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

OMB Approved # 0938-0944 (Expires: 01/31/2022)

INSTRUCTIONS FOR COMPLETING
THE PRESCRIPTION DRUG PLAN
BID PRICING TOOL
FOR CONTRACT YEAR 2021

As of September, 2019

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CMS-10142

TABLE OF CONTENTS
Table of Contents ............................................................................................................................................... 2
I. Introduction.................................................................................................................................................... 4
Background .................................................................................................................................................... 4
Document Overview ...................................................................................................................................... 4
Bidding Resources ......................................................................................................................................... 5
II. Pricing Considerations................................................................................................................................... 6
Bidding/Pricing Approach ............................................................................................................................. 6
Specific Topics............................................................................................................................................... 6
Actuarial Equivalence ................................................................................................................................ 6
Base Period Experience.............................................................................................................................. 7
Coverage in the Gap ................................................................................................................................. 10
Credibility ................................................................................................................................................ 12
Decreased Initial Coverage Limit............................................................................................................. 13
Direct and Indirect Remuneration (DIR).................................................................................................. 13
Enrollment ................................................................................................................................................ 14
Gain/Loss Margin..................................................................................................................................... 14
Health Care Reform ................................................................................................................................. 19
Non-Benefit Expenses .............................................................................................................................. 19
PBM Pricing ............................................................................................................................................. 21
Related-Party Arrangements .................................................................................................................... 21
Risk Score Development for CY2021 ...................................................................................................... 24
Sequestration ............................................................................................................................................ 26
Supporting Documentation ...................................................................................................................... 26
Types of Part D-Covered Drugs ............................................................................................................... 26
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 ....................................................................................................... 34
Section IV – PMPM Non-Benefit Expenses ................................................................................................ 38
Section V – PMPM Premium Revenue ........................................................................................................ 38
Section VI – PMPM Income Statement Summary....................................................................................... 38
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 Expenses ................................................................................................. 43
Section VI – Percentage of Revenue ............................................................................................................ 43
PD Worksheet 3 – Rx Contract Period Projection for Defined Standard Coverage ........................................ 44
Section I – General Information................................................................................................................... 44
Section II – Projection Data ......................................................................................................................... 44
Section III – Part D Covered Drug Claims .................................................................................................. 44
Section IV – PMPM Non-Benefit Expense and Gain/Loss ......................................................................... 47
Section V – Defined Standard Coverage Bid Development ........................................................................ 48
PD Worksheet 4 – Rx Standard Coverage with Actuarially Equivalent Cost Sharing .................................... 49
Considerations for Actuarially Equivalent Coverage................................................................................... 49
Section I – General Information................................................................................................................... 49
Section II – Projection Data ......................................................................................................................... 49
Section III – Development of Bid for Defined Standard Coverage ............................................................. 49

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Section IV – Development of Bid Components and Tests for Actuarial Equivalence................................. 49
Section V – Standard Coverage Bid Development with Actuarially Equivalent Cost Sharing ................... 50
PD Worksheet 5 – Rx Alternative Coverage.................................................................................................... 51
Considerations for Basic Alternative and Enhanced Alternative Coverage ................................................. 51
Section I – General Information................................................................................................................... 51
Section II – Projection Data ......................................................................................................................... 52
Section III – Development of Bid for Defined Standard Coverage ............................................................. 52
Section IV – Development of Bid Components ........................................................................................... 52
Section V – Development of Actuarial Equivalence Test............................................................................ 53
Section VI – Tests for Alternative Coverage ............................................................................................... 53
Section VII – Development of Supplemental Premium ............................................................................... 54
Section VIII – Development of Induced Utilization Adjustment................................................................. 54
PD Worksheet 6 – Script Projections for Defined Standard, Actuarially Equivalent or Alternative
Coverage .................................................................................................................................................. 55
Considerations.............................................................................................................................................. 55
Section I – General Information................................................................................................................... 55
Section II – Projections for Equivalence Tests ............................................................................................ 55
PD Worksheet 6A – Coverage in the Gap for Defined Standard, Actuarially Equivalent or Alternative
Coverage .................................................................................................................................................. 59
Considerations.............................................................................................................................................. 59
Section I – General Information................................................................................................................... 59
Section II – Spending in the Coverage Gap ................................................................................................. 59
PD Worksheet 7 – Summary of Key Bid Elements ......................................................................................... 62
Section I – General Information................................................................................................................... 62
Section II – 2021 Defined Standard Benefit Parameters.............................................................................. 62
Section III – Summary of Key Bid Elements ............................................................................................... 62
Section IV – Part D Bid Pricing Tool Contacts and Date Prepared ............................................................. 64
Section V – Working Model Text Box ........................................................................................................ 64
IV. Appendices................................................................................................................................................. 65
Appendix A – Actuarial Certification .............................................................................................................. 65
General ......................................................................................................................................................... 65
Appendix B – Supporting Documentation ....................................................................................................... 67
General ......................................................................................................................................................... 67
Submitting Supporting Documentation........................................................................................................ 68
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................................................................................................................ 87

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INTRODUCTION

I. INTRODUCTION
BACKGROUND
Part D sponsors, that is, 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 that they intend to offer Medicare beneficiaries.
This includes Part D plans without a corresponding Medicare Advantage (MA) plan such as
Section 1876 cost plans, Section 1833 cost plans, and Programs of All-Inclusive Care for the
Elderly (PACE) plans.
Note that, an MA organization (MAO) may offer private fee-for-service (PFFS) and Religious
Fraternal Benefit PFFS plans without Part D coverage. However, if an MAO offers, in a given
MA service area, at least one benefit plan of any other plan type, at least one benefit plan in
such service area must include Part D coverage.
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).
Each bid submission must include an actuarial certification and supporting documentation 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 contained 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 CY2020 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).

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INTRODUCTION

BIDDING RESOURCES
The following resources provide information on CY2021 bidding:
•

•

•
•

•

•

The CY2021 Advance Notices and Announcement at
https://www.cms.gov/Medicare/Health-Plans/MedicareAdvtgSpecRateStats/
Announcements-and-Documents.html.
The CY2021 Actuarial Bid Training is offered as a web-based conference. The
conference materials, including slides and streaming video downloads, are available at
https://www.cms.gov/Medicare/Health-Plans/MedicareAdvtgSpecRateStats/
BidTraining2021.html.
For questions about the BPT, 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
CY2021 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 > CY2021 > Documentation > BPT Technical Instructions
◦ The Bid Submission User’s Manual, also available in HPMS, under HPMS Home >
Plan Bids > Bid Submission > CY2021 > Documentation > Bid User’s Manual
◦ HPMS Help Desk: 1-800-220-2028 or [email protected]
For information about benefits, see the Medicare Prescription Drug Benefit Manual
located at https://www.cms.gov/Regulations-and-Guidance/Guidance/Manuals/InternetOnly-Manuals-IOMs-Items/CMS050485.html.

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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 CY2019, regardless of the level of enrollment. This
experience must also be projected in Worksheet 2 and assigned an appropriate level of
credibility by the certifying actuary. Data may be aggregated for determining manual rates to
blend with partially credible projected experience rates or to account for significant changes in
enrollment from the base period to the contract year.

SPECIFIC TOPICS
Topic
Actuarial Equivalence
Base Period Experience
Coverage in the Gap
Credibility

Page
6
7
10
12

Decreased Initial Coverage Limit

13

Direct and Indirect Remuneration
(DIR)
Enrollment
Gain/Loss Margin

Topic
Health Care Reform
Non-Benefit Expenses
PBM Pricing
Related-Party Arrangements
Risk Score Development for
CY2021

Page
19
19
21
21

13

Sequestration

26

14
14

Supporting Documentation
Types of Part D-Covered Drugs

26
26

24

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.

