan is the secondary payer.
✓ Column h
The value is calculated automatically in the BPT as column g divided by line 6,
column e.
✓ Column m
Enter, as a positive value, the projected pmpm plan liability for Part D-covered
drugs attributable to federal reinsurance for which the Part D plan is the
secondary payer.
✓ Column n
The value is calculated automatically in the BPT as column h minus column m.
Line 10 – Projected Percentage Out-of-Network (OON) Allowed
Enter the percentage of line 6, column g of projected allowed dollars for prescriptions
that will be filled OON.
Line 11 – Projected Percentage Out-of-Network (OON) Plan Liability
Enter the percentage of line 6, column n of projected Part D plan liability for
prescriptions that will be filled OON.
Line 12, columns g through o – Total
The values are automatically calculated in the BPT as line 6 minus line 7 minus line 8
plus line 9 for each column.
SECTION IV – PMPM NON-BENEFIT EXPENSE AND GAIN/LOSS
Section IV summarizes components of the contract period non-benefit expenses and
gain/loss margin.
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WORKSHEET 3
Lines 1 through 5
The values are carried from other worksheets or are calculated automatically in the BPT.
Line 6 – Total Gain/loss
Enter the estimated pmpm amount of gain or loss projected during the contract period.
Overall Gain/(Loss) Margin Level
Enter in cell D46 the level at which the overall gain/(loss) margin requirements are met.
The options are “contract”, “organization” and “parent-organization”.
SECTION V – DEFINED STANDARD COVERAGE BID DEVELOPMENT
Section V summarizes the components of the defined standard bid amount.
Lines 1 through 5, columns i and j
The values are carried from other sections in Worksheet 3 or are calculated automatically
in the BPT as sums or quotients.
CY2016 Part D BPT Instructions
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WORKSHEET 4
PD WORKSHEET 4 – RX STANDARD COVERAGE WITH
ACTUARIALLY EQUIVALENT COST SHARING
Worksheet 4 must be completed when the plan benefit type is actuarially equivalent. The
three tests that must be satisfied to demonstrate actuarial equivalence are as follows:
•
•
•
The average coinsurance percentage for amounts between the deductible and the
ICL must be actuarially equivalent to 25 percent; and
The average coinsurance percentage above the catastrophic limit must be
actuarially equivalent to the percentage for DS coverage.
The average coinsurance percentage for amounts between the ICL and
catastrophic limit must be actuarially equivalent to the percentage for DS
coverage.
CONSIDERATIONS FOR ACTUARIALLY EQUIVALENT COVERAGE
Although the average cost sharing between the deductible and ICL must be 25 percent for
an AE plan, it is expected that the cost sharing will be restructured to encourage more
efficient drug use through tiered copays and/or coinsurance. As compared to DS plans,
AE plans generally have higher generic, preferred brand and mail service utilization and
lower non-preferred brand utilization.
Part D sponsors must model the differences between the AE benefit and the DS by
making adjustments in utilization and average allowed amounts by type of drug and
point-of-sale (retail or mail order as defined by the PBP) in Worksheets 6 and 6A. The
distribution of utilization between generic and brand, and between retail and mail, must
be reasonable given the proposed benefit. Significant changes to the benefit are expected
to result in meaningful differences in utilization when compared to the DS bid.
SECTION I – GENERAL INFORMATION
This section displays the information entered on Worksheet 1, Section I.
SECTION II – PROJECTION DATA
This section displays the information entered on Worksheet 3, Section II.
SECTION III – DEVELOPMENT OF BID FOR DEFINED STANDARD COVERAGE
This section displays the information entered on Worksheet 3, Section V.
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WORKSHEET 4
SECTION IV – DEVELOPMENT OF BID COMPONENTS AND TESTS FOR
ACTUARIAL EQUIVALENCE
Lines 1 through 3 and 5 through 14, columns e, h, and k
The values are carried from other worksheets in the BPT.
Line 4 – Allowed PMPM
✓ Column e – Amounts below the Initial Coverage Limit
Enter the projected average allowed amount pmpm below the ICL.
✓ Column h – Amounts above Catastrophic Threshold
Enter the projected average allowed amount pmpm above the catastrophic
threshold.
Line 15 – Rebates
✓ Column k
Enter the estimated total amount of rebates expected to be received by the plan.
✓ Column h
The value is calculated automatically in the BPT and is prorated for reinsurance.
Lines 16 through 18 – Tests for Actuarial Equivalence
The three actuarial equivalence tests are applied to certain values in Section IV to
determine whether the proposed benefit plan qualifies as standard coverage with
actuarially equivalent cost sharing.
SECTION V – STANDARD COVERAGE BID DEVELOPMENT WITH ACTUARIALLY
EQUIVALENT COST SHARING
Lines 1 through 5
The values are calculated automatically in the BPT from values in Section IV. The
amounts in the first column are calculated based on the plan’s risk score, while the
amounts in the second column are based on a 1.000 risk score.
Line 6 – LIS
Enter the projected average low-income cost-sharing pmpm subsidy for the risk score of
the expected population.
CY2016 Part D BPT Instructions
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WORKSHEET 5
PD WORKSHEET 5 – RX ALTERNATIVE COVERAGE
Worksheet 5 must be completed when the plan benefit type is basic alternative or
enhanced alternative. The six tests that must be satisfied to demonstrate actuarial
equivalence are as follows:
•
•
•
•
•
•
The value of total coverage is at least actuarially equivalent to DS coverage;
The alternative unsubsidized value of coverage is no less than the DS
unsubsidized value of coverage;
The average alternative benefits for beneficiaries with allowed drug costs at the
ICL are not less than the average DS benefits at the ICL;
The deductible is not greater than the DS deductible; and
The average alternative catastrophic cost sharing is not greater than the average
DS catastrophic cost sharing.
The average coinsurance percentage for amounts between the ICL and
catastrophic limit is at least actuarially equivalent to DS coverage.
CONSIDERATIONS FOR BASIC ALTERNATIVE AND ENHANCED ALTERNATIVE COVERAGE
Although the average cost sharing between the deductible and ICL must be 25 percent for
a BA and less than or equal to 25 percent for an EA plan, it is expected that the cost
sharing will be restructured to encourage more efficient drug use through tiered copays
and/or coinsurance. As compared to DS plans, BA and EA plans generally have higher
generic, preferred brand and mail service utilization and lower non-preferred brand
utilization.
Part D sponsors must model the differences between the BA or EA benefit and the DS by
making adjustments in utilization and average allowed amounts by type of drug and
point-of-sale (retail or mail order as defined by the PBP) in Worksheets 6 and 6A. The
distribution of utilization between generic and brand, and retail and mail, must be
reasonable given the proposed benefit. Significant changes to the benefit are expected to
result in meaningful differences in utilization when compared to the DS bid.
BA and EA plans may reduce the value of the deductible. BA and EA plans may provide
additional coverage in the gap. Since the value of coverage up to the ICL must remain
the same relative to the DS, a supplemental premium will result unless the cost of the
additional coverage is offset by savings in catastrophic coverage.
Additional coverage in the gap can delay the point at which a beneficiary achieves $6,680
of true out-of-pocket (TrOOP) costs and reaches catastrophic coverage. This delay can
reduce the amount of reinsurance that will be provided, cause induced utilization and
increase the risk profile of the group. Members with extremely high spending will not
benefit as much as those with moderate amounts of spending.
SECTION I – GENERAL INFORMATION
This section displays the information entered on Worksheet 1, Section I.
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WORKSHEET 5
SECTION II – PROJECTION DATA
This section displays the information entered on Worksheet 3, Section II.
SECTION III – DEVELOPMENT OF BID FOR DEFINED STANDARD COVERAGE
This section displays the information entered on Worksheet 3, Section V.
SECTION IV – DEVELOPMENT OF BID COMPONENTS
Lines 1 through 3
✓ Columns f, g and m
The values are carried from Worksheet 3 in the BPT.
✓ Columns i and o
The values are calculated automatically in the BPT as column f plus column g.
Type of Deductible
Enter the type of deductible consistent with the description in the PBP for the alternative
coverage. The valid options are: “no deductible”, “applies to all tiers” or “applies to
some tiers”.
Alternative Coverage ICL
Enter the ICL consistent with the description in the PBP for the alternative coverage.
Type of Gap Coverage
Enter the type of gap coverage consistent with the description in the PBP for the
alternative coverage. The options are: “defined standard coverage”, “enhanced – all
drugs”, “enhanced – generics”, “enhanced – generics and some brands”, “enhanced –
other”, or “increased ICL”. Use the following mapping:
When the PBP indicates the defined standard ICL and cost sharing, select
“defined standard coverage”.
When the PBP indicates an increased ICL and defined standard cost sharing,
select “increased ICL”.
When the PBP indicates all drugs in all tiers are covered in full, select
“enhanced-other”.
When the PBP indicates reduced cost sharing on some or all drugs on some or
all formulary tiers, select from the remaining options, “enhanced – all drugs”,
“enhanced – generics” or “enhanced – generics and some brands”.
CY2016 Part D BPT Instructions
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WORKSHEET 5
Lines 4 through 24
The values in columns d through o include Part D-covered drugs only; the values in
column q include non-Part D-covered drugs only. The values are carried from other
worksheets or are calculated automatically in the BPT, with the exception of the
following, which must be entered:
✓ Line 5, column k – Amounts in Gap
Enter the projected average allowed amount pmpm in the coverage gap.
✓ Line 5, column m – Amounts above Catastrophic
Enter the projected average allowed amount pmpm above the catastrophic limit.
