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

OMB Approved # 0938-0944

INSTRUCTIONS FOR COMPLETING
THE PRESCRIPTION DRUG PLAN
BID PRICING TOOL
FOR CONTRACT YEAR 2017

As of August 27, 2015

CMS-10142 (02/29/2016)

TABLE OF CONTENTS
I. Introduction.................................................................................................................................................... 4
Background .................................................................................................................................................... 4
Document Overview ...................................................................................................................................... 4
New for Contract Year 2017 (CY2017) ......................................................................................................... 4
Bidding Resources ......................................................................................................................................... 4
II. Pricing Considerations.................................................................................................................................. 6
Bidding/Pricing Approach ............................................................................................................................. 6
Specific Topics............................................................................................................................................... 6
III. Data Entry and Formulas .......................................................................................................................... 28
Prescription Drug ......................................................................................................................................... 28
PD Worksheet 1 – Rx Base Period Experience................................................................................................ 31
Section I – General Information................................................................................................................... 31
Section II – Base Period Background Information ...................................................................................... 34
Section III – Part D Claims Experience ....................................................................................................... 35
Section IV – PMPM Non-Benefit Expenses ................................................................................................ 38
Section V – PMPM Premium Revenue ........................................................................................................ 38
Section VI – PMPM Income Statement Summary....................................................................................... 39
PD Worksheet 2 – Rx PDP Projection of Allowed/Non-Benefit ..................................................................... 40
Section I – General Information................................................................................................................... 40
Section II – Utilization for Covered Part D Drugs ....................................................................................... 40
Section III – Cost for Covered Part D Drugs ............................................................................................... 41
Section IV – Projected Allowed PMPM ...................................................................................................... 42
Section V – PMPM Non-Benefit Expense ................................................................................................... 43
Section VI – Development of Manual Rate ................................................................................................. 44
Section VII – Percentage of Revenue .......................................................................................................... 44
PD Worksheet 3 – Rx Contract Period Projection for Defined Standard Coverage ........................................ 45
Section I – General Information................................................................................................................... 45
Section II – Projection Data ......................................................................................................................... 45
Section III – Part D Covered Drug Claims .................................................................................................. 45
Section IV – PMPM Non-Benefit Expense and Gain/Loss ......................................................................... 48
Section V – Defined Standard Coverage Bid Development ........................................................................ 49
PD Worksheet 4 – Rx Standard Coverage with Actuarially Equivalent Cost Sharing .................................... 50
Considerations for Actuarially Equivalent Coverage................................................................................... 50
Section I – General Information................................................................................................................... 50
Section II – Projection Data ......................................................................................................................... 50
Section III – Development of Bid for Defined Standard Coverage ............................................................. 50
Section IV – Development of Bid Components and Tests for Actuarial Equivalence................................. 51
Section V – Standard Coverage Bid Development with Actuarially Equivalent Cost Sharing ................... 51
PD Worksheet 5 – Rx Alternative Coverage.................................................................................................... 52
Considerations for Basic Alternative and Enhanced Alternative Coverage ................................................. 52
Section I – General Information................................................................................................................... 52
Section II – Projection Data ......................................................................................................................... 53
Section III – Development of Bid for Defined Standard Coverage ............................................................. 53
Section IV – Development of Bid Components ........................................................................................... 53
Section V – Development of Actuarial Equivalence Test............................................................................ 54
Section VI – Tests for Alternative Coverage ............................................................................................... 54
Section VII – Development of Supplemental Premium ............................................................................... 55
Section VIII – Development of Induced Utilization Adjustment................................................................. 55

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PD Worksheet 6 – Script Projections for Defined Standard, Actuarially Equivalent or Alternative
Coverage .................................................................................................................................................. 56
Considerations.............................................................................................................................................. 56
Section I – General Information................................................................................................................... 56
Section II – Projections for Equivalence Tests ............................................................................................ 56
PD Worksheet 6A – Coverage in the Gap for Defined Standard, Actuarially Equivalent or Alternative
Coverage .................................................................................................................................................. 60
Considerations.............................................................................................................................................. 60
Section I – General Information................................................................................................................... 60
Section II – Spending in the Coverage Gap ................................................................................................. 60
PD Worksheet 7 – Summary of Key Bid Elements ......................................................................................... 63
Section I – General Information................................................................................................................... 63
Section II – 2017 Defined Standard Benefit Parameters.............................................................................. 63
Section III – Summary of Key Bid Elements ............................................................................................... 63
Section IV – Part D Bid Pricing Tool Contacts and Date Prepared ............................................................. 65
Section V – Working Model Text Box ........................................................................................................ 65
IV. Appendices................................................................................................................................................ 66
Appendix A – Actuarial Certification .............................................................................................................. 66
Appendix B – Supporting Documentation ....................................................................................................... 68
General ......................................................................................................................................................... 68
Submitting Supporting Documentation........................................................................................................ 69
Part D Checklist for Required Supporting Documentation .......................................................................... 78
Sample Cover Sheet – Submitted with Initial Bid Upload........................................................................... 79
Sample Cover Sheet – Submitted as a Subsequent Substantiation Upload ................................................. 80
Sample Format for Reliance on Information Supplied by Others ................................................................ 80
Appendix C – Employer/Union-Only Group (EGWP) Requirements ............................................................. 81
Appendix D – Calculation of National Average Monthly Bid Amount ........................................................... 82
Appendix E – Calculation of Low-Income Benchmark Premium Amounts .................................................... 83
Appendix F – Health Care Reform .................................................................................................................. 85
Provisions..................................................................................................................................................... 85
Appendix G – Trending Risk Scores................................................................................................................ 86

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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 CY2016 BPT 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 2017 (CY2017)
BIDDING RESOURCES
•

The CY2017 Advance Notice and draft CY2017 Call Letter can be found at
http://www.cms.gov/Medicare/Health-Plans/MedicareAdvtgSpecRateStats/Downloads/
Advance2017.pdf.