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PRICING CONSIDERATIONS

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.
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 2019 incurred period with at least
30 days of paid claim run-out; 2-3 months of paid claim run-out is preferable. Further, the
enrollment data for the Part D bid in an MA-PD plan must reflect the same underlying
population as that for the corresponding MA bid.
Worksheet 1 must be completed with data for the plan ID. Note that these data—
•
•

•

•

•

•
•
•

Must be submitted in Worksheet 1 for any plans with experience data for 2019,
regardless of the level of enrollment.
Must reconcile in an auditable manner to the plan-level Prescription Drug Event (PDE)
data submitted to CMS for payment and reconciliation and the Part D sponsor’s audited
financial statements.
Must include accepted PDEs, rejected PDEs that are expected to be accepted by CMS
upon resubmission, adjustments for Plan-to-Plan (P2P) transactions and, if appropriate,
transfer of over-the-counter (OTC) drug data from the base period experience to the
non-benefit expense component. The impacts of each of these considerations must be
quantifiable and must not be included in the completion factor.
Must be reported without adjustment. Adjustments may be made in Worksheet 2,
Sections II and III to accommodate population, benefit design or other changes from the
base period to the contract period.
May be reported in aggregate for a number of plans only when there are enrollment
changes associated with the dissolution of a plan and the retained members are crosswalked into existing plans in the same contract or across contracts. Each contract-plansegment ID must be identified in Section II, line 5.
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.

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PRICING CONSIDERATIONS

•

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 cross-walks and enrollment shifts
depend on—
•

How enrollment changes are processed.
◦ 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,
members are dis-enrolled from the terminating plan and must actively select
to enroll in a new plan of their choosing.
◦ Medicare Advantage and Prescription Drug (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.
◦ For more information about cross-walks, see the May 18, 2016
memorandum released via HPMS titled “Process for Requesting an HPMS
Crosswalk Exception for Contract Year (CY 2018).”

The requirements for reporting base period data for crosswalks and enrollment shifts are
described below.
 Rule 1 – Cross-walks

Base period data for more than one CY2019 contract number-plan ID 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 1 applies when members are cross-walked within the same contract and when
members are cross-walked between contracts in accord with limited exceptions
described in CMS annual renewal and non-renewal guidance.
 Rule 2 – Enrollment Shifts

Base period data for more than one contract number-plan ID 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 contractplan ID; do not include partial plan experience on Worksheet 1.

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PRICING CONSIDERATIONS
 Rule 4 – Two-Year Perspective

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 CY2019 to CY2020 and from CY2020 to CY2021).
Example 1: Formal Cross-walk

A Part D sponsor offers plans 001, 002 and 003 in CY2019 and CY2020 and
plans 002 and 003 in CY2021. Plan 001 is consolidated and the membership is
formally cross-walked into plan 003 for CY2021 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 CY2021 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 CY2019 and CY2020 and
plan 003 and new plan 004 in CY2021. Plan 001 is consolidated and the
membership is formally cross-walked into plan 003 for CY2021 as submitted in
HPMS. Plan 002 is terminated for CY2021 and the certifying actuary expects the
membership in plan 002 to enroll evenly between plans 003 and 004; however, there
is no formal cross-walk or approved cross-walk exception in place. Base period
experience must be reported on Worksheet 1 of the CY2021 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 CY2019. In
CY2020, 50 beneficiaries stayed in plan 001 and 50 beneficiaries were cross-walked
into plan 002 via MARx enrollment transactions. In CY2021, 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 CY2021 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.
Mapping of Prescription Drug Events to Part D Claims Experience
in Worksheet 1, Section III
Column
(f)

Field Name
Total Number of Scripts

(g)

Total Allowed Dollars

(i)

Average Paid Amount per Member

(j)

Average Cost Sharing per Member

(k)

Supplemental Cost-Share Reduction
per Member
Reimbursement for LIS per Member

(l)
(m)

Reimbursement for Federal
Reinsurance per Member

PDE Reference Information
Count # of PDEs where (Ingredient
Cost + Dispensing Fee + Sales Tax +
Vaccine Administration Fee) > Zero
Σ (Ingredient Cost + Dispensing Fee +
Sales Tax + Vaccine Administration
Fee)
Σ [Covered Plan Paid Amount (CPP)
+ Non-Covered Plan Paid Amount
(NPP) + Low-Income Cost Sharing
(LICS)] ÷ Members
Σ [Patient Pay Amount + Other
TrOOP Amount + Reported Gap
Discount + Patient Liability Reduction
due to other Payer Amount (PLRO)] /
Members
Σ [Non-Covered Plan Paid Amount
(NPP)] ÷ Members
Σ [Low-Income Cost Share (LICS)] /
Members
Σ {[Gross Drug Cost above Out-ofPocket Threshold (GDCA) with
Catastrophic Coverage Codes A or
C]× 0.8} ÷ Members

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:
•

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

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PRICING CONSIDERATIONS

•
•

•
•
•

•

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 CY2020, beneficiary cost sharing for applicable drugs is 25 percent of the
negotiated price plus 25 percent of the dispensing and vaccine administration
fees, if any; the Part D sponsor’s liability is 5 percent of the negotiated price
plus 75 percent of the dispensing fee and vaccine administration, if any. Ninetyfive (95) percent of the negotiated price of the applicable drug and 25 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 and throughout the BPT, 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 CY2020, beneficiary cost sharing is reduced to 25 percent and the Part D
sponsor’s liability is increased to 75 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.
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.

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PRICING CONSIDERATIONS

•

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

CMS does not permit adjustments to the credibility percentages on Worksheet 2 for the purpose
of modifying the manual rate. For example, do not adjust the credibility percentages in the BPT
as an equivalent alternative to removing the base period experience from the manual rate
development.
The following 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 https://www.cms.gov/
Medicare/Health-Plans/MedicareAdvtgSpecRateStats/Bid-Pricing-Tools-and-InstructionsItems/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

Exposure Required for Full
Credibility
56,000 member months

CMS Formula for
Partial Credibility
√

member months
56,000

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.

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PRICING CONSIDERATIONS

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 2021 bids as
posted on HPMS

125 beneficiaries

Beneficiary-level file to support
2021 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 $4,020 by point-ofsale (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) 25 percent of the allowed
costs of non-applicable (generic) drugs and 95 percent of the negotiated price of
applicable (brand) drugs plus 25 percent of dispensing fees and vaccine administration,
if any, for applicable (brand) drugs between the decreased ICL and standard ICL.
Direct and Indirect Remuneration (DIR)

Part D sponsors must include all expected amounts that will be reported as DIR under “Rebate”
in the BPT. The DIR reported under “Rebate” represents the Part D sponsors’ best estimate of
all DIR categories and amounts that they expect to report under the Part D payment
reconciliation process for the respective contract year. The development of the DIR amounts
must be consistent with the development of projected costs.

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PRICING CONSIDERATIONS
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 around the cost of the drug
as reflected on claims data. Any gains or losses that the Part D sponsor may experience
as a result of these risk-sharing arrangements also constitute DIR that must be reported
to CMS. As with other types of DIR, the value can be negative.
Generic dispensing incentive payments, and any adjustments to generic dispensing
incentive payments made to pharmacies after the point-of-sale dispensing event, are
also considered DIR. Please note that generic dispensing incentive payments made to
the pharmacy at the point-of-sale are part of the dispensing fee reported on the PDE
record and therefore are not included in the DIR Report for Payment Reconciliation.
Enrollment

The projected enrollment for the Part D bid in an MA-PD plan must be consistent with that for
the corresponding MA bid and must reflect the same underlying population.
Gain/Loss Margin

Gain/loss margin refers to the additional revenue requirement beyond benefit expenses and
non-benefit expenses.
By statute, the bid must represent the revenue requirement of the expected population;
therefore, the gain/loss margin requirements must be met with the gain/loss margin entered in
the BPT.
Do not combine margins for the Medicare Advantage (MA) and Part D components of MA-PD
bids to satisfy these Instructions.
Do not combine margin for bids in segmented plans to satisfy these Instructions.