✓ Line 6, column d – Proposed Deductible
Enter the dollar value of the deductible consistent with the description in the PBP.
✓ Line 8, column f – Value of Proposed Deductible
Enter the projected pmpm value of the deductible for members with total allowed
amount less than the ICL. Refer to the topic “Non-Uniform Deductible” in the
“Pricing Considerations” section of the Instructions for more information.
✓ Line 12, column k – Coinsurance Percentage in Gap
Enter the effective coinsurance percentage for any coverage provided in the gap,
including coverage because of variations in the ICL.
✓ Line 18, column o – Minus Rebates
Enter the estimated total rebates pmpm expected to be received for Part Dcovered drugs.
✓ Line 18, column q – Minus Rebates
Enter the estimated total rebates pmpm expected to be received for non-Part Dcovered drugs.
✓ Line 20, columns m, o and q – Minus Other Insurance
Enter, as a positive value, the projected reduction to average allowed amount
pmpm attributable to other Rx insurance for Part D-covered drugs, reinsuranceeligible Part D-covered drugs and non-Part D-covered drugs in columns m, o and
q, respectively.
✓ Line 22, columns m, o, and q – Plus Part D as Secondary
Enter, as a positive value, the projected plan liability pmpm for which the Part D
plan is the secondary payer for Part D-covered drugs, reinsurance-eligible Part Dcovered drugs and non-Part D-covered drugs in columns m, o and q, respectively.
SECTION V – DEVELOPMENT OF ACTUARIAL EQUIVALENCE TEST
Lines 1 through 8
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WORKSHEET 5
The values are calculated automatically in the BPT from values in Section IV. The
amounts in the first column are calculated based on the plan’s risk score, while the
amounts in the second column are based on a 1.000 risk score.
Line 9 – LIS
Enter the projected average low-income cost-sharing pmpm subsidy for the risk score of
the expected population.
SECTION VI – TESTS FOR ALTERNATIVE COVERAGE
This section applies the six actuarial equivalence tests to certain values in Sections III
through V to determine whether the proposed benefit plan qualifies as alternative
coverage.
SECTION VII – DEVELOPMENT OF SUPPLEMENTAL PREMIUM
Lines 1 through 5 and 8
The values are calculated automatically by the BPT from values in Worksheet 5.
Line 6 – Additional Non-Benefit Expenses
The value is carried from Worksheet 3.
Line 7 – Additional Gain/loss
The value is carried from Worksheet 3.
SECTION VIII – DEVELOPMENT OF INDUCED UTILIZATION ADJUSTMENT
This section summarizes the additional costs of DS coverage with respect to the enhanced
alternative plan with supplemental benefits and is used to adjust allowable costs for risk
corridor payments.
Line 2 – Impact of Alternative Utilization on Standard Benefit
Enter the additional costs for Part D-covered drugs under a DS plan in the first column if
the utilization of the EA plan was used to price the DS coverage in the bid. The
adjustment applies to the EA plan type only and must be a positive value.
CY2016 Part D BPT Instructions
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WORKSHEET 6
PD WORKSHEET 6 – SCRIPT PROJECTIONS FOR DEFINED
STANDARD, ACTUARIALLY EQUIVALENT OR ALTERNATIVE
COVERAGE
Worksheet 6 summarizes drug utilization and costs by type of drug and point-of-sale (retail or
mail order as defined by the PBP) in different distributions of drug spending. In addition,
Worksheet 6 illustrates the underlying assumptions used in the demonstration of the actuarial
equivalence tests in Worksheets 4 and 5. Section II collects data in a manner that supports an
actuarial comparison of the proposed AE, BA or EA plan benefit type to DS coverage.
CONSIDERATIONS
Although this worksheet is not a detailed model of the cost-sharing structure of the AE, BA or
EA plan design, the impact of tiered cost sharing, non-uniform deductible, decreased ICL and
benefit management programs on utilization must be clearly demonstrated. The distribution of
utilization between generic and brand, and between retail and mail, must be reasonable given
the proposed benefit. Significant changes to the alternative benefit are expected to result in
meaningful differences in utilization when compared to the DS bid. Part D sponsors must
model the impact of the alternative benefit compared to the DS by making adjustments in
utilization and average script pricing in Worksheet 6. The distributions must be based on the
intervals defined for DS coverage. For purposes of modeling the alternative coverage,
members must be reported in the claims interval in which they were reported under DS
coverage even though their total drug spend may be different because of the impact of the
alternative benefits. For example, lines 1 through 9 must reflect the utilization for the AE, BA
or EA plan for members expected to have less than the DS ICL of $2,960 in CY2015. In other
words, the amounts summarized in columns i, j and k must be based on the same members
represented in columns f, g, and h of each line.
Refer to the “Pricing Considerations” section of the Instructions for information on modeling
the impact of coverage in the gap, decreased ICL and non-uniform deductible.
SECTION I – GENERAL INFORMATION
This section displays the information entered on Worksheet 1, Section I.
SECTION II – PROJECTIONS FOR EQUIVALENCE TESTS
Data are collected for four levels of allowed costs on lines 1 through 36. The distribution of the
population and Part D covered drug claims reported on Worksheet 3 must be used in
completing this section. Columns f through h must be completed for all plans based on DS
coverage; columns i through k must be completed when the plan benefit type is AE, BA or EA
based on the alternative coverage. In developing the cost-sharing values in columns h and k, do
not model the impact of the deductible, coverage gap and LIS subsidy. To model column h,
use the cost-sharing structure of the DS plan; to model column k, use the cost-sharing structure
of the alternative (AE, BA or EA) plan.
CY2016 Part D BPT Instructions
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WORKSHEET 6
Lines 1 through 8 – Population Not Exceeding Allowed Costs of $2,960 with Standard
Coverage
All utilization for members with projected total allowed costs less than $2,960 must be reported
on these lines.
✓ Columns f through h – Defined Standard Coverage
Enter the projected total number of scripts, total allowed dollars, and total standard cost
sharing for the population identified in Worksheet 3, Section III, cells D21 plus D22,
using the cost-sharing structure of the DS plan by point-of-sale and type of drug in
columns f, g and h, respectively, for each line. Calculate the cost sharing as if there
were no deductible, coverage gap and LIS subsidy.
✓ Columns i through k – Actuarially Equivalent or Alternative Benefits
When the plan benefit type is AE, BA or EA, enter the projected total number of scripts,
total allowed dollars and total cost sharing for the population identified in Worksheet 3,
Section III, cells D21 plus D22, using the cost sharing structure of the AE, BA or EA
plan by point-of-sale (retail or mail order as defined by the PBP) and type of drug in
columns i, j and k, respectively, for each line. Calculate the cost sharing as if there
were no deductible, coverage gap and LIS subsidy. These values include changes to
utilization patterns based on the difference between DS coverage and the proposed
alternative coverage.
Line 9, columns f through k – Total
The values are calculated automatically in the BPT as the sum of lines 1 through 8 for each
column.
Lines 10 through 17 – Population Exceeding Allowed Costs of $2,960 with Standard
Coverage
All utilization for members with projected total allowed costs greater than or equal to $2,960
must be reported on these lines.
✓ Columns f and g – Defined Standard Coverage
Enter the projected total number of scripts and total allowed dollars for the population
identified in Worksheet 3, Section III, cells D23 plus D24 by point-of-sale (retail or
mail order as defined by the PBP) and type of drug in columns f and g, respectively, for
each line.
✓ Columns i and j – Actuarially Equivalent or Alternative Benefits
When the plan benefit type is AE, BA or EA, enter the projected total number of scripts
and total allowed dollars for the population identified in Worksheet 3, Section III,
cells D23 plus D24 by point-of-sale (retail or mail order as defined by the PBP) and
type of drug in columns i and k, respectively, for each line. These values include
changes to utilization patterns based on the difference between DS coverage and the
proposed alternative coverage.
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WORKSHEET 6
Line 18, columns f, g, i and j – Total
The values are calculated automatically in the BPT as the sum of lines 10 through 17 for each
column.
Lines 19 through 26 – Population Exceeding $2,960 with Standard Coverage Amounts
Allocated up to ICL
All utilization for total allowed costs up to $2,960 for members with projected total allowed
costs greater than or equal to $2,960 must be reported on these lines. These amounts are a
subset of the amounts reported in lines 10 through 18; amounts in the gap are intentionally
excluded.
✓ Columns f through h – Defined Standard Coverage
Enter the projected total number of scripts, total allowed dollars, and total standard cost
sharing, for amounts allocated up to the ICL of $2,960 in CY2015, for the population
identified in Worksheet 3, Section III, cells D23 plus D24, using the cost sharing
structure of the DS plan by point-of-sale (retail or mail order as defined by the PBP) and
type of drug, in columns f, g and h, respectively, for each line. Calculate the cost
sharing as if there were no deductible, coverage gap and LIS subsidy.
✓ Columns i through k – Actuarially Equivalent or Alternative Benefits
When the plan benefit type is AE, BA or EA, enter the projected total number of scripts,
total allowed dollars and total cost sharing, for amounts allocated up to the ICL, for the
population identified in Worksheet 3, Section III, cells D23 plus D24, using the costsharing structure of the AE, BA or EA plan by point-of-sale (retail or mail order as
defined by the PBP) and type of drug, in columns i, j and k, respectively, for each line.
Calculate the cost sharing as if there were no deductible, coverage gap and LIS subsidy.
These values include changes to utilization patterns based on the difference between DS
coverage and the proposed alternative coverage.
Line 27, columns f through k – Total
The values are calculated automatically in the BPT as the sum of lines 19 through 26 for each
column.