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INTRODUCTION

•

The CY2017 Call Letter and CY2017 Rate Announcement can be found at
http://www.cms.gov/Medicare/Health-Plans/MedicareAdvtgSpecRateStats/Downloads/
Announcement2017.pdf.
• The CY2017 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/
BidTraining2017.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
CY2017 bidding process. The conference calls will include live Question and Answer
sessions with CMS actuaries. For call-in information, see the OACT memorandum
with the subject line “Actuarial User Group Calls” released via HPMS.
• For technical questions about the BPT, BPT Batch Tools, HPMS, or the upload process,
refer to the following resources:
◦ The BPT Technical Instructions located in HPMS, under HPMS Home > Plan
Bids > Bid Submission > CY2017 > Documentation > BPT Technical
Instructions
◦ The Bid Submission User’s Manual, also available in HPMS, under HPMS
Home > Plan Bids > Bid Submission > CY2017 > Documentation > Bid User’s
Manual
◦ HPMS Help Desk: 1-800-220-2028 or [email protected]

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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 CY2015, 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 2015 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 2015,
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 contractplan 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,

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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://cms.hhs.gov/Regulations-andGuidance/Guidance/Manuals/downloads/mc86c04.pdf.

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.

✓ 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 enrollment changes do not involve a cross-walk whether or not a plan is
terminated.
✓ 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.
✓ Rule 4 – Cross-walks in Successive Years

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 CY2015 to CY2016 and from CY2016 to CY2017).
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.

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PRICING CONSIDERATIONS
Example 1

Formal Cross-walk

A Part D sponsor offers plans 001, 002 and 003 in CY2015 and CY2016 and plans
002 and 003 in CY2017. Plan 001 is consolidated and the membership is formally
cross-walked into plan 003 for CY2017 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 CY2017 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 plans 001 and 003 (Rule 1 and
Rule 3).

Example 2

Formal Cross-walk and Enrollment Shift

A Part D sponsor offers plans 001, 002 and 003 in CY2015 and CY2016 and plan
003 and new plan 004 in CY2017. Plan 001 is consolidated and the membership is
formally cross-walked into plan 003 for CY2017 as submitted in HPMS. Plan 002
is terminated for CY2017 and the certifying actuary expects the membership in plan
002 to enroll evenly between plans 003 and 004; however, there is no formal crosswalk or approved cross-walk exception in place. Base period experience must be
reported on Worksheet 1 of the CY2017 BPT as follows:
•
•

For plan 003, report base period experience for plans 001 and 003 (Rule 1 and
Rule 3).
For plan 004, do not report base period experience (Rule 2). Data aggregation is
not allowed.

Example 3

Cross-walks in Successive Years

A Part D sponsor offers plan 001 with 100 beneficiaries and plan 002 in CY2015.
In CY2016, 50 beneficiaries stayed in plan 001 and 50 beneficiaries were crosswalked into plan 002 via MARx enrollment transactions. In CY2017, 25
beneficiaries stayed in plan 001 and 25 beneficiaries were cross-walked into plan
002 via MARx enrollment transactions. Base period experience must be reported
on Worksheet 1 of the CY2017 BPT as follows:
•
•

For plan 001, report base period experience for plan 001 (Rule 3).
For plan 002, report base period experience for plans 001 and 002 (Rule 1, Rule
3 and Rule 4).

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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:

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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 CY2016, 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 CY2016, beneficiary cost sharing is reduced to 58 percent and the Part D
sponsor’s liability is increased to 42 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.

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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:
‣ 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

The credibility guidance in this section is provided as a resource to certifying actuaries, not
as a requirement.
Information on the development of the CMS guidelines for full credibility can be found on
the “Medicare Advantage Rates & Statistics” page of the CMS website at
http://www.cms.gov/Medicare/Health-Plans/MedicareAdvtgSpecRateStats/Bid-PricingTools-and-Instructions-Items/BidGuidance.html.
Claims Credibility

This section pertains to the credibility percentages on Worksheet 2.
CMS has established Part D credibility guidelines as summarized in the following table:
Subject Experience
Allowed Costs

CY2017 Part D BPT Instructions

Exposure Required for Full
Credibility
18,000 member months

CMS Formula for
Partial Credibility
√

member months
18,000

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PRICING CONSIDERATIONS
Risk Score Credibility

This section pertains to the credibility of risk scores based on the CMS preferred
methodology. CMS has not developed credibility guidelines for risk scores based on
alternate approaches.
CMS has established Part D credibility guidelines as summarized in the following table:
Subject Experience

Exposure Required for
Full Credibility

Estimated Part D risk scores for
development of 2017 bids as
posted on HPMS

125 beneficiaries

Beneficiary-level file to support
2017 Part D bids as distributed
by CMS

1,500 member months

CMS Formula for
Partial Credibility
√

number of beneficiaries
125

√

member months
1,500

Overriding the CMS Formulas for Partial Credibility

The following guideline is applicable only to the CMS claims and risk score credibility
formulas presented above; such guideline may not be suitable for any alternative
credibility formula. If the CMS formula for partial credibility is applied and the
resulting credibility is—
•
•

Less than or equal to 20 percent, then the actuary may override the computed
credibility with 0 percent credibility.
Greater than or equal to 90 percent, then the actuary may override the
computed credibility with 100 percent credibility.