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See the “Instructions for Completing the Medicare Advantage Bid Pricing Tool for Contract
Year 2021” 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 exceptions to the gain/loss margin requirements must be disclosed, be fully
explained and supported, and ultimately be approved by CMS.
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.
Definitions

In the BPT and these Instructions, the term—
•

•

•
•

“Plan Category” refers to the following groupings of Part D bids:
◦ For Part D plans that are part of an MA-PD plan,—
 General enrollment plans and institutional or chronic care special needs
plans (general enrollment plans & I/C SNPs), including MSA and
ESRD-SNP plans; and
 Dual-eligible special needs plans (D-SNPs).
◦ Part D plans that are not part of an MA-PD plan, that is, Part D BPTs with
the following Plan Type Codes: PDP, PACE, 1876 Cost, and 1833 Cost.
“Level of aggregation” refers to the level at which the gain/loss margins entered
in the BPTs must comply with the aggregate-level gain/loss margin
requirements.
◦ The Part D sponsor may choose one of the following two levels:
organization level (that is, the legal entity that contracts with CMS under one
or more contracts 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 of aggregation selected in the Part D BPT must match the level
selected in the MA BPT of an MA-PD bid.
◦ The level of aggregation selected in the BPT must be the same for all general
enrollment plans & I/C SNPs and D-SNPs in the same Part D sponsor/
parent organization.
“Aggregate Part D margin” refers to the projected enrollment-weighted average
BPT PMPM gain/loss margin for the applicable plan category.
“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: (i) Medigap (Medicare Supplement); (ii) Medicaid; (iii) MMPs
offered through a Financial Alignment Demonstration; (iv) Stop Loss;
(v) dental, vision, and commercial lines of business; and (vi) the non-Part D
portion of Section 1876 cost plans, Section 1833 cost plans, and PACE plans.
Non-Medicare business excludes administrative services only (ASO) business.

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•

•

“MA and Part D business” refers to all MA and Part D enrollees (including, but
not limited to: (i) enrollees in hospice or ESRD status; and (ii) enrollees in
SNPs, MSA plans, ESRD-SNPs, EGWPs, and the Part D portion of the
following: Section 1876 cost plans, Section 1833 cost plans, and PACE plans).
“Corporate margin requirement” refers to the Part D sponsor’s margin
requirement using either the non-Medicare corporate margin basis or the RiskCapital-Surplus corporate margin basis as explained below.
◦ The “Non-Medicare” corporate margin basis applies if the volume of the
Part D sponsor’s non-Medicare business, for which it has discretion in rate
setting, is greater than or equal to 10% of the Part D sponsor’s total
non-Medicare business.
◦ The “Risk-Capital-Surplus” corporate margin basis applies if: (i) 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 (ii) the Part D sponsor has no non-Medicare business.

Bid-Level Requirements

The gain/loss margin entered in the BPT is allocated to basic coverage and
supplemental coverage based on the distribution of total prescription drug costs between
these coverages.
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.

The bid-level requirements below do not apply to Part D BPTs that have a
corresponding MA BPT. The bid-level requirements below apply only to Part D BPTs
with the following Plan Type Codes: PDP, PACE, 1876 Cost, and 1833 Cost.
 Benefit Value

The bid must provide benefit value in relation to the margin level.
For a bid with a high margin, consideration must be given to—
•

Premium changes that can be made in CY2021 to reduce gain/loss margin.

 Anti-competitive Practices

Anti-competitive practices will not be accepted. For example, significantly low or
negative gain/loss margins for plans that have substantial enrollment and stable
experience, or “bait and switch” approaches to specific plan margin buildup, will be
rejected, absent sufficient support that such pricing is consistent with these
Instructions.

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 Bids with Negative Margin

If the projected gain/loss margin in the Part D BPT is negative, the Part D sponsor
must develop, submit, and follow a Part D bid-specific business plan to achieve
profitability within five years as explained below. 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 updated
business plans, if any.
•

•

•

Product Pairing: If two or more Part D products are “paired” and the pricing
reflects implicit “subsidies” across benefit or service area offerings as described
below, then CMS does not require the Part D sponsor to submit a business plan
for the bid(s) with negative gain/loss margin. In this case, the bids in the Part D
product pairing must—
◦ Have identical service areas;
◦ Have a positive combined Part D gain/loss margin for CY2021.
Examples include a low-benefit plan with a positive margin paired with a
rich-benefit plan with a negative margin.
Business Plan: If the two situations above do not apply (or the Part D sponsor
does not choose one of these options), then the Part D bid-specific business plan
must include both a numeric projection and a narrative explanation.
◦ The numeric (non-pdf) projection must include, but is not limited to,
projected: member months, risk scores, CMS revenue, Part D premium,
claims expenses, non-benefit expenses, and gain/loss margin.
◦ A suggested negative-margin business plan template can be found at
https://www.cms.gov/Medicare/Health-Plans/MedicareAdvtgSpecRateStats/
Bid-Pricing-Tools-and-Instructions-Items/BidGuidance.html
Five-Year Period: An exception to the five-year period to achieve profitability
for a unique situation must be disclosed, be fully explained and supported, and
ultimately be approved by CMS. The exception applies only for CY2021.
◦ The five-year period to achieve profitability excludes contract years in which
the bid is projected to be in a product pairing, as defined above in this
pricing consideration.
◦ If the contract number-plan ID-segment ID changes for a certain contract
year, then the five-year period to achieve profitability begins with such
contract year.

Aggregate-Level Requirements

The aggregate-level requirements are applied separately to each plan category.
See the “MA-PD Margin Requirements” section in this pricing consideration for the
requirements for Part D plans that are part of an MA-PD plan.
 Year-to-Year Consistency

Although actual gain/loss margin may vary from year to year, CMS expects
certifying actuaries to price bids such that actual Part D aggregate returns over the

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long term are consistent with (that is, follow) the gain/loss margin assumptions used
for pricing. That is, at the applicable level of aggregation,—
•
•

Actual aggregate Part D margin is to be consistent with the aggregate Part D
margin used in pricing, as a percentage of revenue.
A point estimate of actual corporate margin is to be consistent with the corporate
margin requirement used for the Part D pricing.

 Requirements for Part D Plans Without Corresponding MA Plans

This requirement applies only to Part D BPTs with the following Plan Type Codes:
PDP, PACE, 1876 Cost, and 1833 Cost.
For Part D sponsors, if the corporate margin basis is—
•

•

“Non-Medicare,” then the aggregate Part D margin as a percentage of revenue
must be within 1.5 percent of the Part D sponsor’s non-Medicare business
margin requirement, unless CMS grants an exception, as explained below.
◦ An exception for unique circumstances must be disclosed, be fully explained
and supported, and ultimately be approved by CMS.
◦ The exception applies only for CY2021.
“Risk-Capital-Surplus,” then the aggregate Part D margin, as a percentage of
revenue, must be set by taking into account the degree of risk and capital and
surplus requirements of the Part D sponsor’s MA and Part D business prior to
any impact of sequestration.

 Minnesota Senior Health Options Program

For bids participating in the Minnesota Senior Health Options program, additional
aggregate-level gain/loss margin requirements can be found at
https://www.cms.gov/Medicare-Medicaid-Coordination/Medicare-and-MedicaidCoordination/Medicare-Medicaid-Coordination-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
Apply this method consistently for all MA-PD bids submitted by the Medicare
Advantage Organization.

Option B: Set the Part D margins at the plan-category level defined in the “Aggregate-

Level Requirements” section of this pricing consideration consistent with the level of
aggregation selected in the BPT. Specifically, at the applicable level of aggregation,—
•

The MA-PD sponsor must set the Part D margins equal for all plans within a
plan category.

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•

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.

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 and other non-benefit costs
incurred in the operation of the Medicare Prescription Drug Plan. Therefore, any allocation of
non-benefit expenses to the Part D bid (whether performed at the bid level or a broader level)
must take into consideration differences between the Part D bid and other bids, and the impact
on non-benefit costs of the Part D bid.
The non-benefit expenses must be entered separately on the BPT for the following categories:
•

•

Sales & Marketing
◦ Examples include, but are not limited to the cost of—
▪ Marketing materials;
▪ 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 CY2020. The

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•

•
•

COB user fee will be collected at a monthly rate of $0.1166 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 $0.04 pmpm on a
national basis for CY2020, or develop an alternative estimate that is consistently
applied to all plans in the contract—for example, the Part D sponsor’s historical
amount relative to the CMS annual national estimate;
▪ Uncollected enrollee premium;
▪ Uncollected cost sharing, which includes plan liability resulting from cost
sharing not recovered in state-to-plan or plan-to-plan transactions;
▪ Medication therapy management programs;
▪ Disease management functions such as patient education and disease
monitoring; and
▪ Over-the-counter drugs.
Indirect Administration
◦ Examples include, but are not limited to, functions that may be considered
“corporate services,” such as—
▪ The position of CEO;
▪ Accounting operations;
▪ Actuarial services;
▪ Legal services; and
▪ Human resources.
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 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.