Lines 28 through 35, columns f through k – Amounts Allocated over Catastrophic Coverage
The amounts in these lines are a subset of the amounts reported in lines 10 through 18.
✓ Columns f through h – Defined Standard Coverage
Enter the projected total number of scripts, total allowed dollars, and total standard cost
sharing, for amounts over the catastrophic limit, for the population identified in
Worksheet 3, Section III, cell D24, using the cost-sharing structure of the DS plan by
point-of-sale (retail or mail order as defined by the PBP) and type of drug, in columns f,
g and h, respectively, for each line.
✓ Columns i through k – Actuarially Equivalent or Alternative Benefits
CY2016 Part D BPT Instructions
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WORKSHEET 6
When the plan benefit type is AE, BA or EA, enter the projected total number of scripts,
total allowed dollars and total cost sharing, for amounts over the catastrophic limit, for
the population identified in Worksheet 3, Section III, cell D24, using the cost-sharing
structure of the AE, BA or EA plan by point-of-sale (retail or mail order as defined by
the PBP) and type of drug, in columns i, j and k, respectively, for each line. These
values include changes to utilization patterns based on the difference between DS
coverage and the proposed alternative coverage.
Line 36, columns f through k – Total
The values are calculated automatically in the BPT as the sum of lines 28 through 35 for each
column.
Line 37, columns i through k – Non-Part D-Covered Drugs All Spending
When the plan benefit type is EA and the plan covers non-Part D drugs, enter the projected
total number of scripts, total allowed dollars and total cost sharing, for the population identified
in Worksheet 3, Section III, using the cost-sharing structure of the EA plan by point-of-sale
(retail or mail order as defined by the PBP) and type of drug, in columns i, j and k, respectively,
for each line.
Example
Below is an example of how lines 10 through 36 are to be completed. It is based on the
CY2008 defined standard benefit parameters:
•
•
•
•
Deductible:
ICL:
OOP Threshold:
Total Covered Part D Drug Spend at OOP Threshold:
$275.00
$2,510.00
$4,050.00
$5,726.25
The example assumes that Beneficiaries A and B reach catastrophic coverage with total
allowed costs of $10,000 and $6,425, respectively. The following cost-sharing provisions
apply:
Cost Sharing
Retail Generic
Retail Preferred Brand
Retail Non-Preferred Brand
Retail Specialty
Mail Order Generic
Mail Order Preferred Brand
Mail Order Non-Preferred Brand
Mail Order Specialty
Up to ICL
$5
$25
$50
25%
$10
$50
$100
25%
Catastrophic
$2.25
$2.25
$5.60
5%
$2.25
$2.25
$5.60
5%
For illustrative purposes only, the beneficiaries are shown separately and in aggregate.
CY2016 Part D BPT Instructions
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WORKSHEET 6
Beneficiary A’s costs are distributed as follows:
Population Exceeding $2,510 with Standard Coverage
Utilization
20
15
8
2
10
10
5
70
$
$
$
$
$
$
$
$
$
Beneficiary A
Allowed
500.00
1,500.00
1,200.00
2,000.00
550.00
2,250.00
2,000.00
10,000.00
Amounts Allocated up to ICL $2,510
19. Retail Generic
20. Retail Preferred Brand
21. Retail Non-Preferred Brand
22. Retail Specialty (2)
23. Mail Order Generic
24. Mail Order Preferred Brand
25. Mail Order Non-Preferred Brand
26. Mail Order Specialty (2)
27. Total
5.02
3.77
2.01
0.50
2.51
2.51
1.26
17.57
$
$
$
$
$
$
$
$
$
125.50
376.50
301.20
502.00
138.05
564.75
502.00
2,510.00
$
$
$
$
$
$
$
$
$
25.10
94.13
100.40
125.50
25.10
125.50
125.50
621.23
Amounts Allocated over Catastrophic Coverage
28. Retail Generic
29. Retail Preferred Brand
30. Retail Non-Preferred Brand
31. Retail Specialty (2)
32. Mail Order Generic
33. Mail Order Preferred Brand
34. Mail Order Non-Preferred Brand
35. Mail Order Specialty (2)
36. Total
8.55
6.41
3.42
0.85
4.27
4.27
2.14
29.92
$
$
$
$
$
$
$
$
$
213.69
641.06
512.85
854.75
235.06
961.59
854.75
4,273.75
$
$
$
$
$
$
$
$
$
19.23
14.42
19.15
42.74
9.62
9.62
11.97
126.74
10. Retail Generic
11. Retail Preferred Brand
12. Retail Non-Preferred Brand
13. Retail Specialty (2)
14. Mail Order Generic
15. Mail Order Preferred Brand
16. Mail Order Non-Preferred Brand
17. Mail Order Specialty (2)
18. Total
CY2016 Part D BPT Instructions
Cost Sharing
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WORKSHEET 6
Beneficiary B’s costs are distributed as follows:
Population Exceeding $2,510 with Standard Coverage
10. Retail Generic
11. Retail Preferred Brand
12. Retail Non-Preferred Brand
13. Retail Specialty (2)
14. Mail Order Generic
15. Mail Order Preferred Brand
16. Mail Order Non-Preferred Brand
17. Mail Order Specialty (2)
18. Total
Utilization
18
12
10
5
8
3
56
$
$
$
$
$
$
$
$
$
Beneficiary B
Allowed
450.00
1,200.00
1,500.00
275.00
1,800.00
1,200.00
6,425.00
7.03
4.69
3.91
1.95
3.13
1.17
21.88
$
$
$
$
$
$
$
$
$
175.80
468.79
585.99
107.43
703.19
468.79
2,510.00
$
$
$
$
$
$
$
$
$
35.16
117.20
195.33
19.53
156.26
117.20
640.68
1.96
1.31
1.09
0.54
0.87
0.33
6.09
$
$
$
$
$
$
$
$
$
48.94
130.51
163.13
29.91
195.76
130.51
698.75
$
$
$
$
$
$
$
$
$
4.40
2.94
6.09
1.22
1.96
1.83
18.44
Amounts Allocated Up to ICL $2,510
19. Retail Generic
20. Retail Preferred Brand
21. Retail Non-Preferred Brand
22. Retail Specialty (2)
23. Mail Order Generic
24. Mail Order Preferred Brand
25. Mail Order Non-Preferred Brand
26. Mail Order Specialty (2)
27. Total
Amounts Allocated over Catastrophic Coverage
28. Retail Generic
29. Retail Preferred Brand
30. Retail Non-Preferred Brand
31. Retail Specialty (2)
32. Mail Order Generic
33. Mail Order Preferred Brand
34. Mail Order Non-Preferred Brand
35. Mail Order Specialty (2)
36. Total
CY2016 Part D BPT Instructions
Cost Sharing
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WORKSHEET 6
The aggregate costs of Beneficiaries A and B are distributed as follows:
Population Exceeding $2,510 with Standard Coverage
38
27
18
2
15
18
8
126
$
$
$
$
$
$
$
$
$
Total A & B
Allowed
950.00
2,700.00
2,700.00
2,000.00
825.00
4,050.00
3,200.00
16,425
Amounts Allocated up to ICL $2,510
19. Retail Generic
20. Retail Preferred Brand
21. Retail Non-Preferred Brand
22. Retail Specialty (2)
23. Mail Order Generic
24. Mail Order Preferred Brand
25. Mail Order Non-Preferred Brand
26. Mail Order Specialty (2)
27. Total
12.05
8.45
5.91
0.50
4.46
5.64
2.43
39.45
$
$
$
$
$
$
$
$
$
301.30
845.29
887.19
502.00
245.48
1,267.94
970.79
5,020.00
$
$
$
$
$
$
$
$
$
60.26
211.32
295.73
125.50
44.63
281.76
242.70
1,261.91
Amounts Allocated over Catastrophic Coverage
28. Retail Generic
29. Retail Preferred Brand
30. Retail Non-Preferred Brand
31. Retail Specialty (2)
32. Mail Order Generic
33. Mail Order Preferred Brand
34. Mail Order Non-Preferred Brand
35. Mail Order Specialty (2)
36. Total
10.51
7.72
4.51
0.85
4.82
5.14
2.46
36.01
$
$
$
$
$
$
$
$
$
262.63
771.57
675.98
854.75
264.96
1,157.35
985.26
4,972.50
$
$
$
$
$
$
$
$
$
23.64
17.36
25.24
42.74
10.84
11.57
13.79
145.18
Utilization
10. Retail Generic
11. Retail Preferred Brand
12. Retail Non-Preferred Brand
13. Retail Specialty (2)
14. Mail Order Generic
15. Mail Order Preferred Brand
16. Mail Order Non-Preferred Brand
17. Mail Order Specialty (2)
18. Total
Cost Sharing
(2) - The Specialty tier is used only when the Part D sponsor places Specialty drugs on a
separate tier in accord with CMS guidelines.
Network Pricing
Enter the projected average percentage discount off of AWP and the projected average
dispensing fees for generic, brand and Specialty drugs dispensed at retail and mail.
The values in this section must be based on the network pricing contracts that will be effective
in CY2016 and on the projected weighted utilization by pharmacy of the population identified
in Worksheet 3.
CY2016 Part D BPT Instructions
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WORKSHEET 6A
PD WORKSHEET 6A – COVERAGE IN THE GAP FOR DEFINED
STANDARD, ACTUARIALLY EQUIVALENT OR ALTERNATIVE
COVERAGE
Worksheet 6A summarizes drug utilization and costs by type of drug and point-of-sale (retail or
mail order as defined by the PBP) in the coverage gap. As a continuation of Worksheet 6,
Worksheet 6A illustrates the underlying assumptions used in the demonstration of the actuarial
equivalence tests in Worksheets 4 and 5 and calculates the plan-specific prospective brand
discount amount payment. Section II collects data in a manner that supports an actuarial
comparison of the proposed AE, BA or EA plan benefit type to DS coverage.