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 $360 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) 58 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.

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PRICING CONSIDERATIONS
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
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.

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PRICING CONSIDERATIONS
Gain/Loss Margin

Gain/loss margin refers to the additional revenue requirement beyond allowed prescription drug
costs and non-benefit expenses. It is allocated to basic coverage and supplemental coverage
based on the distribution of total prescription drug costs between these coverages.
By statute, the bid must represent the revenue requirement of the expected population;
therefore, the margin requirements must be met with the gain/loss margin entered in the BPT.
In addition, the combined margin for the Medicare Advantage (MA) and Part D components of
MA-PDs is not a substitute for the Part D margin in these Instructions. See the “Instructions
for Completing the Medicare Advantage Bid Pricing Tool for Contract Year 2017” for
gain/loss margin requirements that are specific to MA bids.
The gain/loss margin entered in the BPT must be determined in consideration of other CMS
requirements such as Total Beneficiary Cost (TBC). 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.
Gain/loss margin requirements apply at two levels—the bid level and an aggregate level; both
sets of requirements must be met in the initial bid submission and upon bid resubmission or
withdrawal.
Bid-Level Requirements

There is flexibility in setting the gain/loss margin at the bid level provided that—
• The bid offers benefit value in relation to the margin level;
• Anti-competitive practices are not used;
• The bid margin is non-negative or the special rules for bids with negative
margin outlined below are followed; and
• All aggregate-level margin requirements described below are met.
 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

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profitability within five (5) years. Exceptions to the five-year period for unique
situations must be fully explained and supported. CMS expects that in subsequent
years, Part D projected gain/loss margins 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 as described below.


The plans in the product offering must—
o Have identical service areas; and
o Have a positive combined Part D gain/loss margin for CY2017.



An example is a low-benefit plan with a positive margin paired with a richbenefit plan with a negative margin.

Aggregate-Level Requirements

In these Instructions, “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, Medigap (Medicare Supplement); Medicaid; commercial lines of business;
Stop Loss; the non-Part D portion of Section 1876 cost plans, Section 1833 cost plans
and PACE plans; and Medicare-Medicaid plans offered through the Financial
Alignment Demonstration. Non-Medicare business excludes Administrative Services
Only (ASO) business.
The aggregate gain/loss margin levels in the BPT for Part D plans—
• Must be consistent from year to year.
• 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 the BPT. The level aggregation selected in the
Part D BPT must match the level selected in the MA BPT of an MA-PD bid.
• Must be within 1.5 percent of the Part D sponsor’s margin for all non-Medicare
business, as measured by a percentage of revenue. If the volume of the Part D
sponsor’s 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 Part D margin must
be set by taking into account the degree of risk and capital and surplus
requirements of the business.
Although actual aggregate Part D 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.

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For bids participating in the Minnesota Senior Health Options program, additional
aggregate-level margin requirements can be found at http://www.cms.gov/MedicareMedicaid-Coordination/Medicare-and-Medicaid-Coordination/Medicare-MedicaidCoordination-Office/FinancialAlignmentInitiative/Downloads/MNMOU.pdf.
MA-PD Margin Requirements

The MA-PD margin requirements are separate from the aggregate-level requirements
above. There are two options for setting the Part D margin of MA-PD bids:
Option A: Set the margins at the bid level. Specifically, an MA-PD sponsor must—

• Set the Part D margin for a plan as a percentage of revenue within 1.5 percent of
the margin for the MA component of the same MA-PD bid, and
• Applied this method consistently for all MA-PD bids submitted by the Medicare
Advantage Organization.
Option B: Set the margins at the plan-category level (that is, general enrollment plans

& I/C-SNPs or D-SNPs) defined in the “Aggregate-Level Requirements” section of the
“Instructions for Completing the Medicare Advantage Bid Pricing Tool for Contract
Year 2017”. Specifically,—
• The MA-PD sponsor must set the Part D margins equal for all plans within a
plan category as selected in the BPT.
• Within each plan category, the Part D margin as a percentage of revenue must
be within 1.5 percent of the aggregate MA margin for all MA-PD bids in such
category selected in the BPT.
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

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◦

•

•

Examples include, but are not limited to the cost of—
‣ Marketing materials;
‣ 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 $1.05 per-member per-year (pmpy) or
$0.087 per-member-per-month (pmpm) on a national basis for CY2016. The
COB user fee will be collected at a monthly rate of $0.116 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
$0.72 pmpy or $0.06 pmpm on a national basis for CY2017, 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;

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•
•

‣ Legal services; and
‣ Human resources.
Net Cost of Private Reinsurance (that is, reinsurance premium less projected
reinsurance recoveries)
Insurer Fees
◦ This category includes only the Health Insurance Providers Fee imposed by
Section 9010 of the Patient Protection and Affordable Care Act, as amended.