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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 solely attributable to MA or Part D must be reported only on the
corresponding MA or Part D BPT.
Non-benefit expenses that are common to the MA and Part D components of MA-PD bids 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.
PBM Pricing

For CY2021, 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 with a different tax identification number
than that of the Part D sponsor, but 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 related party pricing consideration does not apply to Part D sponsors’ arrangements with
parties within the Part D sponsors’ own tax identification number. When a Part D sponsor has
an arrangement for benefit services within their tax ID number, they may 1) submit PDE data
that matches the reporting of these internal transactions in their financial statements,
2) establish the pharmacy under a new tax identification number and follow the related party
instructions, or 3) follow the actual cost methods detailed in the CY2021 Part D BPT
instructions and submit additional documentation that explains and compares how these costs
are reflected in the bid versus the Part D sponsor’s financial statements.
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

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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 for each identified related party.
A Part D sponsor in a related-party arrangement must—
•
•

•

Declare the related-party arrangement(s) to CMS at the time of the initial bid
submission.
Disclose all services that are covered in the arrangement(s). These include, but are not
limited to:
◦ Claims processing
◦ Network (retail and mail order pharmacy) access
◦ Clinical services, such as Utilization Management
◦ Formulary management
◦ Rebate contracting
◦ Drugs at related-party retail and/or mail order pharmacies
◦ Marketing materials and ID cards
◦ Call center operations
Select one of the following methods for entering costs associated with the related-party
arrangement into the BPT.
◦ 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 by CMS upon request. When supporting comparable rates through the related party, the
Part D sponsor must include with the rate analysis a signed attestation from the related party
stating that the actual contracts will be available upon request for review by CMS. Note that, if
a related-party arrangement includes both administrative services and benefit services, the
requirements apply separately to the costs associated with such administrative and benefit
services.

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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.
Actual Cost Method for Benefit Costs

Under the actual cost method for benefit costs, the BPT is prepared as follows:
•
•
•

All fees paid to the related party for benefit costs are entered as the benefit
expense of the Part D sponsor.
The related-party benefit costs are consistent with the actual and projected PDE
experience of the plan.
The gain or loss of the related party with respect to the Part D benefit costs is
provided in the supporting documentation.

Supporting documentation of the development of the actual cost method for benefit
costs must be provided with the initial bid submission as required in Appendix B.
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.

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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.

Supporting documentation for the market comparison through related party method
must be provided with the initial bid submission as required in Appendix B.
Risk Score Development for CY2021

The projected CY2021 risk score must—
•
•
•
•

Be based on the data sources and their respective weights, as specified in the resources
listed below in the Risk Adjustment Information Sources subsection.
Reflect the expected risk score trend at the bid level.
Be appropriate for the expected population.
Be adjusted for CY2021 normalization.
Risk Score Calculation Approaches

There are two methods for calculating the projected risk score: the preferred approach
and the alternate approach.
•

•

The preferred approach is to start with either the beneficiary or plan-level data
files provided by CMS, which contain the calculated risk scores using the
CY2021 payment model on 12 months of 2019 membership or the July 2019
enrollees, respectively.
The alternate approach allows new plans or plans with significant population
changes to use a different starting point for estimating their contract year risk
score.

For both approaches, explicit adjustments for the following factors are required:
•
•
•
•
•

Run out of diagnosis data from all sources, including differences in the final
cut-off date for data submission.
Bid-specific coding trend.
Changes in bid population.
Impact of any improvements to operational and submission process for
diagnosis data sources.
Changes in filtering logic.

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•

Other appropriate factors.

For an alternate approach, Part D sponsors must consider the following additional
adjustments:
•

•

•

•

•

•

Conversion to risk model-specific unblended risk scores.
◦ If the starting risk scores are blended scores, then Part D sponsors must
produce unblended risk scores before the conversion to raw risk scores.
Conversion to a raw risk score.
◦ When starting from a data source with normalized risk scores, such as the
MMR, Part D sponsors must consider a conversion to a raw (un-normalized)
scores before making other adjustments.
Impact of lagged versus non-lagged diagnosis data.
◦ If the starting risk scores are based on lagged diagnosis data, as is the case
for initial risk scores, Part D sponsors must transition the scores from lagged
to non-lagged risk scores.
Seasonality.
◦ If the starting risk score is based on membership that is other than the July
cohort or a full calendar-year cohort, then Part D sponsors must make an
adjustment for enrollment seasonality.
Risk model change.
◦ This includes the use of a different model in the data source versus the
projection year and differences in the diagnoses included in each model.
Impact of changes to diagnosis data sources and weights between the time
period of the data source and the contract year. Examples of the use of this
factor include adjustments for—
◦ The transition of starting risk scores based on MMR data from incomplete to
final diagnosis data.
◦ An estimate of the impact of the final risk score reconciliation.

After projecting the starting risk scores to the contract year, Part D sponsors must take
into account the effect of future due to the reporting of expected overpayments.
Once projected to the contract year, the risk scores must reflect the CY2021 Part D
normalization factor. Note that if a raw (not normalized) risk score associated with a
different model calibration year is being normalized, the CY2021 Part D normalization
factor is not the appropriate normalization factor.
Risk Adjustment Information Sources

The following resources provide information on the development of projected CY2021
risk scores:
•

The CY2021 Advance Notices and Announcement found through the
“Announcements & Documents” link on the “Medicare Advantage Rates and
Statistics” page of the CMS website at https://www.cms.gov/Medicare/HealthPlans/MedicareAdvtgSpecRateStats/index.html.

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•
•
•

Bid-level data and technical notes available after the publication of the CY2021
Announcement through the “Risk Adjustment” link on the HPMS Home page.
Beneficiary-level files and technical notes sent to MAOs electronically after the
publication of the CY2021 Announcement.
Additional information found—
◦ Under the “Risk Adjustment” and “Ratebooks & Supporting Data” links at
https://www.cms.gov/Medicare/Health-Plans/MedicareAdvtgSpecRateStats/
index.html.
◦ At https://www.csscoperations.com/.

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.
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 $670 per month supply be placed in the

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PRICING CONSIDERATIONS

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 $435 for CY2020.
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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DATA ENTRY & FORMULAS

III. DATA ENTRY AND FORMULAS
This section includes line-by-line instructions for completing the Part D BPT. It also describes
the formulas for calculated cells.

PRESCRIPTION DRUG
To complete the Part D bid form, Part D sponsors must provide a series of data entries on the
appropriate BPT worksheets. The number of inputs depends on the type of plan being offered
and the length of time it has had a contract with CMS, among other factors.
The Part D bid form is organized as outlined below:
•
•
•
•
•
•
•
•

Worksheet 1 – Rx Base Period Experience
Worksheet 2 – PDP Projection of Allowed/Non-Benefit
Worksheet 3 – Rx Contract Period Projection for Defined Standard Coverage
Worksheet 4 – Rx Standard Coverage with Actuarially Equivalent Cost Sharing
Worksheet 5 – Rx Alternative Coverage
Worksheet 6 – Rx Script Projections for Defined Standard, Actuarially Equivalent or
Alternative Coverage
Worksheet 6A – Coverage in the Gap
Worksheet 7 – Summary of Key Bid Elements

All Part D sponsors must complete Section I of Worksheet 1; completion of subsequent
sections of the BPT is based on the plan benefit type being offered. The worksheets and
sections that must be completed for each plan benefit type are defined below.
Defined Standard Coverage
 Worksheet 1

For all plans, complete Section I; for plans with claims experience in CY2019, complete
all sections.
 Worksheet 2

For plans with fully credible claims experience in CY2019, complete Sections II, III, IV
Column O, V and VII; for plans with partially credible claims experience in CY2019,
complete all sections. For new plans in CY2020 and CY2021, complete Sections IV, V,
VI and VII.
 Worksheet 3

Complete all sections for all plans.
 Worksheet 6

Complete columns f, g, and h of Section II for all plans.
 Worksheet 6A

Complete columns f, g, and h of Section II for all plans.