CONSIDERATIONS
Although this worksheet is not a detailed model of the cost-sharing structure of the AE, BA or
EA plan design, the impact of tiered cost sharing, non-uniform deductible, decreased ICL and
benefit management programs on utilization must be clearly demonstrated. The distribution of
utilization between generic and brand, and between retail and mail, must be reasonable given
the proposed benefit. Significant changes to the alternative benefit are expected to result in
meaningful differences in utilization when compared to the DS bid.
SECTION I – GENERAL INFORMATION
This section displays the information entered on Worksheet 1, Section I.
SECTION II – SPENDING IN THE COVERAGE GAP
Data are collected for allowed costs in the coverage gap on lines 1 through 33. The distribution
of the population and Part D-covered drug claims reported on Worksheet 3 must be used in
completing this section. Columns f through h must be completed for all plans based on DS
coverage; columns i through k must be completed when the plan benefit type is AE, BA or EA
based on the alternative coverage. In developing the cost-sharing values in columns h and k, do
not model the impact of the LIS subsidy. To model column h, use the cost-sharing structure of
the DS plan; to model column k, use the cost-sharing structure of the alternative (AE, BA or
EA) plan.
Lines 1 through 11, columns f through k – Amounts Allocated between $2,960 and
Catastrophic
The values are calculated automatically in the BPT.
Lines 12 through 21 – Low-Income Population Amounts Allocated between $2,960 and
Catastrophic
All utilization for LIS members with projected total allowed costs greater than $2,960 and less
than the catastrophic limit must be reported on these lines.
CY2016 Part D BPT Instructions
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WORKSHEET 6A
✓ Columns f through h – Defined Standard Coverage
Enter the projected total number of scripts, total allowed dollars, and total standard cost
sharing for the LIS population identified in Worksheet 3, Section III, cell D23 plus cell
D24, using the cost-sharing structure of the DS plan by point-of-sale (retail or mail
order as defined by the PBP) and type of drug in columns f, g and h, respectively, for
each line. Calculate the cost sharing as if there were no deductible and LIS subsidy.
✓ Columns i through k – Actuarially Equivalent or Alternative Benefits
When the plan benefit type is AE, BA or EA, enter the projected total number of scripts,
total allowed dollars and total cost sharing for the LIS population identified in
Worksheet 3, Section III, cell D23 plus cell D24, using the cost-sharing structure of the
AE, BA or EA plan by point-of-sale (retail or mail order as defined by the PBP) and
type of drug in columns i, j and k, respectively, for each line. Calculate the cost sharing
as if there were no deductible and LIS subsidy. These values include changes to
utilization patterns based on the difference between DS coverage and the proposed
alternative coverage.
Line 22, columns f through k – Total
The values are calculated automatically in the BPT as the sum of lines 11 through 21 for each
column.
Lines 23 through 32 – Non-Low-Income Population Amounts Allocated between $2,960 and
Catastrophic
All utilization for non-LIS members with projected total allowed costs greater than $2,960 and
less than the catastrophic limit must be reported on these lines.
✓ Columns f through h – Defined Standard Coverage
Enter the projected total number of scripts, total allowed dollars, and total standard cost
sharing for the non-LIS population identified in Worksheet 3, Section III, cell D23 plus
cell D24, using the cost-sharing structure of the DS plan by point-of-sale (retail or mail
order as defined by the PBP) and type of drug in columns f, g and h, respectively, for
each line. Calculate the cost sharing as if there were no deductible and LIS subsidy.
✓ Columns i through k – Actuarially Equivalent or Alternative Benefits
When the plan benefit type is AE, BA or EA, enter the projected total number of scripts,
total allowed dollars and total cost sharing for the non-LIS population identified in
Worksheet 3, Section III, cell D23 plus cell D24, using the cost-sharing structure of the
AE, BA or EA plan by point-of-sale (retail or mail order as defined by the PBP) and
type of drug in columns i, j and k, respectively, for each line. Calculate the cost sharing
as if there were no deductible and LIS subsidy. These values include changes to
utilization patterns based on the difference between DS coverage and the proposed
alternative coverage.
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WORKSHEET 6A
Line 33, columns f through k – Total
The values are calculated automatically in the BPT as the sum of lines 23 through 32 for each
column.
Non-LI Generics in Gap PMPM
The value is calculated automatically in the BPT.
Non-LI Brand Discount Amount PMPM
The value is calculated automatically in the BPT.
CY2016 Part D BPT Instructions
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WORKSHEET 7
PD WORKSHEET 7 – SUMMARY OF KEY BID ELEMENTS
Worksheet 7 summarizes key payment-related components of the bid and the Part D sponsor’s
estimate of the national average monthly bid amount and calculates premiums.
SECTION I – GENERAL INFORMATION
This section displays the information entered on Worksheet 1, Section I.
SECTION II – 2016 DEFINED STANDARD BENEFIT PARAMETERS
Line 1 – Deductible
The cell is pre-populated with the deductible for the DS plan benefit type.
Line 2 – Initial Coverage Limit
The cell is pre-populated with the ICL for the DS plan benefit type.
Line 3 – Out-of-Pocket Limit
The cell is pre-populated with the OOP for the DS plan benefit type.
SECTION III – SUMMARY OF KEY BID ELEMENTS
Line 1 – Standardized Part D Bid
The value is carried from other worksheets in the BPT based on the plan benefit type (DS, AE,
BA or EA).
Line 2 – National Average Monthly Bid Amount (NAMBA)
Enter the Part D sponsor’s estimate of the national average monthly bid amount at the time of
bid submission. The final national average monthly bid amount for CY2016 will be calculated
and published by CMS in early August 2015.
Line 3 – Base Beneficiary Premium (BBP)
Enter the Part D sponsor’s estimate of the base beneficiary premium amount. The national
average monthly bid amount, basic Part D A/B rebate allocation reported on the MA BPT for
MA plans and base beneficiary premium will determine the plan’s basic Part D target premium.
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WORKSHEET 7
Lines 4 and 5 – Basic Part D Premium (prior to A/B Rebate Reallocation)
The values are calculated automatically in the BPT. Line 4 is calculated as line 1 minus line 2
plus line 3. Line 5 reflects the value of the basic Part D premium from line 4 after the rounding
rule selected on line 8 of this section has been applied. If the basic Part D premium is negative
and the plan benefit type is DS, AE or BA, then the Part D sponsor is permitted to lower its
estimate of the NAMBA and BBP. If the plan benefit type is EA, then the Part D sponsor is
permitted to lower its estimate of the NAMBA and BBP or fully offset the negative basic
premium with a supplemental Part D premium. The basic Part D premium, before and after the
rounding rule is applied, will be updated based on the actual national average monthly bid
amount and base beneficiary premium that are calculated and published by CMS in early
August.
Lines 6 and 7 – Supplemental Part D Premium (prior to A/B Rebate Reallocation)
The values are calculated automatically in the BPT when supplemental benefits are offered.
Line 6 is carried from Worksheet 5 of the BPT. Line 7 reflects the value of the supplemental
Part D premium from line 6 after the rounding rule selected on line 8 of this section has been
applied.
Line 8 – Prospective Federal Reinsurance (Non-Standardized)
The value is carried from other worksheets in the BPT based on the plan benefit type (DS, AE,
BA or EA).
Line 9 – Prospective Low-income Cost-Sharing Subsidy (Non-Standardized)
The value is carried from other worksheets in the BPT based on the plan benefit type (DS, AE,
BA or EA).
Line 10 – Target Adjustment (Allowed Costs as a Ratio of Bid)
The target adjustment is the allowed cost percentage of the bid and it is used in calculating the
target amount for risk corridor payments. The value is calculated as–
[(1.00 – administration cost percentage) X (total direct subsidy payments + total beneficiary
premiums related to the standardized bid amount)]
Line 11 – Prospective Brand Discount Amount
The value is carried from Worksheet 6A of the BPT.
Line 12 – Rounding Rule
Select the option from the drop-down box that corresponds to the preferred method for
rounding the Part D premium. The valid options are $0.10 and $0.50. MA-PD plans are
required to round to the nearest $0.10; Part D plans are permitted to round to either the nearest
$0.10 or nearest $0.50.
CY2016 Part D BPT Instructions
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WORKSHEET 7
SECTION IV – PART D BID PRICING TOOL CONTACTS AND DATE PREPARED
Part D sponsors must identify three persons as plan bid contact, Part D certifying actuary and
additional Part D BPT contact. The Part D certifying actuary and additional Part D BPT
contact must be readily available and authorized to discuss the development of the pricing of
the bid.
In this section, enter the name, phone number and e-mail information for all three contacts;
credentials are a required input for the certifying actuary. For the phone number, enter all ten
digits consecutively without parentheses or dashes. Do not leave any part of this section blank.
Section IV also contains a field labeled “Date Prepared”. This field must contain the date that
the BPT was prepared. If the BPT is revised and resubmitted during the bid desk review
process, then this date field must be updated accordingly.
SECTION V – WORKING MODEL TEXT BOX
This section contains multiple cells that may be used by bid preparers to enter internal notes–
for example, to facilitate communication between BPT and PBP preparers or to track internal
version schemes.
Section V will be deleted from the finalized file and therefore will not be uploaded to HPMS.