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 $360 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.



Enter the “Alternative Coverage Deductible Amount” in cell I34.

✓ Worksheet 6

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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.
PBM Pricing

For CY2017, 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

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•

◦ 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.
◦ 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 actual cost of the non-benefit services provided by the related party is
entered as the non-benefit expense of the Part D sponsor. The gain/loss margin
of the related party is excluded from the non-benefit expense of the Part D
sponsor.
• When entering gain/loss margin in the BPT, the Part D sponsor may consider the
gain/loss margin of the related party, subject to the gain/loss margin
requirements.
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.
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• 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.
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 arrangement 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 arrangement 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.

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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 CY2016

The projected CY2016 risk score must—
•
•
•
•

Be based on the methodology for calculating CY2016 risk scores, as discussed in
CY2016 Rate Announcement.
Reflect the expected risk score trend at the bid level.
Be appropriate for the expected population.
Be adjusted for Part D normalization.

Risk Score Definitions and Information Sources
Part D RxHCC Risk Model

CMS will use an updated RxHCC risk model for CY2016 payment. Diagnosis data
from CY2012 were used to predict CY2013 expenditures; the denominator year is
CY2013. Additional information, including the CY2016 normalization factor, is
contained in the CY2016 Rate Announcement, published April 6, 2015.
Normalization Factor

At time of payment, the risk scores for each enrollee will be divided by the Part D
normalization factor, which is 0.939 for CY2016. This adjustment accounts for the
actual program risk score experience and the expected increase in risk scores between
the contract year (2016) and the denominator year (2013). Accordingly, the projected
risk scores for CY2016 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) 2016 Medicare Advantage
Capitation Rates and Medicare Advantage and Part D Payment Policies”
◦ “Advance Notice of Methodological Changes for Calendar Year (CY) 2016
for Medicare Advantage (MA) Capitation Rates, Part C and Part D Payment
Policies and 2016 Draft Call Letter” (2016 Advance Notice)
Additional information can be found—
◦ At http://www.cms.gov/Medicare/Health-Plans/MedicareAdvtgSpecRateStats/
index/html under the “Risk Adjustment” and “Ratebooks & Supporting Data”
links.
◦ At http://www.csscoperations.com/.

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◦

In the February 18, 2015 memorandum released via HPMS titled “Guidance
for Reporting and Returning Medicare Advantage Organization and/or
Sponsor Identified Overpayments to the Centers for Medicare & Medicaid
Services”.

Risk Score Calculation Approaches
Preferred Methodology

The preferred method for projecting the CY2016 risk scores is to start with the Part D
RxHCC risk scores that are provided by CMS in—
•
•

The bid-level data for the July 2014 enrollee cohort with retroactive enrollment and
status adjustments; or
The beneficiary-level file containing 12 months of 2014 membership with
retroactive enrollment adjustments and status adjustments.

The bid-level data will be available after the publication of the 2016 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 2016
and are accompanied by technical notes to assist actuaries with understanding the
material presented. The beneficiary-level data provide the 2014 risk scores calculated
using both the risk model used for 2014 payment and the model to be used for 2016.
These data are sent electronically to Part D sponsors at about the same time.
There are several advantages to using these 2014 Part D RxHCC risk scores in the
projection of the CY2016 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 2013 dates of service
submitted through January 31, 2015, which is the final reporting deadline for this
period.
They require no adjustment for risk model changes.
In both the plan-level data and the beneficiary-level file, they are based on the risk
model that will be used for 2016 payment.
Please note that since the HPMS plan-level risk scores are based on a mid-year
cohort with full calendar year data and 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 2014 to 2016 with explicit adjustment for the
following factors, as appropriate:
◦
◦
◦

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

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Part D sponsors must take into account the effect of future changes in the risk score due
to the reporting of expected overpayments.
Finally, the projected risk scores must be normalized by dividing by the 2016 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 2015, if there was limited enrollment in 2014, or if there were
significant changes in plan or enrollment characteristics between 2014 and 2015.
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.
Impact of lagged (initial risk score) versus non-lagged (midyear risk score)
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 risk scores.
◦ An example is a starting point of March 2015 MMR data, which contain risk
scores based on the July 2013 to June 2014 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 (midyear) to complete (final) 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 CY2016 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.
Bid-specific coding trend.
Population changes.

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◦

•

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 CY2016, the scores must be normalized by dividing by the 2016
Part D normalization factor. Note that, if a nominal or actual risk score associated with
a different model calibration year is being normalized, the CY2016 Part D
normalization factor is not appropriate.
Supporting documentation that clearly demonstrates consistency with the preferred
approach is required.
Other Considerations

See the “Credibility” pricing consideration for more information about the projection of
risk scores.
See Appendix G for more information about trending MA and Part D risk scores.
Sequestration

Pricing assumptions must consistently reflect the effect of sequestration.
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.

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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 $360 for CY2016.
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
the PBP). In this situation, the Specialty categories in Worksheet 2, 6 and 6A are not
completed.