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DATA ENTRY & FORMULAS
 Worksheet 7

Complete all sections for all plans.
Actuarially Equivalent Coverage
 Worksheet 1

For all plans, complete Section I; for plans with claims experience in CY2019, complete
all sections.
 Worksheet 2

For plans with fully credible claims experience in CY2019, complete Sections II, III, IV
Column O,V and VII; for plans with partially credible claims experience in CY2019,
complete all sections. For new plans in CY2020 and CY2021, 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 CY2019, complete
all sections.
 Worksheet 2

For plans with fully credible claims experience in CY2019, complete Sections II, III, IV
Column O, V and VI; for plans with partially credible claims experience in CY2019,
complete all sections. For new plans for CY2020 and CY2021, complete Sections IV,
V, VI and VII.
 Worksheet 3

Complete all sections for all plans.
 Worksheet 5

Complete all sections for all plans.
 Worksheet 6

Complete all columns of Section II for all plans.
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DATA ENTRY & FORMULAS
 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 2019 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 zeroes.
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 zeroes (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 zeroes.
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 is to include any leading zeroes.
Line 4 – Contract Year

The cell is pre-populated with the calendar year to which the contract applies.
Line 5 – Organization Name

Enter the organization’s legal entity name. This information also appears in HPMS and in
the PBP.
Line 6 – SNP

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

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WORKSHEET 1
Line 7 – Plan Name

Enter the name of the PBP. This information also appears in HPMS.
Line 8 – Plan Type

Enter the type of Part D plan. The valid options are listed in the table below.
Type of Plan
Local Coordinated Care Plans:
Health Maintenance Organization (HMO)
Religious Fraternal Benefit HMO
Religious Fraternal Benefit HMO with a Point-of-Service (POS)
Option
HMO with a POS Option
Provider-Sponsored Organization (PSO) with a State License
Religious Fraternal Benefit with a State License
Preferred Provider Organization (PPO)
Religious Fraternal Benefit PPO
Regional Coordinated Care Plan:
Regional Preferred Provider Organization (RPPO)
Private Fee-for-Service Plans:
Private Fee-for-Service Plan (PFFS)
Religious Fraternal Benefit PFFS
Prescription Drug Plans:
Medicare Prescription Drug Plan (PDP)
Fallback Plan
Demonstration Plans:
National PACE
Cost Plans:
1876 Cost
1833 Cost

Plan Type Code
HMO
RFB HMO
RFB HMO POS
HMO POS
PSO State License
RFB PSO State License
LPPO
RFB LPPO
RPPO
PFFS
RFB PFFS
PDP
Fallback
PACE
1876 Cost
1833 Cost

Line 9 – Enrollee Type

If the plan covers enrollees eligible for both Part A and Part B of Medicare, enter “A/B”.
If the plan covers enrollees eligible for Part B only, enter “Part B Only”. When the plan
type is “PDP” or “Fallback”, then the enrollee type cell is white and locked; no input is
required.
Line 10 – VBID

If the plan is participating in the Value-Based Insurance Design Demonstration, enter yes,
otherwise enter no.
Line 11 – MTM

If the plan is participating in the Medication Therapy Management Demonstration, enter
yes, otherwise enter no.

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Line 12 – ESRD-SNP

Enter Y if the plan is part of an ESRD-SNP MA-PD.
Line 13 – 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 zeroes.
The valid entries are shown in the following table:
Region
01
02
03
04

Description
Maine and New Hampshire
Connecticut, Massachusetts,
Rhode Island and Vermont
New York
New Jersey

05

Delaware, District of Columbia
and Maryland

06
07
08
09
10
11
12
13
14
15
16
17
18
19
20

Pennsylvania and West Virginia
Virginia
North Carolina
South Carolina
Georgia
Florida
Alabama and Tennessee
Michigan
Ohio
Indiana and Kentucky
Wisconsin
Illinois
Missouri
Arkansas
Mississippi

Region
21

Description
Louisiana

22

Texas

23
24

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

25
26
27
28
29
30
31
32
33
34
35
36
37
38
39

Line 14 – 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 15 – 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.
Line 16 – Payment Modernization Model

If the plan is participating in the Part D Payment Modernization Model, enter Y,
otherwise enter N.

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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 2020,
then the paid through date is 2/28/2020.
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 final average risk score for the population represented in the base period data
using the Part D risk model that was used for payment year 2019. This risk score must
incorporate the normalization factors and an estimate of the final reconciliation.
Actuaries may use as a starting point risk scores calculated with the model used for 2019,
which are included in the beneficiary-level files sent to Part D sponsors electronically
after the publication of the CY2021 Announcement.
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-segment 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, plan, and
segment ID in cells D5 and D6; the contract-plan-segment 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-segment 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 in supporting documentation the contractplan-segment IDs and member months of all plans in the “all other” category.
Enter the corresponding number of member months in the second column.

SECTION III – PART D CLAIMS EXPERIENCE
Lines 1 through 11 include experience relating to Part D-covered drugs only. Lines 12
through 14 include experience for drugs that are covered by the plan but are not
Part D-covered drugs at the time they are dispensed.

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WORKSHEET 1
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 $405 and $3,749, 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 CY2019 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

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

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

Enter the average value of supplemental cost sharing per member for
Part D-covered drugs for members in column d for each line.
 Column l – Reimbursement for Low-Income Cost-Sharing Subsidy per Member

Enter the average low-income cost-sharing subsidy amount received and
receivable for the members in column d for each line.

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WORKSHEET 1
 Column m – Reimbursement for Federal Reinsurance per Member

Enter the average federal reinsurance amount received and receivable for the
members in column d for each line.
 Column n – Net Plan Responsibility per Member

The value is calculated automatically in the BPT as column i minus the sum of
columns k through m for each line.
Line 6, columns d through n – Subtotal

The values are calculated automatically in the BPT as the sum of lines 1 through 5 for
columns d through g and as the weighted average based on the number of members in
column d of lines 1 through 5 for columns h through n.
Line 7 – Percentage OON
 Column g

Enter the percentage of total allowed dollars in line 6 for prescriptions filled at
out-of-network (OON) pharmacies.
 Column i

Enter the percentage of average paid dollars in line 6 for prescriptions filled at
OON pharmacies.
 Column j

Enter the percentage of average cost sharing per member in line 6 for
prescriptions filled at OON pharmacies.
Line 8, column i and columns k through n – PMPM Values

They are calculated automatically by the BPT as the result of the subtotal of the column
in line 6 divided by the number of member months in column d.
Line 9 – Minus Rebates
 Column g

Enter the total amount of rebates received as of the “Paid thru Date” in Section I
and expected to be received for the claims in lines 1 through 5. Total rebates
include all direct and indirect remuneration received after the point-of-sale
transaction. Report the rebates at the PBP level. If the Part D sponsor does not
receive rebates at the PBP level, then an allocation methodology may be used.
The methodology used for reporting rebates must be substantiated in the
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.

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WORKSHEET 1
 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 either
GDCA (Gross Drug Cost above Out-of-Pocket Threshold) or GDCA minus
PLRO (Patient Liability Reduction Due to Other Payer Amount) as appropriate.
 Column i

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

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

The values are calculated automatically in the BPT as line 8 minus line 9 plus line 10.
Line 12 – Non-Covered Supplemental Drugs
 Column g

Enter the total plan paid amount for prescription drugs that are covered by the
plan but are not Part D-covered drugs.
 Column i

The value is calculated automatically in the BPT as column g divided by line 6,
column e.
Line 13, column i – Rebates on Supplemental Drugs

Enter the total amount of rebates received as of the “Paid thru Date” in Section I and
expected to be received for the claims in line 12. Total rebates include all direct and
indirect remuneration received after the point-of-sale transaction. Report the rebates at
the PBP level. If the Part D sponsor does not receive rebates at the PBP level, then an
allocation methodology may be used. The methodology used for reporting rebates must
be substantiated in the supporting documentation that is uploaded into HPMS with the
initial bid submission.

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WORKSHEET 1
Line 14, columns I and n – Net PMPM on Supplemental Drugs

The value in column i is calculated automatically in the BPT as line 40 minus line 41 and
is carried to column n.

SECTION IV – PMPM NON-BENEFIT EXPENSES
Section IV summarizes all administrative expenses associated with the operation of the
prescription drug plan in the base period, including any expenses that were offset by
direct or indirect remuneration.
Lines 1 through 5, column g – Total

Enter the sales and marketing, direct administration, indirect administration, net cost of
private reinsurance and insurer fees average pmpm amounts for total coverage on lines 1
through 5, respectively. Include uncollected enrollee premium, uncollected cost sharing
and OTC drugs in direct administration.
Line 6, column g – Total Non-Benefit Expenses

The value is calculated automatically in the BPT as the sum of lines 1 through 5.