Bid preparers must not enter information in this section meant to be communicated to CMS or
to CMS reviewers, as CMS will not have access to it. Section V will not be deleted from the
working file or the backup file during finalization.
CY2016 Part D BPT Instructions
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APPENDIX A
IV. APPENDICES
APPENDIX A – ACTUARIAL CERTIFICATION
CMS requires an actuarial certification to accompany every bid submitted to HPMS. A
qualified actuary who is a member of the American Academy of Actuaries (MAAA) must
complete the certification. The objective of obtaining an actuarial certification is to place
greater responsibility on the actuary’s professional judgment and to hold him/her accountable
for the reasonableness of the assumptions and projections.
ACTUARIAL STANDARDS OF PRACTICE AND OTHER CONSIDERATIONS
In preparing the actuarial certification, the actuary must 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 …
ASOP No. 23, Data Quality.
ASOP No. 25, Credibility Procedures.
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, “Instructions for Completing the Medicare Prescription Drug Plan
Bid Pricing Tool for Contract Year 2016” and current CMS guidance. The actuarial work
supporting the bid must be consistent and reasonable with respect to the plan benefit package.
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
CY2016 Part D BPT Instructions
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APPENDIX A
intermittent resubmission throughout the bid review process, but they may do so if they wish.
Note that in the event that the PBP changes after the “final” bid is certified, the bid that is
uploaded into HPMS with the revised PBP must be recertified whether or not the BPT changes.
Material changes to the certification language after the initial June certification submission are
not allowed without prior written permission from the CMS Office of the Actuary.
Part D sponsors may have multiple actuaries assigned to one contract to perform the
certifications. For example, a consulting actuary may certify the Part D portion of a bid, while
an internal plan staff actuary may certify the MA portion of the bid. Also, one actuary may
certify plan Hxxxx-001, while a different actuary may certify plan Hxxxx-002. The
instructions contained in this appendix must be followed by all actuaries who will be certifying
CY2016 bids.
If a certification is not submitted via the HPMS certification module, the bid will not be
considered for CMS review and approval.
Every Part D BPT requires a certification.
Additional information regarding the actuarial certification process including technical
instructions for completing the HPMS certification module will be provided in a forthcoming
initial actuarial certification deadline memorandum released via HPMS.
Required Certification Elements
The certification module contains the following information as part of the standardized
language:
•
•
•
•
•
•
•
•
The certifying actuary’s name/user ID and the date, “stamped” when the certification is
submitted.
Attestation that the actuary submitting the certification is a member of the American
Academy of Actuaries (MAAA). As such, the actuary is familiar with the requirements
for preparing MA and Part D bid submissions and meets the Academy’s qualification
standards for doing so.
The specific contract-plan-segment ID of the bid associated with the certification.
The contract year of the bid contained in the certification.
Indication of whether the certification applies to the MA bid, the Part D bid or both.
Attestation that the certification complies with the applicable laws,1 rules,2 Instructions
and current CMS guidance.
Attestation that, in accordance with federal law, the bid is based on the “average
revenue requirements in the payment area for a Medicare Advantage/Part D enrollee
with a national average risk profile.”
Attestation that the data and assumptions used in the development of the bid are
reasonable for the PBP.
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
CY2016 Part D BPT Instructions
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APPENDIX A
•
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.
Certification Module Access
Detailed instructions regarding how to apply for access to the CY2016 certification module are
released via an HPMS memorandum regarding consultant access or electronic signature access
to HPMS.
CY2016 Part D BPT Instructions
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APPENDIX B
APPENDIX B – SUPPORTING DOCUMENTATION
GENERAL
In addition to the BPT and actuarial certification, Part D sponsors must provide CMS with
supporting documentation for every bid, as described in these Instructions.
Unless otherwise noted, Part D sponsors must upload all required supporting documentation at
the time of the initial June bid submission. Additional supporting documentation must be made
available to CMS reviewers upon request, and within 48 hours of the request, as required by
these Instructions. Part D 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 Part D sponsor or a third party. If the actuary
relied upon others for certain bid data and/or assumptions, those individuals are subject to the
same documentation requirements. The actuary must be prepared to produce all substantiation
pertaining to the bid, even if it was prepared by others or is based on a reliance.
In preparing supporting documentation, the actuary must consider ASOP No. 41, Actuarial
Communications. In accordance with Section 3.2, “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 and additional Part D BPT
actuarial contacts must be available to respond to inquiries from CMS reviewers regarding the
submitted bids.
Supporting documentation must–
•
•
•
•
•
•
•
•
•
Be clearly labeled and easily understood by CMS reviewers.
Explain the rationale for the assumptions, including quantitative support and details,
rather than just narrative descriptions of assumptions.
Describe plan-specific variations in addition to the overall pricing assumption or
methodology.
Match the values entered in the current BPT and tie to the PBP.
Include Excel spreadsheets, rather than pdf files, with working formulas and an
explanation of the calculations and their components.
Clearly identify if it is related to MA, Part D or both.
Clearly identify the bid(s) relating to the support. At a minimum, the contract number
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.
Include a hard-coded date.
Include the contract-plan ID and topic in the beginning of the file name.
CY2016 Part D BPT Instructions
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APPENDIX B
•
Be labeled “revised” if any information in the file is revised or appended during bid
desk review.
Acceptable forms of supporting documentation include, but are not limited to, the following
items:
•
•
•
•
•
•
Meeting minutes that include comprehensive documentation of discussions related to
bid development.
E-mail correspondence related to bid development.
A complete description of data sources–for example, a report’s official name/title, file
name, date obtained, source file, etc.
Intermediate calculations showing each step taken to calculate an assumption.
A summary of contractual terms of administrative services agreements.
A business plan.
Supporting documentation that is not acceptable or that may result in a request for additional
information includes, but is not limited to, the following items:
•
•
•
•
•
•
•
Materials that are accessed only through a secure server link that requires a password.
A reference to the supporting documentation for another plan, such as “the same as for
plan Hxxxx-xxx,” and not the documentation itself. The supporting documentation for
a plan must be self-contained.
General descriptions of pricing that do not include plan-specific information.
A statement that the source of a pricing assumption is “professional judgment” with no
additional explanation of the data points underlying the assumptions–for example,
supporting factors, studies or public information.
“Living worksheets” that are overwritten with current data. Supporting documentation
must include the version of the worksheet that was used in bid preparation.
Information obtained after the bids are submitted.
A statement that a pricing assumption or methodology is assumed acceptable based on
its inclusion in a bid that was approved by CMS in a prior contract year. Data,
assumptions, methodologies and projections must be determined to be reasonable and
appropriate for the current bid, independent of prior bid filings.
SUBMITTING SUPPORTING DOCUMENTATION
Supporting materials must be in electronic format (Microsoft Excel, Microsoft Word, or Adobe
Acrobat) and must be uploaded to HPMS. CMS will not accept paper copies of supporting
documentation. Note that multiple substantiation files can be submitted to HPMS at one time
by using “zip” files, which compress multiple files into one (.zip file extension). Also, one file
can be uploaded to multiple plans in HPMS by using the CTRL key when plans are selected.
However, documentation must not be uploaded to plans to which it does not pertain. It is not
acceptable to upload to multiple plans materials specific to a Part D plan, MA plan or certain
contract ID.
CY2016 Part D BPT Instructions
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APPENDIX B
Cover Sheet
To expedite the bid review process, Part D sponsors must upload a “cover sheet” that lists all of
the supporting documentation that is uploaded or provided with the bid form. The filename
must include the phrase “cover sheet.” A cover sheet is required for each upload of
substantiation.
The cover sheet must include detailed information for each support item–such as the filename
and the location within the file, if applicable–and must clearly identify the bid IDs and whether
the substantiation is related to MA, Part D or both.
Note that some documentation requirements apply to every bid (for example, every bid
contains a risk score assumption), while other documentation requirements apply only to bids
that contain certain assumptions (for example, manual rate documentation applies only if a
bid’s projection is based on manual rates). For documentation categories that apply to a subset
of bids that contain a specified assumption, the cover sheet must not refer to a “range” of bid
IDs (such as “plans 001 – 030” or “all plans under contract Hxxxx”). For these items, the cover
sheet must contain the exact bid IDs (contract/plan/segment) to which the documentation
applies.
For subsequent substantiation uploads, the cover sheet must summarize the additional
documents uploaded at that time (that is, the cover sheet must not be maintained as a
cumulative list). The subsequent cover sheets must also contain the exact bid IDs rather than a
“range” of bid IDs.
Sample check lists and cover sheets for the initial June bid submission, and for subsequent
substantiation uploads, are provided at the end of this appendix.
Timing
Part D sponsors and certifying actuaries must prepare all supporting documentation at the time
of the initial June bid submission so that it is immediately available to CMS and reviewers at
initial bid submission or readily available upon request as explained below.
•
•
•
•
The “Initial June Bid Submission” section of Appendix B describes supporting
documentation materials that Part D sponsors must upload to HPMS with the initial
June bid submission.
The “Upon Request by CMS Reviewers” section of Appendix B describes materials that
Part D sponsors and certifying actuaries must provide within 48 hours of request by
CMS reviewers and upload to HPMS prior to bid approval.
When a BPT is resubmitted, the Part D sponsor must upload a summary of changes,
including the cause and effect of each revision, authorized by CMS or CMS reviewers.
If multiple BPTs are resubmitted at the same time, the supporting documentation must
include a mapping of specific bid changes and bid IDs.