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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 CY2015, complete
all sections.
✓ Worksheet 2

For plans with fully credible claims experience in CY2015, complete Sections II, III, IV
Column O, V and VII; for plans with partially credible claims experience in CY2015,
complete all sections. For new plans in CY2016 and CY2017, 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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✓ 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 CY2015, complete
all sections.
✓ Worksheet 2

For plans with fully credible claims experience in CY2015, complete Sections II, III, IV
Column O,V and VII; for plans with partially credible claims experience in CY2015,
complete all sections. For new plans in CY2016 and CY2017, 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 CY2015, complete
all sections.
✓ Worksheet 2

For plans with fully credible claims experience in CY2015, complete Sections II, III, IV
Column O, V and VI; for plans with partially credible claims experience in CY2015,
complete all sections. For new plans for CY2016 and CY2017, 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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✓ 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.

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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 prepopulated by the Plan Benefit Package (PBP) software.) Sections II through VI must be
completed for all plans with experience data for 2015 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.

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WORKSHEET 1
Line 6 – SNP

If the plan is a Special Needs Plan (SNP), enter “Y”. Otherwise, enter “N”.
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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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
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39

CY2017 Part D BPT Instructions

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
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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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 2016,
then the paid through date is 2/28/2016.
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-plan ID (in the format H###-###) of each plan for which base period
data is required by these Instructions to be reported in Section III in the first column.
Cell K12 is automatically populated with the contract number and plan ID in cells D5 and
D6; the contract-plan ID in cell K12 can be overwritten if there is no base period data for
that plan. When base period data for more than eight plans is entered in Section III, (i)
enter the contract-plan IDs of the plans with the greatest number of member months in
cells K12:K15 and M12:M14, (ii) enter “all other” in cell M15 and (iii) list the contract-

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WORKSHEET 1

plan IDs and member months of all plans in the “all other” category in the “Base Period
Experience Description” textbox in line 6.
Enter the corresponding number of member months in the second column.
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 costs in the defined standard
allowed costs interval defined for each line. For example, if 7,000 members had
total allowed costs between $310 and $2,849, then enter “7,000” in line 3, column
d. The “Total Covered Part D Spending at OOP Threshold for Non-Applicable
Beneficiaries” and “Estimated Total Covered Part D Spending at OOP Threshold
for Applicable Beneficiaries” for CY2015 must 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 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

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Enter the result of dividing the total dollars paid by the plan for the members in
column d by the number of members in column d. Total paid dollars are defined
as basic and supplemental payments for Part D-covered drugs and are not net of
rebates, low-income subsidy payments or federal reinsurance.
✓ Column j – Average Cost Sharing per Member

Enter the average cost sharing per member for Part D-covered drugs for the
members in column d for each line.
✓ Column k – Supplemental Cost-Sharing Reduction per Member

Enter the average value of supplemental cost sharing per member for Part 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.

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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
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 plan liability for Part D-covered drugs for which the Part D plan is
the secondary payer. “Total plan liability” is defined as CPP (Covered Plan Paid
Amount) plus NPP (Non-covered Plan Paid Amount) minus 80 percent of GDCA
(Gross Drug Cost above Out-of-Pocket Threshold).
✓ Column i

The value is calculated automatically in the BPT as column g divided by line 6,
column e.
✓ Column n

The value is calculated automatically in the BPT as column i minus the sum of
columns k through m.
Line 11, columns i and k through n – Net Average Paid Amount PMPM

The values are calculated automatically in the BPT as line 8 minus line 9 plus line 10.

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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.
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.

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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 CY2015 which will be received in mid-2016 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.
Lines 1 through 9, column m

Enter in line 4 the average pmpm amount of the MA rebate dollars, including the impact
of sequestration, 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 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 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 relevant experience 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 CY2017 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. For CY2017, the “Total Covered
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Part D Spending at OOP Threshold for Non-Applicable Beneficiaries” of
$7,062.50 and “Estimated Total Covered Part D Spending at OOP Threshold for
Applicable Beneficiaries” of $7,515.22 must 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

Select in cell D46 the level at which the overall gain/(loss) margin requirements are met.
The options are “contract”, “organization” and “parent-organization”.
Corporate Margin Requirement % of Revenue

Enter in cell D47 the corporate margin requirement as a percentage of revenue.
Corporate Margin Basis

Select in cell D48 the basis of the corporate margin percentage. The options are “nonMedicare” and “risk-capital-surplus”.

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.

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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 14, columns e, g, i, and l

The values are carried from other worksheets in the BPT.
Line 15 – Rebates
✓ Column l

Enter the estimated total amount of rebates expected to be received by the plan.
✓ Column i

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.

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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

Select in cell I33 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 Deductible Amount

Enter in cell I34 the alternative coverage deductible amount consistent with the amount in
the PBP.
Type of Gap Coverage

Select in cell M33 the type of gap coverage consistent with the description in the PBP for
the alternative coverage. The options are: “DS ICL and cost sharing”, “increased ICL
and DS cost sharing”, “all drugs covered in full”, “reduced cost sharing on some drugs”.
Alternative Coverage ICL

Enter in cell M34 the ICL consistent with the description in the PBP for the alternative
coverage.
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:

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WORKSHEET 5
✓ Line 6, column d – Proposed Deductible

Enter the dollar value of the deductible consistent with the description in the PBP
Refer to the topic “Non-Uniform Deductible” in the “Pricing Considerations”
section of the Instructions for more information.
✓ 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 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

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.
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WORKSHEET 5

SECTION VII – DEVELOPMENT OF SUPPLEMENTAL PREMIUM
Lines 1 through 5 and 8

The values are calculated automatically by the BPT from values in Worksheet 5.
Line 6 – Additional Non-Benefit Expenses

The value is carried from Worksheet 3.
Line 7 – Additional Gain/loss

The value is carried from Worksheet 3.