SECTION V – PMPM PREMIUM REVENUE
Section V summarizes the components of premium revenue of the prescription drug plan
for the base period.
Lines 1 through 4, column e – Basic

Enter the CMS Part D direct subsidy payment, low-income premium subsidy, member
premium average pmpm amounts for basic coverage on lines 1 through 3, respectively.
The direct subsidy amount must account for the final risk-adjusted reconciliation
payment for CY2019 which will be received in mid-2020 and include the impact of
sequestration and PACE add-on, if applicable.
Line 3, column f – Supplemental

Enter the member premium average pmpm amount for supplemental coverage on line 3.
Lines 1 through 4, column g and line 5 – Total Premium

The values are calculated automatically in the BPT as the sums of columns e and f.

SECTION VI – PMPM INCOME STATEMENT SUMMARY
Section VI is a summary of the prescription drug plan’s income, including the amount of
MA rebate allocable to Part D when applicable, for the base period.

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WORKSHEET 1
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 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 (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.
 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

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WORKSHEET 2

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.
 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.

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WORKSHEET 2
 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 56,000, not to exceed 100 percent.

SECTION V – PMPM NON-BENEFIT EXPENSES
Section V summarizes the components of non-benefit expenses in the projection period.
Lines 1 through 5
 Column e – Projected Expenses

Enter the projected non-benefit expense by component for each line.
Line 6, column e – Total Non-Benefit Expenses

The values are calculated automatically in the BPT using information entered on lines 1
through 5.

SECTION VI – PERCENTAGE OF REVENUE
Section VI 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 j

The values are carried from Worksheets 3 through 5.
Line 4, column j

The value is calculated automatically in the BPT as the sum of lines 1 through 3.
Lines 5a through 5c, column j

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 CY2021 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 CY2021, the “Total Covered
Part D Spending at OOP Threshold for Non-Applicable Beneficiaries” of

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WORKSHEET 3

$7653.75 and “Estimated Total Covered Part D Spending at OOP Threshold for
Applicable Beneficiaries” of $8139.54 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 D-covered drugs for the members in column d for each line.
 Column g – Projected Allowed Amount

Enter the estimated total allowed dollars for prescriptions expected to be filled for
Part D-covered drugs for the members in column d for each line. Total allowed
dollars must reflect the price paid to the dispensing provider at the point-of-sale
and must be net of point-of-sale rebates and price concessions.
 Column i – Cost Sharing

The value is calculated automatically in the BPT as the sum of columns j
through l for each line.
 Column k – PMPM Deductible

Enter the projected pmpm value of the deductible for the members in column d
for each line.
 Column l – Other Cost Sharing PMPM

Enter the projected pmpm value of the 25 percent cost sharing between the
deductible and ICL and the catastrophic coinsurance above the catastrophic limit
for the members in column d for each line.
 Column o – Federal LIS Cost Sharing PMPM

Enter the projected amount of low-income cost sharing subsidy that will be
received for the members in column d who are LIS-eligible divided by the total
projected member months entered in Section II, line 1 for each line.

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WORKSHEET 3
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 – Plus Part D as Secondary
 Column g

Enter, as a positive value, the projected total plan cost (Covered Plan Paid
Amount (CPP) + Non-Covered Plan Paid Amount (NPP) ) 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.

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WORKSHEET 3
 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 9 – 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 10 – 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 11, columns g through o – Total

The values are automatically calculated in the BPT as line 6 minus line 7 minus line 8
plus line 9 for each column.

SECTION IV – PMPM NON-BENEFIT EXPENSE AND GAIN/LOSS
Section IV summarizes components of the contract period non-benefit expenses and
gain/loss margin.
Lines 1 through 5

The values are carried from other worksheets or are calculated automatically in the BPT.
Line 6 – Total Gain/loss

Enter the estimated pmpm amount of gain or loss projected during the contract period.
Line 7 – Overall Gain/(Loss) Margin Level

Select in cell D46 the level at which the overall gain/(loss) margin requirements are met.
The options are “organization” and “parent-organization”. The option selected in the
Part D BPT must match the option selected in the MA BPT of an MA-PD.
Line 8 – Corporate Margin Requirement % of Revenue

Enter in cell D47 the corporate margin requirement as a percentage of revenue. The level
selected in the Part D BPT must match the level selected in the MA BPT of an MA-PD.
Line 9 – Corporate Margin Basis

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

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WORKSHEET 3
Lines 10 and 11 – Negative Bid-Level Gain/(Loss) Margin

These fields pertain to a PD bid with a negative projected gain/loss margin in line 7. See
the “Gain/Loss Margin” pricing consideration for more information regarding bid level
gain/loss margin requirements.
Line 10 – Valid Product Pairing

If, in the contract year, the bid satisfies the requirements for the product pairing
exemption to the bid specific business plan requirement, enter “Yes” to the question,
“Is the bid part of a valid product pairing?” Otherwise enter “No”.
Line 11 – Bids in Product Pairing

If the answer in line 10 to the product pairing question is “Yes”, enter in line 11,
columns d through h, the contract number-Plan ID-Segment ID of the bids in the product
pairing.
Make the first entry in column d of the top input row. Continue with additional entries
across the top input row, then use the input cells in columns d through h of the bottom
input row. Leave input cells blank to the extent the preceding cells in line 11 identify
each bid in the Part D product pairing.
If there are more than 10 bids in the product pairing, then include in supporting
documentation the contract number-Plan ID-Segment ID of each bid not identified in
line 11.

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.

SECTION IV – DEVELOPMENT OF BID COMPONENTS AND TESTS FOR
ACTUARIAL EQUIVALENCE
Lines 1 through 8, columns e, g, i, and l

The values are carried from other worksheets in the BPT.

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WORKSHEET 4
Line 9 – Coinsurance Percentage
 Column e

Enter the estimated percentage of total allowed costs above the deductible but
below the ICL that is the beneficiary cost sharing under the actuarially equivalent
plan design.
 Columns g, i, and l

The values are carried from other worksheets in the BPT.
Lines 10 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 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. Plans with a non-uniform deductible must also enter their deductible amount in
this cell.
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:
 Line 6, columns f and g– Value of Defined Standard Deductible

Enter the projected pmpm value of the deductible for members with total allowed
amount less than the ICL and greater than or equal to the ICL in cells F39 and
G39, respectively.
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 Line 7, columns f and g – Value of Proposed Deductible

Enter the projected pmpm value of the deductible for members with total allowed
amount less than the ICL and greater than or equal to the ICL in cells F40 and
G40, respectively.
 Line 11, column f – Coinsurance Percentage

Enter the projected percentage of total allowed costs above the deductible but less
than the ICL for beneficiaries with spending less than the ICL that is the
beneficiary cost sharing under the alternative plan design.
 Line 11, column g – Coinsurance Percentage

Enter the projected percentage of total allowed costs above the deductible but less
than the ICL for beneficiaries with spending greater than or equal to the ICL that
is the beneficiary cost sharing under the alternative plan design.
 Line 17, column o – Minus Rebates

Enter the estimated total rebates pmpm expected to be received for
Part D-covered drugs.
 Line 17, column q – Minus Rebates

Enter the estimated total rebates pmpm expected to be received for
non-Part D-covered drugs.
 Line 19, 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 reinsurance-eligible Part D-covered drugs,
Part D-covered 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, 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 $4,020 in CY2020. 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, and decreased ICL.

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 $4,020 with Standard
Coverage

All utilization for members with projected total allowed costs less than $4,020 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 $4,020 with Standard
Coverage

All utilization for members with projected total allowed costs greater than or equal to $4,020
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 $4,020 with Standard Coverage Amounts
Allocated up to ICL

All utilization for total allowed costs up to $4,020 for members with projected total allowed
costs greater than or equal to $4,020 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 $4,020 in CY2020, 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
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 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

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

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WORKSHEET 6

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 CY2021 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, 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 $4,020 and
Catastrophic

The values are calculated automatically in the BPT.
Lines 12 through 21 – Low-Income Population Amounts Allocated between $4,020 and
Catastrophic

All utilization for LIS members with projected total allowed costs greater than $4,020 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 $4,020 and
Catastrophic

All utilization for non-LIS members with projected total allowed costs greater than $4,020 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.
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.