Prior to bid approval
◦ Part D sponsors and certifying actuaries must revise supporting documentation
consistent with the final certified bid. The upload of e-mail correspondence to
HPMS alone does not satisfy this requirement.
CY2016 Part D BPT Instructions
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APPENDIX B
◦
Part D sponsors must upload revised supporting documentation and e-mail
correspondence supporting bid resubmissions to HPMS.
Initial June Bid Submission
The following documentation requirements apply to all bids (as all bids contain these
assumptions):
•
•
•
•
•
•
•
A cover sheet outlining the documentation files, as described above.
A product narrative that offers relevant information about plan design, the product
positioning in the market (such as high/low), enrollment shifts, changes in service area,
type of coverage, contractual arrangements, marketing approach and any other pertinent
information that would help expedite the bid review.
A document titled “Related-Party Declaration” that states whether or not the Part D
sponsor is in a related-party arrangement (Worksheets 1, 2 and 3).
Support for sequestration’s effect on the bid, including a detailed qualitative and
quantitative description of how it is reflected in pricing assumptions.
Support for the claims credibility assumptions (Worksheet 2), including–
◦ A statement of the credibility methodology used–for example, the CMS
guideline or the CMS override.
◦ A description of the credibility methodology used if it varies from the CMS
guideline or the CMS override.
◦ The method for blending differences in the credibility for utilization and unit
cost into a composite pmpm credibility factor.
A quantitative mapping in a spreadsheet format of allowed costs, effective cost sharing
and script counts from the formulary tiers to type-of-drug and point-of-sale (retail or
mail order as defined by the PBP) categories used in pricing (Worksheets 2, 6 and 6A).
The required elements include–
◦ The PBP description of the deductible and copay/coinsurance structure by days
supply, point-of-sale and claims interval.
◦ Allowed costs, effective cost sharing and script counts by formulary tier within
each claims interval based on the cost-sharing structure, including days supply
and point-of-sale, specified in the PBP.
◦ A quantitative description of the distribution of the allowed costs, effective cost
sharing and script counts by formulary tier to each of the categories on
Worksheets 6 and 6A.
Support for non-benefit expense assumptions (Worksheet 2). The required elements
include–
◦ A reconciliation of the base period non-benefit expenses reported in Worksheet
1 of the BPT to audited material such as corporate financial statements and planlevel operational data.
◦ A description of the administrative costs included in each non-benefit expense
category in the BPT.
◦ Detailed support for the development of projected non-benefit expenses. The
required elements include-
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APPENDIX B
‣
‣
•
A description of the methodology used to develop non-benefit expenses.
An analysis that demonstrates the development of each line item using
relevant data, assumptions, contracts, financial information, business plans
and other experience.
‣ A description of the relationship between the non-benefit expense line items
reported in the BPT and audited material such as corporate financials and
plan-level operational data.
‣ An explanation for significant differences between actual and expected nonbenefit expenses for CY2012, CY2013 and CY2014, including a description
of how that knowledge was incorporated into the contract year projection.
Justification of the gain/loss margin (Worksheet 2). The required elements include–
◦ The Part D sponsor’s margin requirement for all non-Medicare lines of business,
including any change in such requirement in the prior two years and
identification of these lines of business.
◦ Support for overall margin levels, including a description of the methodology
used to develop gain/loss margin assumptions, the level at which overall
margins are determined and demonstration of year to year consistency of
projected margins.
◦ A list of the Part D contract numbers offered by the organization, if aggregate
gain/loss requirements are met at the organization level.
◦ A demonstration of consistency between the projected aggregate margins for
Part D and the actual aggregate returns over the long term. If the returns have
been inconsistent historically, provide an explanation of how this is addressed in
the current bid submission. For example, what pricing assumptions have been
made to bring the projected margin closer to the actual returns?
◦ For MA-PD plans, a description of the approach for setting the Part D margin in
relation to the MA margin
◦ A detailed explanation of the need for flexibility in the gain/loss margin
requirements in order to satisfy other CMS requirements.
◦ 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 bid-specific, year-by-year numeric business
plan that demonstrates profitability within 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 of how the targeted margin in the
original business plan will be met, if the plan is progressing toward a
positive margin more slowly than projected in the original business plan,
including—
A revised business plan demonstrating that the plan will reach
profitability within 5 years of the original business plan.
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APPENDIX B
•
A description of benefits reductions or premium increases for
CY2016.
• A copy of the original business plan uploaded to HPMS in a separate
file.
• The year that profitability will be achieved or the plan becomes part of a
valid product pairing.
‣ A description of the product pairing that includes the gain/loss margin for
each plan and shows that the plans have—
• Identical service areas,
• The same plan type, if an MA-PD plan, and
• A positive combined gain/loss margin.
◦ A detailed justification for unique situations in which a business plan does not
achieve profitability within 5 years, including—
‣ A description of extenuating circumstances supporting an exception.
‣ Evidence of the evidence of anti-competitive practices and solvency issues.
‣ Actions taken to bring the margin differential into compliance with these
Instructions.
◦ Justification of the margin for bids with relatively large projected overall gains
including an explanation of how the PBP offers benefit value in relation to the
margin.
◦ Support for bids with high margins including—
‣ An explanation of a need for a contingency margin that correlates to the
“risk” to the Part D sponsor, low credibility and/or significant claims
variability from year to year.
Detailed support for the development of projected risk scores (Worksheet 3). The
required elements include–
◦ A detailed description and corresponding numerical demonstration of the
methodology used to develop projected CY2016 Part D risk scores.
◦ A description of the source data for the development of the projected CY2016
Part D risk scores.
◦ A description of all projection factors and the basis for the factors.
◦ A statement about the consistency between the development of the projected
risk scores for the plan population and the development of projected prescription
drug expenses.
◦ A demonstration that the method used is consistent with the preferred
development approach in these Instructions, including an explanation for using
an alternate approach.
◦ Justification for and a description of the credibility assumption for actual plan
risk scores.
CY2016 Part D BPT Instructions
Page 76 of 91
APPENDIX B
The following documentation requirements apply to all bids that contain these specified
assumptions:
•
•
•
•
•
Detailed qualitative and quantitative support for the development of the base period
experience (Worksheet 1). The required elements include–
◦ A description of the source data, such as a list of the CMS return files that were
used in the compilation of the PDEs.
◦ Any applicable adjustments, stated as absolute values or percentages, to the
source data, including considerations for–
‣ Accepted PDEs.
‣ Rejected PDEs expected to be accepted by CMS upon resubmission.
‣ P2P transactions.
‣ Transfer of OTC drug data from the base period experience to the nonbenefit expense component.
Reconciliation of base period experience to the Part D sponsor’s audited financial
statements and bid-level operational data (Worksheet 1). The data are to be reported on
an incurred, rather than an accounting or GAAP, basis, including both claims paid,
unloaded claim reserves, non-benefit expenses and revenues. 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 the rebates and all
other types of direct and indirect remuneration (DIR) (Worksheets 1 and 3).
Detailed qualitative and quantitative support of the development of each trend
projection factor (Worksheet 2). The required elements include–
◦ A description of the source data, including the data’s relevance to the Part D
plan.
◦ A summary of the Part D 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–
‣ Part D sponsor’s experience.
‣ PBM reports and contracts.
‣ Industry and/or internal studies.
‣ Formulary analysis.
‣ Benefit design analysis.
◦ An explanation for how the knowledge of significant differences between actual
and projected claims for recent contract years has been incorporated into the
projection factors.
Detailed support for the manual rate development (Worksheet 2), including a
description/illustration of the underlying data source(s) and data/methodology used in
the development of the manual rates, if manual rates are used. The required elements
include–
CY2016 Part D BPT Instructions
Page 77 of 91
APPENDIX B
◦
•
A description of the source data, including the data’s relevance to the Part D
plan.
◦ Credibility standards applied to the data and corresponding adjustments, if
applicable.
◦ Consideration of any adjustments made for annual volatility of the source data.
◦ Any applicable adjustments to the source data, such as–
‣ Approach and factors applied to account for incomplete claim run-out,
formulary differences and/or expenditures that are not reflected in the source
data;
‣ Techniques and factors used to reflect differences between the underlying
population and that expected of the Part D plan; and
‣ Techniques and factors used to adjust for differences in plan design between
the source data and the Part D plan.
◦ Data and methodology used to project the data from base period to CY2015.
◦ A description of the source of data for the development of corresponding
CY2016 risk scores and how that source compares to the risk profiles of the
population underlying the manual rate source data.
◦ All other applicable factors and/or adjustments.
Detailed support for related-party arrangements (Worksheets 1, 2 and 3).
◦ A Part D sponsor in a related-party arrangement must provide the following:
‣ Declaration of every related-party arrangement.
‣ Disclosure of all services provided in every related-party arrangement.
‣ A summary that explains the relationship of the parties involved and
common ownership, control and investment.
‣ A summary of the contractual terms of each relationship that includes a
description of the services provided and money exchanged.
‣ Disclosure of the method used in preparing the bid for each arrangement.
The options are Actual Cost Method for Administrative Services, Actual
Cost for Benefit Costs, Market Comparison through Part D Sponsor Method
and Market Comparison through Related Party Method.
‣ Supporting documentation for each arrangement, as outlined below.
◦ A Part D sponsor that chooses the Actual Cost Method for Administrative
Services must–
‣ Provide a qualitative and quantitative summary of the development of the
related party’s non-benefit expense and gain/loss margin.