SECTION VIII – DEVELOPMENT OF INDUCED UTILIZATION ADJUSTMENT
This section summarizes the additional costs of DS coverage with respect to the enhanced
alternative plan with supplemental benefits and is used to adjust allowable costs for risk
corridor payments.
Line 2 – Impact of Alternative Utilization on Standard Benefit

Enter the additional costs for Part D-covered drugs under a DS plan in the first column if
the utilization of the EA plan was used to price the DS coverage in the bid. The
adjustment applies to the EA plan type only and must be a positive value.

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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 $3,310 in CY2016. 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.

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WORKSHEET 6
Lines 1 through 8 – Population Not Exceeding Allowed Costs of $3,310 with Standard
Coverage

All utilization for members with projected total allowed costs less than $3,310 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 $3,310 with Standard
Coverage

All utilization for members with projected total allowed costs greater than or equal to $3,310
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 $3,310 with Standard Coverage Amounts
Allocated up to ICL

All utilization for total allowed costs up to $3,310 for members with projected total allowed
costs greater than or equal to $3,310 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 $3,310 in CY2016, 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

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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.
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 CY2017 and on the projected weighted utilization by pharmacy of the population identified
in Worksheet 3.

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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 $3,310 and
Catastrophic

The values are calculated automatically in the BPT.
Lines 12 through 21 – Low-Income Population Amounts Allocated between $3,310 and
Catastrophic

All utilization for LIS members with projected total allowed costs greater than $3,310 and less
than the catastrophic limit must be reported on these lines.

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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 $3,310 and
Catastrophic

All utilization for non-LIS members with projected total allowed costs greater than $3,310 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.

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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 – 2017 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 CY2017 will be calculated
and published by CMS in early August 2016.
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 12 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 costs 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) × (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.

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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 is populated with a
date/time stamp during the BPT finalization.

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.

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APPENDIX B

IV. APPENDICES
APPENDIX A – ACTUARIAL CERTIFICATION
CMS requires an actuarial certification to accompany every bid submitted to HPMS. 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. Likewise, every MA
BPT requires a certification.
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.
Certification Module

The certification module contains the following features:
• Standardized required language.
• The ability to append free-form text language to the required standardized language.
• A summary of key information from the submitted bids.
• Links to additional information regarding the bid package, such as the PBP, BPT and
supporting documentation.
• The ability to certify multiple bids/contracts.
• The ability to print and save the submitted certification.
An initial actuarial certification must be submitted via the HPMS certification module in June.
The actuary must also certify the final bid (that is pending CMS approval) via the certification
module in August following the CMS publication of the Part D national average monthly bid
amount, the Part D base beneficiary premium, the Part D regional low-income premium
subsidy amounts and the MA regional benchmarks. Actuaries are not required to certify every
intermittent resubmission throughout the bid review process, but they may do so if they wish.
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.
Multiple actuaries may be 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 certifying actuaries.
Additional information regarding the actuarial certification process (including technical
instructions for completing the HPMS certification module) will be included in an initial
actuarial certification deadline memorandum released via HPMS.

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APPENDIX B

Detailed instructions regarding how to apply for access to the certification module are released
via an HPMS memorandum regarding consultant access or electronic signature access to
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 completed.
Declaration that the actuary submitting the certification is a member of the American
Academy of Actuaries (MAAA). As such, the actuary is familiar with the requirements
for preparing Medicare Advantage and Prescription Drug bid submissions and meets the
Academy’s qualification standards for doing so.
The specific contract number, plan ID and segment ID of the bid(s) being certified.
The contract year of the bid(s) contained in the certification.
Indication of whether the certification applies to the MA bid(s), the PD (Part D) bid(s)
or both.
Attestation that the bid(s) are in compliance with the applicable laws,1 rules,2 CY2017
bid instructions and current CMS guidance.
Attestation that, in accordance with Federal law, the bid(s) are based on the “average
revenue requirements in the payment area for a Medicare Advantage/Prescription Drug
enrollee with a national average risk profile.”
Attestation that the data and assumptions used in the development of the bid(s) are
reasonable for the plan’s benefit package (PBP).
Attestation that the bid(s) were prepared in compliance with the current standards of
practice, as promulgated by the Actuarial Standards Board of the American Academy of
Actuaries.3

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

3

Emphasis is placed on, but not limited to, the following ASOPs:
•

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

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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 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 bid-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 with working formulas, rather than pdf files, and a narrative
explanation of the inputs and 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 (or organization name) and topic in the beginning of the
file name.
Include the topic in the name of each worksheet in an Excel workbook.

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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, the precise name of any published tables used, etc.
Intermediate calculations showing each step taken to calculate an assumption.
A summary of contractual terms of administrative services arrangements.
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 bid must be self-contained.
Excel spreadsheets with a vague or no explanation of the bid-specific inputs and
calculations.
PDF files with the “copy” function disabled.
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 bid filings in previous years.