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WORKSHEET 6A
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 – 2021 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 CY2021 will be calculated
and published by CMS in early August 2020.
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.
Line 4 – Medication Therapy Management (MTM) Performance Payment

For standalone PDP plans that are participating in the MTM demonstration, this input cell will
account for the performance payment the plan is to receive in its CY2021 payments. All plans
must enter 0 for this amount in their initial bid submission on the first Monday in June. Plans
that qualify for this performance payment will be given an opportunity to resubmit their bid
after they have been informed of the amount.

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WORKSHEET 7
Lines 5 and 6 – 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 minus line 4. Line 6 reflects the value of the basic Part D premium from line 5 after
the rounding rule selected on line 9 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 7 and 8 – 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 9 – 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 10 – 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 11 – 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) X (total direct subsidy payments + total beneficiary
premiums related to the standardized bid amount)]
Line 12 – Prospective Brand Discount Amount

The value is carried from Worksheet 6A of the BPT.
Line 13 – 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
Part D additional actuarial BPT contact. However the Part D sponsor may designate a
centralized mailbox as the “Email Address” for any of the three contacts.
The Part D certifying actuary and Part D additional actuarial 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 A

IV. APPENDICES
APPENDIX A – ACTUARIAL CERTIFICATION
GENERAL
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 A

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
CY2021 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 Actuarial Standards of Practice (ASOPs):
•

ASOP No. 5, Incurred Health and Disability Claims

•

ASOP No. 8, Regulatory Filings for Health Benefits, Accident and Health Insurance, and Entities
Providing Health Benefits (Revised)

•

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 to HPMS all required supporting
documentation at the time of the initial June bid submission. Additional supporting
documentation must be made available to CMS auditors and reviewers upon request, and for
CMS reviewers, within 48 hours of the request, as required by these Instructions. Part D
sponsors must upload supporting documentation consistent with the final certified bid.
Additional information not listed by number in this appendix may be requested by CMS
reviewers and auditors at any point during bid desk review or a CMS audit.
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.

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APPENDIX B

•

Include the contract-plan ID (or organization name) and brief description in the
beginning of the file name.

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.
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 accessible 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 explanation 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 (for example, Microsoft Excel,
Microsoft Word, or Adobe Acrobat) and must be uploaded to HPMS. CMS will not accept
paper copies of supporting documentation. Note that multiple substantiation files can be
submitted to HPMS at one time by using “zip” files, which compress multiple files into one
(.zip file extension).
Also note that although one file can be uploaded to multiple plans in HPMS, documentation
must not be uploaded to plans to which it does not pertain. Similarly, it is not acceptable to
upload to multiple plans materials specific to a Part D plan, an MA bid or another contract
number.

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APPENDIX B

More requirements about the upload of substantiation files are located in HPMS in the “Notes”
section, under HPMS Home > (Plan Bids) Bid Submission > CY2021 > (Upload)
Substantiation > Next.
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 bids for which such
support item applies 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) 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 numberplan 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.
◦ Sample BPTs are not to be uploaded to HPMS.

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APPENDIX B

•

Prior to the final actuarial certification—
◦ Part D sponsors and certifying actuaries must revise supporting documentation
consistent with the final certified bid. This includes additional information or
materials provided during bid review to support the bid.
◦ CMS expects revised supporting documentation to have the same file name as the
original substantiation file except for a different date or a word such as “revised.”

Initial June Bid Submission

The following documentation requirements apply to all bids (as all bids contain these
assumptions):
1. A cover sheet outlining the documentation files, as described above.
2. 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.
3. 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).
4. Support for sequestration’s effect on the bid, including a detailed qualitative and
quantitative description of how it is reflected in pricing assumptions.
5. Support for the claims credibility assumptions (Worksheet 2), including5.1. A statement of the credibility methodology used–for example, the CMS guideline or
the CMS override.
5.2. An actuarial report of the credibility procedure used if it varies from the CMS
guideline or the CMS override.
6. 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–
6.1. The PBP description of the deductible and copay/coinsurance structure by days
supply, point-of-sale and claims interval.
6.2. 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.
6.3. 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.
7. Support for non-benefit expense assumptions (Worksheet 2). The required elements
include–
7.1. A reconciliation of the base period non-benefit expenses reported in Worksheet 1 of
the BPT to auditable material such as corporate financials and plan-level operational
data.
7.2. A description of the expenses included in each non-benefit expense category in the
BPT.

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APPENDIX B

7.2.1. For the “Net Cost of Private Reinsurance” category, the required elements
include the type of reinsurance and applicable benefits, attachments points,
maximums, and other information pertinent to the reinsurance coverage.
7.3. Detailed support for the development of projected non-benefit expenses. The required
elements include7.3.1. A description of the methodology used to develop non-benefit expenses.
7.3.2. An analysis that demonstrates the development of each line item using
relevant data, assumptions, contracts, financial information, business plans and
other experience.
7.3.3. 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.
8. Justification of the Part D gain/loss margin (Worksheet 2). The required elements include–
8.1. For a Part D plan without a corresponding Medicare Advantage plan, support for the
corporate margin requirement at the applicable level of aggregation. This includes—
8.1.1. A demonstration of how corporate margin requirement is set, including an
explanation for any changes from the prior year.
8.1.2. A demonstration of consistency between the corporate margin requirement
used in pricing and the actual corporate returns over the long term. If the
returns have been inconsistent historically, provide an explanation of how that
knowledge was incorporated into the current bid submission.
8.2. Support for overall gain/loss margin levels including—
8.2.1. The level of aggregation.
8.2.2. A list of the contract numbers offered by the organization, if aggregate gain
loss margin requirements are met at the organization level.
8.3. For a Part D plan without a corresponding Medicare Advantage plan, a detailed
justification, at the applicable level of aggregation, if the aggregate margin is outside
of the stated range of the corporate margin. The required elements include—
8.3.1. Disclosure of a Part D aggregate-margin exception request for CY2021.
8.3.2. A description of the unique circumstances supporting an exception.
8.3.3. A description of the historical, current, and future actions taken or to be taken
to bring the margin into compliance with these Instructions.
8.3.4. An aggregate-margin numeric (non-pdf) business plan demonstrating when the
applicable aggregate Part D-margin requirements will be satisfied. The
required elements include:
a. A year-by-year projection of projected member months, risk scores,
CMS revenue, Part D premium, claims expenses, non-benefit expenses, and
gain/loss margin.
b. The year-by-year projected gain/loss margin as a percentage of revenue
from the original or updated aggregate-margin numeric (non pdf) business
plan, if applicable
8.4. A demonstration of consistency between the projected aggregate margins for Part D
and the actual aggregate returns over the long term at the applicable level of
aggregation and plan–category level, including—

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APPENDIX B

8.4.1. An explanation of how that knowledge was incorporated into the current bid
submission, if the returns have been inconsistent historically.
8.5. A detailed justification of the need for flexibility in the gain/loss margin requirements
in order to satisfy other CMS requirements such as TBC.
8.6. For a Part D plan without a corresponding Medicare Advantage plan, support for a bid
with a negative gain/loss margin, including one of the four items outlined below.
8.6.1. A description of the Part D product pairing that includes the gain/loss margin
for each Part D bid and shows that such bids—
a. Have identical service areas;
b. Have a positive combined gain/loss margin for CY2021.
8.6.2. For a new bid (including a bid with a revised contract number, plan ID, and/or
segment ID), or a bid with a zero or positive projected gain/loss margin for the
prior contract year, a Part D bid-specific, year-by-year, numeric (non-pdf)
business plan that demonstrates profitability within five years, including, but
not limited to, the elements listed below. A negative-margin business plan
template can be found at https://www.cms.gov/Medicare/Health-Plans/
MedicareAdvtgSpecRateStats/Bid-Pricing-Tools-and-Instructions-Items/
BidGuidance.html.
a. For each year, projected: member months, risk scores, CMS revenue, Part D
premium, claims expenses, non-benefit expenses, and gain/loss margin.
b. An explanation of steps taken in the contract year and to be taken in each
future year to achieve profitability, that is, a year-by-year description of
benefit and premium changes, and other actions.
c. The year that either profitability is projected or the Part D sponsor expects
the Part D bid to be part of a valid product pairing, as defined in these
instructions.
8.6.3. For a Part D bid that is not subject to 8.6.1 or 8.6.2, a numerical (non-pdf)
comparison of the projected gain/loss margin to the Part D margin in the
original or updated Part D bid-specific numeric business plan. The required
elements include—
a. Details and sources of deviation from the original or updated Part D
business plan.
b. For a bid that is progressing toward a positive margin more slowly than
projected in the original or updated business plan, an explanation and a
demonstration of how the targeted margin in the original or updated Part D
business plan will be met. This includes, but is not limited to,—
i. A revised (non-pdf) business plan demonstrating that the Part D bid will
reach profitability within the required five-year period. The revised
business plan must include the detailed numeric and narrative
information required in 8.6.3. (a through c) and the year-by-year
projected gain/loss margin, as a percentage of revenue, from the original
or updated Part D bid-specific numeric business plan.
ii. Copies of the original and most recent Part D business plans uploaded to
HPMS in a separate file.