◦ A Part D sponsor that chooses the Actual Cost Method for Benefit Costs must–
‣ Provide a qualitative and quantitative analysis of the development of the
related party’s gain/loss margin reflected in the benefit costs, where the
related party’s gain/loss margin is defined as the allowed amount entered in
the BPT less the cost of purchasing pharmaceuticals and dispensing
prescriptions. The gain/loss margin must be reconcilable to the related
party’s audited financial statements.
CY2016 Part D BPT Instructions
Page 78 of 91
APPENDIX B
◦
•
•
•
•
A Part D sponsor that chooses the Market Comparison through Part Sponsor
Method must–
‣ Provide an analysis that clearly explains the terms of each contract in the
comparison and how the financial results are not significantly different from
what is achieved in the absence of the related-party relationship.
‣ Show that results of pricing at least two quarters of the Part D plan’s
experience through the related and unrelated party contracts are within plus
or minus five percent. All terms of each of the contracts must be included
when pricing the plan’s experience.
‣ Demonstrate that the contracts with the unrelated parties are associated with
sufficient costs to be considered valid contracts.
◦ A Part D sponsor that chooses the Market Comparison through Related Party
Method must–
‣ Provide an analysis that clearly explains the terms of each contract in the
comparison and how the financial results are not significantly different from
what is achieved in the absence of the related-party relationship.
‣ Show that results of pricing at least two quarters of the Part D plan’s
experience through the related and unrelated party contracts are within plus
or minus five percent. All terms of each of the contracts must be included
when pricing the plan’s experience.
‣ Demonstrate that the contracts with the unrelated parties are associated with
sufficient costs to be considered valid contracts.
‣ Provide a signed attestation from the related party stating that the actual
contracts will be available for review upon request by CMS.
Detailed quantitative support of the development of the induced utilization factor
(Worksheet 5).
The input sheet(s) for the pricing model used in the development of the bid.
An explanation of and detailed support for how CY2015 bid audit findings and
observations and compliance issues 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 this appendix.
CY2016 Part D BPT Instructions
Page 79 of 91
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 by the certifying actuary
or additional Part D BPT contact within 48 hours. These materials will be reviewed at audit:
•
•
•
•
Copies of related-party contracts.
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.
An explanation of how certain findings from the Office of Financial Management
(OFM) audit were addressed in the current bid.
Communication between CMS reviewers and the Part D sponsor throughout the bid
review process (that is, e-mail communication) that was not uploaded to HPMS during
bid review.
Additional information not specified in this list may be requested by CMS reviewers, as
needed, at any point during the bid desk review process.
PART D CHECKLIST FOR REQUIRED SUPPORTING DOCUMENTATION
Initial June Bid Submission – Required for All Bids
Cover sheet
Product narrative
Related-party declaration
Claims credibility assumption
Sequestration assumptions
Mapping of allowed costs, script counts and cost sharing in formulary tiers to type-of-drug and
point-of-sale (retail or mail order as defined by the PBP) categories
Non-benefit expenses
Gain/loss margin
Projected risk scores
Initial June Bid Submission – Required for All Bids with Specified Assumptions
Base period experience and projections
Reconciliation of base period experience to company financial data
Rebates – base period and contract year
Manual rate development
Trend projection factor development
Disclosure of related-party arrangements
Induced utilization factor development
Input sheet(s) for pricing model
CY2016 Part D BPT Instructions
Page 80 of 91
APPENDIX B
Related-party arrangements
Bid audit results and compliance issues
Reliance information
Upon Request by CMS Reviewers
Related-party contracts
Reliance letter
OFM audit results
Bid review communications
Other
CY2016 Part D BPT Instructions
Page 81 of 91
APPENDIX B
SAMPLE COVER SHEET – SUBMITTED WITH INITIAL BID UPLOAD
Supporting Documentation Cover Sheet
CY2016 Bid Submission
Organization Name: Health One
Contract(s): H1234, H9999 and S9999
Date: June 2, 2015
Documentation
Requirement
Cover sheet
Specific
Bid ID(s) or N/A
All bids
Product narrative
All bids
Credibility
assumption
Cost sharing
mapping
Non-benefit
expenses
Gain/loss margins
Risk scores
All bids
All bids
File Name
Cover Sheet 6-215.pdf
Cover Sheet 6-215.pdf
Cover Sheet 6-215.pdf
Cover Sheet 6-215.pdf
AdminProfit.xls
All bids
All bids
AdminProfit.xls
Risk CY15.xls
Related-party
declaration
Sequestration
All bids
Manual rates
H1234-003-0
S9999-001-0
H1234-001-0
H1234-004-0
Cover Sheet 6-215.pdf
Cover Sheet 6-215.pdf
Manual.xls
ESRD subsidy
All bids
All bids
CY2016 Part D BPT Instructions
Manual.xls
Location
within File (if
Applicable)
Page 1
Applies to: MA,
PD, or Both
both
Pages 2-4
both
Page 5
both
Page 6
both
Sheet1
both
Sheet2
MA-Sheet 1
PD-Sheet 2
Page 7
both
both
Page 7
both
Section II
PD
Section I
MA
both
Page 82 of 91
APPENDIX B
SAMPLE COVER SHEET – SUBMITTED AS A SUBSEQUENT SUBSTANTIATION UPLOAD
Supporting Documentation Cover Sheet #2
CY2016 Bid Submission
Organization Name: Health One
Contract(s): H1234, H9999, and S9999
Date: July 16, 2015
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 7-16-15.doc
Location
within File (if
Applicable)
n/a
Applies to:
MA, PD,
or Both
both
E-mail1.doc
n/a
MA
E-mail2.doc
n/a
PD
E-mail3.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
CY2016 Part D 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 83 of 91
APPENDIX C
APPENDIX C – EMPLOYER/UNION-ONLY GROUP (EGWP)
REQUIREMENTS
The Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA) gives
employers and unions a number of options for providing prescription drug coverage to their
retirees. Employers and unions can–
•
•
•
Provide coverage at least as good as Medicare’s Part D DS benefit and receive a retiree
subsidy of 28 percent of a retiree’s drug costs between $320 and $6,600;
Purchase customized benefits from a PDP or MA-PD pursuant to CMS waivers; or
Contract directly with CMS to become a PDP and provide customized benefits pursuant
to CMS waivers.
Under sections 1860D-22(b) and 1857(i) of the Social Security Act (SSA), CMS may waive or
modify Part D requirements that hinder the design of, offering of, or enrollment in an employer
or union Part D retiree plan. The waiver authority applies to PDPs and MA-PDs that offer
employer/union-only group plans and to employer/union-only groups that contract directly with
CMS to become a PDP.
For CY2006, CMS issued guidance that waives or modifies many of the requirements for these
entities. All of the standard Part D bidding guidelines apply, with the exception of those
specifically waived.
For CY2016, CMS does not require a Part D BPT for employer/union-only group plans.
For additional information on CY2016 EGWP bidding policy, please refer to the CY2016 Call
Letter.
CY2016 Part D BPT Instructions
Page 84 of 91
APPENDIX D
APPENDIX D – CALCULATION OF NATIONAL AVERAGE MONTHLY
BID AMOUNT
For CY2006, the national average monthly bid amount was calculated using equal weighting
applied to all PDP sponsors, and MA-PD plans were assigned a weight based upon prior
enrollment. New MA-PD plans were assigned a zero weight. This approach was used because
no PDP enrollment data existed for 2005.
For CY2007 and CY2008, the national average monthly bid calculation was performed
according to the guidelines established by the “Medicare Demonstration to Limit Annual
Changes in Part D Premiums due to Beneficiary Choice of Low-Cost Plans.” Specifically, 80
percent of the calculation for CY2007 was based on the 2006 averaging methodology, also
known as the uniform-weighting average, and 20 percent was based on an enrollment-weighted
average. For CY2008, 40 percent of the calculation was based on the uniform-weighting
average and 60 percent was based on an enrollment-weighted average. The demonstration was
no longer in effect for CY2009 and the benchmarks were based on the 2008 enrollments
applied to the 2009 bids. The CY2016 benchmarks will be based on the 2015 enrollments
applied to the 2016 bids.
The following table illustrates the impact of the weighted enrollment methodology for two
enrollment periods, June 2013 and February 2014. Recall that the 2014 benchmark was
calculated as 100 percent of the enrollment-weighted approach.
The same values are presented based on the February 2014 enrollment. Since the 2016
benchmarks will be based on 2014 enrollment, these values may be useful for estimating the
2016 benchmarks. The left section of the table shows the actual 2014 benchmarks, which were
calculated based on June 2013 enrollment. The right section, titled “February 2014
Enrollment,” indicates how the 2014 benchmarks would have been calculated based on more
current enrollment data.
Enrollment Weighted Approach
June 2013
Enrollment
February 2014
Enrollment
National average monthly bid amount
$75.88
$74.36
Base beneficiary premium
$32.42
$31.59
Direct subsidy
$43.46
$42.77
This illustrative recalculation of the 2014 benchmarks is provided for the purpose of assisting
Part D sponsors in developing the projected 2016 national average monthly bid amount and
base beneficiary premium, which will be used in the calculation of the plan’s target premium.
The final 2016 benchmarks will be based on the 2015 enrollments applied to the 2016 bids.
CY2016 Part D BPT Instructions
Page 85 of 91
APPENDIX E
APPENDIX E – CALCULATION OF LOW-INCOME BENCHMARK
PREMIUM AMOUNTS
The Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA) directs
CMS to use a weighted average to calculate the regional low-income benchmark premium
amounts used in the determination of the low-income premium subsidy amounts. In
determining the 2006 low-income benchmark premium amounts, PDPs were weighted equally,
MA-PDs were assigned a weight based on prior enrollment as of March 31, 2005, and new
MA-PDs were assigned a zero weight. For CY2007, under the “Medicare Demonstration to
Transition Enrollment of Low-Income Subsidy Beneficiaries,” CMS calculated the regional
low-income benchmark premium amounts using the same weighting methodology applied in
2006.