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). However, file
names for all files, including files that are zipped, must be in the following format:
“filename_date.ext” and can be no longer than 75 characters.
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.
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APPENDIX B

It is not acceptable to upload to multiple plans materials specific to a Part D plan, MA plan or
certain contract number.
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 contract numberplan 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
contract number-plan IDs (such as “plans 001 – 030” or “all plans under contract Hxxxx”). For
these items, the cover sheet must contain the exact contract number-plan 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 contract number-plan
IDs rather than a “range” of contract number-plan 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 the final actuarial certification.
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 contract number-plan IDs.
Prior to the final actuarial certification—

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APPENDIX B

◦
◦

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.
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.
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 auditable material such as corporate financial statements and
plan-level operational data.
◦ A description of the expenses included in each non-benefit expense category in
the BPT.

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APPENDIX B

◦

•

Detailed support for the development of projected non-benefit expenses. The
required elements include‣ 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 auditable material such as corporate financials and
plan-level operational data.
‣ An explanation for significant differences between actual and expected nonbenefit expenses for CY2013, CY2014 and CY2015, 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 business and
identification of these lines of business, or the margin taking into account the
degree of risk and capital and surplus requirements of the business and
demonstration of how this value is set. Include any change in this requirement
in the prior two years.
◦ 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, how 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 bid, or a bid 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 five years and describes steps taken in
the contract year and to be taken in each future year to achieve profitability.
‣ 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

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APPENDIX B

•

positive margin more slowly than projected in the original business plan,
including, but not limited to—
 A revised business plan demonstrating that the plan will reach
profitability within 5 years of the original business plan.
 A description of benefits reductions or premium increases for
CY2017.
 A description of other actions taken in the contract year and to be
taken in each future year to improve margin.
• 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 absence of anti-competitive practices and solvency issues.
‣ Actions taken to bring the margin differential into compliance with these
Instructions.
◦ A suggested business plan template is available at
http://www.cms.gov/Medicare/Health-Plans/MedicareAdvtgSpecRateStats/BidPricing-Tools-and-Instructions-Items/BidGuidance.html.
◦ 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 CY2017 Part D risk scores.
◦ A description of, and the rationale for choosing, the source data for the
development of the projected CY2017 Part D risk scores, including—
‣ Identification of the source of the starting risk score and, if the CMSprovided risk scores, an explanation of why the alternative source was
appropriate.

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APPENDIX B

‣
◦

◦
◦
◦

◦
◦

For an alternative approach, identification of the years used, the population
incorporated and any data points used as a basis in developing the CY2017
risk score.
A description of the methodology used to derive each projection factor,
including a summary of the consideration for using or not using the projection
factor, a description of and the rationale for choosing the source data and the
data points used in the derivation of the projection factor.
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.
An explanation for significant differences between actual and expected risk
scores for CY2013, CY2014 and CY2015, including a description of how that
knowledge was incorporated into the CY projection.
For an alternate approach, a demonstration that the method used is consistent
with the preferred development approach in these Instructions, including an
explanation of why such approach is more appropriate than the CMS preferred
approach.
A statement of the credibility approach used—for example, the CMS guideline
or the CMS override.
A description of the credibility methodology used if it varies from the CMS
guideline or the CMS override.

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.
◦ Information regarding the base period member months, if more than eight bids
constitute the base period experience.
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 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.

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APPENDIX B

•
•

•

•

•

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).
Cross-walk information regarding data aggregation (Worksheet 1). The required
elements include–
◦ A list of all bids involved in approved cross-walks for CY2016 and proposed
cross-walks for CY2017 considered for base period data aggregation.
◦ A statement of the intention to submit a cross-walk exception for CY2017, if
applicable.
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 significant differences between actual and expected claims
for CY2013, CY2014 and CY2015, including a description of how that
knowledge was incorporated into the CY projection.
Detailed support for the data and methodology used in the development of appropriate
manual rates for the expected population (Worksheet 2). The required elements
include–
◦ A description of the source data, including the data’s relevance to the Part D
plan.
◦ 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 CY2017.
◦ All other applicable factors and/or adjustments.
Detailed support for related-party arrangements (Worksheets 1, 2 and 3).

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APPENDIX B

◦

◦

◦

◦

◦

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 of the
related party 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.
‣ Provide the related party’s gain/loss margin as i) the allowed amount of the
related party entered in the BPT less the cost of purchasing pharmaceuticals
and dispensing prescriptions divided by the total member months in the BPT
and ii) the allowed amount of the related party entered in the BPT less the
cost of pharmaceuticals and dispensing prescriptions divided by the allowed
amount of the related party.
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.
‣ Show that both contracts in the comparison are associated with sufficient
costs to be considered valid contracts.
A Part D sponsor that chooses the Market Comparison through Related Party
Method must–

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APPENDIX B

‣

•
•
•

•

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.
‣ Show that both contracts in the comparison 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 CY2016 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.
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.