For CY2008, CMS implemented a transition to the statutorily required weighting such that the
regional low-income benchmark premiums would experience a smaller decrease. CMS
calculated the 2008 regional benchmarks using a composite of the 2006 weighting approach
(simple average) and the statutory weighting formula (weighted average), as described below:
•
•
The first component, the simple average, was the same as the 2006 weighting
methodology for the regional low-income benchmark premium amount. The PDP
organization premium amounts for basic prescription drug coverage in each region were
weighted equally and the MA-PD plan premiums, after the application of Part A/B
rebates, were weighted based upon prior enrollment.
The second component was a weighted average of the premium amounts for each PDP
and MA-PD with a weighting based on each plan’s prior enrollment as a percentage of
all beneficiaries enrolled in those plans.
For CY2008, the regional low-income benchmark amount was based on 50 percent of the first
component and 50 percent on the second component, as described above.
For CY2009, the “Medicare Demonstration to Transition Enrollment of Low-Income Subsidy
Beneficiaries” and the de minimis policy were not in effect. The regional low-income
benchmark amounts were calculated based on 100 percent of the weighted LIS enrollments.
For CY2010, the “Medicare Demonstration to Revise Part D Low-Income Benchmark
Calculation” established that the regional low-income benchmark amounts, based on 100
percent of the weighted LIS enrollments, would be calculated using the Part D premiums for
MA-PD plans before they were reduced by any applicable MA A/B rebates.
For CY2011 and subsequent years, in accord with the codification of the “Medicare
Demonstration to Revise Part D Low-Income Benchmark Calculation”, the weighted average
premium amounts will be calculated using the Part D premiums for MA-PD plans before they
have been reduced by any applicable Part A/B rebates.
The following table illustrates the impact of calculating the regional low-income benchmark
amounts based on 100 percent of the weighted LIS enrollments for two enrollment periods,
June 2013 and February 2014.
CY2016 Part D BPT Instructions
Page 86 of 91
APPENDIX E
Enrollment Weighted Approach
PD Region
State(s)
June 2013
Enrollment
February 2014
Enrollment
01
NH, ME
$27.78
$26.84
02
CT, MA, RI, VT
$27.99
$27.54
03
NY
$37.23
$36.03
04
NJ
$37.10
$36.73
05
DE, DC, MD
$32.34
$30.46
06
PA, WV
$35.50
$35.20
07
VA
$29.34
$28.05
08
NC
$28.28
$27.53
09
SC
$33.87
$30.40
10
GA
$29.32
$26.46
11
FL
$22.13
$22.01
12
AL, TN
$29.67
$28.54
13
MI
$32.46
$30.22
14
OH
$28.93
$28.46
15
IN, KY
$34.95
$32.92
16
WI
$37.03
$35.30
17
IL
$28.59
$28.12
18
MO
$31.21
$30.30
19
AR
$30.03
$28.03
20
MS
$30.56
$30.10
21
LA
$31.75
$31.41
22
TX
$27.73
$26.93
23
OK
$30.18
$29.40
24
KS
$34.21
$31.75
25
IA, MN, MT, ND, NE, SD, WY
$32.23
$31.18
26
NM
$19.92
$19.97
27
CO
$26.90
$26.09
28
AZ
$27.49
$27.40
29
NV
$22.78
$22.24
30
OR, WA
$34.82
$34.36
31
ID, UT
$39.02
$38.37
32
CA
$28.10
$27.01
33
HI
$25.69
$24.45
34
AK
$37.07
$31.41
CY2016 Part D BPT Instructions
Page 87 of 91
APPENDIX F – HEALTH CARE REFORM
PROVISIONS
The following provisions of the Patient Protection and Affordable Care Act as amended by the
Health Care and Education Reconciliation Act of 2010 apply to Part D bids for CY2015.
Coverage in the Gap
A phase-in approach will be implemented to reduce beneficiary cost sharing in the coverage
gap from 100 percent to 25 percent in CY2020. In CY2015, beneficiary cost sharing is reduced
from 72 percent to 65 percent for non-applicable (generic) drugs; the Part D sponsor’s liability
for DS coverage is increased to 35 percent. Beneficiary cost sharing is reduced from 47.5
percent to 45 percent of the negotiated price for applicable (brand) drugs and 45 percent of the
dispensing fee and vaccine administration fee, if any. Pharmaceutical manufacturers will
provide a 50 percent discount off of the Part D sponsor’s negotiated price of the brand-name
drug at the point-of-sale. Ninety five percent of the negotiated price of the drug and 45 percent
of the dispensing fee and vaccine administration fee, if any, will count toward the beneficiary’s
TrOOP; the Part D sponsor’s liability is 5 percent plus 55 percent of the dispensing fee and
vaccine administration, if any. Applicable drugs are defined in Section 1860D-14A(g)(2) of the
statute and are covered Part D drugs that are either approved under a new drug application (NDA)
under Section 505(b) of the Federal Food, Drug, and Cosmetic Act or, in the case of a biologic
product, licensed under Section 351 of the Public Health Service Act (BLA). Non-applicable drugs
are covered Part D drugs that do not meet the definition of an applicable drug.
These coverages apply to beneficiaries who, on the date of dispensing a covered Part D drug,
are enrolled in an MA-PD or PDP plan, are not enrolled in a qualified retiree prescription drug
plan, are not entitled to the low-income subsidy, have reached or exceeded the ICL and have
not exceeded the TrOOP threshold.
Low-Income Premium Subsidy Amounts
The approach to determine the low-income premium subsidy amounts that was established in
the “Medicare Demonstration to Revise Part D Low-Income Benchmark Calculation” and
approved on August 11, 2009 was codified. Therefore, the weighted average premium amounts
will be calculated for MA-PD plans using the Part D premiums before they have been reduced
by any applicable MA A/B rebates.
Income-Related Part D Premium
Similar to Medicare Part B, an income-related premium is established for Part D beneficiaries
with modified gross income greater than specified income thresholds. The income thresholds
for CY2012 through CY2019 are $85,000 per individual and $170,000 per couple. The Part D
income-related monthly adjustment amounts will be collected by the federal government and
will have no impact on the direct subsidy payments received by Part D sponsors.
CY2016 Part D BPT Instructions
Page 88 of 91
APPENDIX G – TRENDING RISK SCORES
This appendix includes the following considerations for trending Part C and Part D risk scores.
Include the most recent annual consecutive calendar risk scores that are available.
Use raw risk scores, that is, not normalized and not adjusted for MA coding patterns.
Reflect the same amount of paid claims run-out for each year’s risk scores.
Use final risk scores from each year or apply a completion factor to the last set of scores
to approximate a final score.
Use the same cohort for each year (e.g., the July cohort).
Use the same model to estimate all payment year scores. If possible, use the risk
adjustment model for the upcoming payment year or apply a conversion factor to each
payment year’s risk scores to convert to a single risk model.
o The model conversion factor should be plan-specific. It can be generated from
the risk scores that CMS sends to Plan sponsors to support bidding; however,
Plan sponsors should also consider whether other years in their trends have a
different conversion factor (e.g., when the population mix differs).
o The conversion factor can be derived by calculating risk scores from a year
under two different models. The factor can be a ratio of the scores under each
model.
The risk scores should have the same run-out and be calculated using the
same cohort.
Plan sponsors should note that when converting risk scores from one
model to another, a conversion between denominator years is, more than
likely, occurring also. The risk scores in the conversion factor should be
raw if the factor will be applied to an old model raw risk score, which is
then projected to the payment year.
Divide cohorts into meaningful subgroups using the same considerations used to
determine allowed costs and project enrollment in each subgroup to the payment year.
Weight subgroup risk scores by enrollment in each subgroup per year to determine
annual risk scores for trending.
Compare year over year risk scores to obtain a trend factor. Unless the Plan sponsor is
anticipating changes in coding efforts or population characteristics, more than two years
of risk scores will help minimize the effect of random changes in coding patterns and
enrolled population. If deviations from previous trend are expected in the payment
year, provide justification for such changes in the supporting documentation.
o If starting with base year risk scores that are blended, Plan sponsors are to assess
whether there are plan-specific risk score trends unique to each model and adjust
their overall trend accordingly.
CY2016 Part D BPT Instructions
Page 89 of 91
Use this trend factor to project from base period risk scores to payment (contract) year
raw risk scores.
CY2016 Part D BPT Instructions
Page 90 of 91
According to the Paperwork Reduction Act of 1995, no persons are required to respond to a
collection of information unless it displays a valid OMB control number. The valid OMB
control number for this information collection is 0938-0944. The time required to complete
this information collection is estimated to average 12 hours per response, including the time to
review instructions, search existing data resources, gather the data needed, and complete and
review the information collection. If you have comments concerning the accuracy of the time
estimate(s) or suggestions for improving this form, please write to: CMS, 7500 Security
Boulevard, Attn: PRA Reports Clearance Officer, Mail Stop C4-26-05, Baltimore, Maryland
21244-1850.
CY2016 Part D BPT Instructions
Page 91 of 91
| File Type | application/pdf |
| File Title | INSTRUCTIONS FOR COMPLETING THE PRESCRIPTION DRUG PLAN BID PRICING TOOL FOR CONTRACT YEAR 2015 |
| Author | HHS/CMS |
| File Modified | 2014-12-11 |
| File Created | 2014-12-11 |