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APPENDIX B

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
Sequestration assumptions
Claims credibility assumption
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
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

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APPENDIX B

SAMPLE COVER SHEET – SUBMITTED WITH INITIAL BID UPLOAD
Supporting Documentation Cover Sheet
CY2017 Bid Submission

Organization Name: Health One
Contract(s): H1234, H9999 and S9999
Date: June 1, 2016
Documentation
Requirement
Cover sheet

Specific
Bid(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 6-115.pdf
Cover Sheet 6-115.pdf
Cover Sheet 6-115.pdf
Cover Sheet 6-115.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 6-115.pdf
Cover Sheet 6-115.pdf
Manual.xls

ESRD subsidy

All bids

All bids

CY2017 Part D BPT Instructions

Manual.xls

Location
within File (if
Applicable)
Page 1

Applies to: MA,
Part D, 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

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APPENDIX B

SAMPLE COVER SHEET – SUBMITTED AS A SUBSEQUENT SUBSTANTIATION UPLOAD
Supporting Documentation Cover Sheet #2
CY2017 Bid Submission

Organization Name: Health One
Contract(s): H1234, H9999, and S9999
Date: July 16, 2016

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(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,
Part D, 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
H1234-002-00

H1234-002-00

MA or
Part D
or Both
MA and
Part D

Source
(Name, Position, Company)
Joe Smith, Director of Finance,
ABC Health Plan

MA and
Part D

Jane Doe, Medicare Analyst,
ABC Health Plan

CY2017 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.

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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 $360 and $7,400;
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 CY2017, CMS does not require a Part D BPT for employer/union-only group plans.
For additional information on CY2017 EGWP bidding policy, please refer to the CY2017 Call
Letter.

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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 CY2017 benchmarks will be based on the 2016 enrollments
applied to the 2017 bids.
The following table illustrates the impact of the weighted enrollment methodology for two
enrollment periods, June 2015 and February 2016. Recall that the 2016 benchmark was
calculated as 100 percent of the enrollment-weighted approach.
The same values are presented based on the February 2016 enrollment. Since the 2017
benchmarks will be based on 2016 enrollment, these values may be useful for estimating the
2017 benchmarks. The left section of the table shows the actual 2016 benchmarks, which were
calculated based on June 2015 enrollment. The right section, titled “February 2016
Enrollment,” indicates how the 2016 benchmarks would have been calculated based on more
current enrollment data.
Enrollment Weighted Approach
June 2015
Enrollment

February 2016
Enrollment

National average monthly bid amount

$70.18

$68.63

Base beneficiary premium

$33.13

$32.25

Direct subsidy

$37.05

$36.38

This illustrative recalculation of the 2016 benchmarks is provided for the purpose of assisting
Part D sponsors in developing the projected 2017 national average monthly bid amount and
base beneficiary premium, which will be used in the calculation of the plan’s target premium.
The final 2017 benchmarks will be based on the 2016 enrollments applied to the 2017 bids.

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APPENDIX E

APPENDIX E – CALCULATION OF LOW-INCOME BENCHMARK
PREMIUM AMOUNTS
The Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA) directs
CMS to use a weighted average to calculate the regional low-income benchmark premium
amounts used in the determination of the low-income premium subsidy amounts. In
determining the 2006 low-income benchmark premium amounts, PDPs were weighted equally,
MA-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 2015 and February 2016.

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APPENDIX E

Enrollment Weighted Approach
PD Region

State(s)

June 2015
Enrollment

February 2016
Enrollment

01

NH, ME

$29.60

$29.36

02

CT, MA, RI, VT

$29.65

$29.22

03

NY

$36.94

$36.86

04

NJ

$37.64

$37.06

05

DE, DC, MD

$30.61

$29.91

06

PA, WV

$33.91

$33.67

07

VA

$29.47

$29.02

08

NC

$29.34

$28.70

09

SC

$28.78

$27.50

10

GA

$26.47

$25.19

11

FL

$25.83

$25.54

12

AL, TN

$30.20

$30.26

13

MI

$31.46

$31.24

14

OH

$28.64

$28.40

15

IN, KY

$31.79

$31.01

16

WI

$35.32

$35.15

17

IL

$28.23

$27.52

18

MO

$28.28

$26.49

19

AR

$24.76

$23.44

20

MS

$29.33

$28.49

21

LA

$31.28

$31.34

22

TX

$27.31

$27.02

23

OK

$29.97

$29.65

24

KS

$30.32

$29.02

25

IA, MN, MT, ND, NE, SD, WY

$30.00

$28.89

26

NM

$21.19

$21.43

27

CO

$28.93

$28.00

28

AZ

$32.89

$32.74

29

NV

$24.25

$24.01

30

OR, WA

$33.81

$33.49

31

ID, UT

$39.74

$39.69

32

CA

$28.84

$28.01

33

HI

$27.91

$27.61

34

AK

$32.86

$32.08

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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 CY2017.
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 CY2016, beneficiary cost sharing is reduced
from 65 percent to 58 percent for non-applicable (generic) drugs; the Part D sponsor’s liability
for DS coverage is increased to 42 percent. Beneficiary cost sharing is unchanged at 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-ofsale. 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.

CY2017 Part D BPT Instructions

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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 are 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 (for example, 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 bid-specific. It can be generated from
the risk scores that CMS sends to Part D sponsors to support bidding; however,
Part D sponsors should also consider whether other years in their trends have a
different conversion factor (for example, 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.



Part D 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.
o 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 Part D 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 bid-specific risk score trends unique to each model and adjust
their overall trend accordingly.

CY2017 Part D BPT Instructions

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

Use this trend factor to project from base period risk scores to payment (contract) year
raw risk scores.

CY2017 Part D BPT Instructions

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According to the Paperwork Reduction Act of 1995, no persons are required to respond to a
collection of information unless it displays a valid OMB control number. The valid OMB
control number for this information collection is 0938-0944. The time required to complete
this information collection is estimated to average 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.

CY2017 Part D BPT Instructions

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