CY2021 Part D BPT Instructions

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APPENDIX B

8.7. For a Part D plan without a corresponding Medicare Advantage plan, a detailed
justification for a unique situation, in which a Part D bid-specific business plan does
not achieve profitability within five years, including—
8.7.1. Disclosure of the exception request for an extended period.
8.7.2. A description of the unique circumstances supporting an exception.
8.7.3. A description of the historical, current, and future actions taken or to be taken
to bring the gain/loss margin into compliance with these Instructions.
8.8. For a Part D plan without a corresponding Medicare Advantage plan, justification of
benefit value in relation to the gain/loss margin, if the gain/loss margin is greater than
12% of revenue. The required elements include—
8.8.1. An explanation of how the PBP provides benefit value in relation to the
margin.
8.8.2. A description of premium changes made for CY2021.
8.9. For MA-PD plans, a description of the approach for setting the Part D margin in
relation to the MA margin.
9. Detailed support for the development of projected risk scores (Worksheet 3). The required
elements include–
9.1. A detailed description and corresponding numerical demonstration of the
methodology used to develop projected CY2021 Part D risk scores, including the
impact of the assumed mix between low-income subsidy (LIS) and non-LIS
populations.
9.2. A description of, and the rationale for choosing, the source data for the development
of the projected CY2021 Part D risk scores, including—
9.2.1. Identification of the source of the starting risk score and, if not the
CMS-provided risk scores, an explanation of why the alternative source was
appropriate.
9.2.2. For an alternative approach, identification of the years used, the population
incorporated and any data points used as a basis in developing the CY2021
risk score.
9.3. A description of the methodology used to derive each projection factor, including—
9.3.1. 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.
9.3.2. For the bid-specific coding trend, a statement about the risk score years
utilized, the number of years used and whether the scores are normalized or
raw.
9.4. 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.
9.5. 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.
9.6. A statement of the credibility approach used—for example, the CMS guideline or the
CMS override.

CY2021 Part D BPT Instructions

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APPENDIX B

9.7. 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:
10. Support for the development of the base period data (Worksheet 1).
10.1. Detailed qualitative and quantitative support for the development of the base period
experience, including allowed cost, GAP discount and LICS. The required elements
include—
10.1.1. Description of the source data, such as a list of the CMS return files that were
used in the compilation of the PDEs
10.1.2. Information regarding the base period member months, if more than eight bids
constitute the base period experience
10.1.3. Any applicable adjustments, stated as absolute values or percentages, to the
source data, including considerations for—
a. Accepted PDEs.
b. Rejected PDEs expected to be accepted by CMS upon resubmission.
c. P2P transactions.
d. Transfer of OTC drug data from the base period experience to the
non-benefit expense component.
10.2. 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.
10.3. Cross-walk information regarding data aggregation (Worksheet 1). The required
elements include–
10.3.1. A list of all bids involved in approved cross-walks for CY2020 and proposed
cross-walks for CY2021 considered for base period data aggregation.
10.3.2. A statement of the intention to submit a cross-walk exception for CY2021, if
applicable.
10.4. 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).
11. Detailed qualitative and quantitative support of the development of each trend projection
factor (Worksheet 2). The required elements include–
11.1. A description of the source data, including the data’s relevance to the Part D plan and
the mix between LIS and non-LIS populations.
11.2. A summary of the Part D sponsor’s historical trends including–
11.2.1. The percentage trends.
11.2.2. A description of the methodology used to analyze the data.
11.2.3. The numeric calculations.
11.3. Any applicable adjustments to the source data, such as considerations for–
11.3.1. Part D sponsor’s experience.

CY2021 Part D BPT Instructions

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APPENDIX B

11.3.2. PBM reports and contracts.
11.3.3. Industry and/or internal studies.
11.3.4. Formulary analysis.
11.3.5. Benefit design analysis.
11.3.6. Bid-specific circumstances.
11.3.7. LIS and non-LIS populations.
12. 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–
12.1. A description of the source data, including, but not limited to, the data’s relevance to
the Part D bid, incurred dates, and the exposure (expressed in member months) as
used to develop the manual rate.
12.2. An analysis justifying the reasonableness of the manual rate, if the manual rate is
based on experience that would not satisfy the CMS guidelines for full credibility,
without overriding the CMS formulas for partial credibility.
12.3. Any applicable adjustments to the source data, such as–
12.3.1. Techniques and factors used to reflect differences between the underlying
population and that expected of the Part D plan;
12.3.2. Techniques and factors used to adjust for differences in plan design between
the source data and the Part D plan; and
12.3.3. Approach and factors applied to account for incomplete claim run-out,
formulary differences and/or expenditures that are not reflected in the source
data.
12.4. Data and methodology used to project the data from the incurred period to CY2021.
12.5. All other applicable factors and/or adjustments.
13. Detailed support for related-party arrangements (Worksheets 1, 2 and 3).
13.1. A Part D sponsor in a related-party arrangement must provide the following:
13.1.1. Declaration of every related-party arrangement.
13.1.2. Disclosure of all services provided in every related-party arrangement.
13.1.3. A summary that explains the relationship of the parties involved and common
ownership, control and investment.
13.1.4. A summary of the contractual terms of each relationship that includes a
description of the services provided and money exchanged.
13.1.5. 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.
13.2. 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.
13.3. A Part D sponsor that chooses the Actual Cost Method for Benefit Costs must–
13.3.1. 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

CY2021 Part D BPT Instructions

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APPENDIX B

prescriptions. The gain/loss margin must be reconcilable to the related party’s
audited financial statements.
13.3.2. 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.
13.4. A Part D sponsor that chooses the Market Comparison through Part Sponsor Method
must–
13.4.1. 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.
13.4.2. 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 historical experience.
13.4.3. Show that both contracts in the comparison are associated with sufficient costs
to be considered valid contracts.
13.5. A Part D sponsor that chooses the Market Comparison through Related Party Method
must–
13.5.1. 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.
13.5.2. 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.
13.5.3. Show that both contracts in the comparison are associated with sufficient costs
to be considered valid contracts.
13.5.4. Provide a signed attestation from the related party stating that the actual
contracts will be available for review upon request by CMS.
14. The input sheet(s) for the pricing model used in the development of the bid.
15. An explanation of and detailed support for how CY2020 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.
16. Support for reliance on information supplied by others that–
16.1. Identifies the source(s) of the information–for example, name, position, company,
date;
16.2. Identifies the information relied upon;
16.3. States the extent of the reliance–for example, whether or not checks as to
reasonableness have been applied; and
16.4. Indicates to which plan(s) the reliance information applies.

CY2021 Part D BPT Instructions

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APPENDIX B

See the sample format at the end of this appendix.
17. Detailed qualitative and quantitative support for the development of the components of
pricing assumptions pertaining to the Part D sponsor’s participation in the Medicare
Advantage Value-Based Insurance Design (MA-VBID) model or Medication Therapy
Management (MTM) model, including an explanation for and a demonstration of elements
that affect projected costs.
18. Detailed quantitative support of the development of the induced utilization factor
(Worksheet 5).
19. – 34. For future use
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:
35. Copies of related-party contracts
36. 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.
37. An explanation of how certain findings from the Office of Financial Management (OFM)
audit were addressed in the current bid.
38. For a Part D plan without a corresponding Medicare Advantage plan, justification of benefit
value in relation to the gain/loss margin, if the gain/loss margin is less than or equal to 12%
of revenue. The required elements include the information required in 8.8.1 and 8.8.2.
39. For the projected bid values listed below, an analysis of the relationship between bid level
actual and projected experience for CY2017, CY2018 and CY2019, including an
explanation of how that knowledge was incorporated into the current bid submission.
39.1. Total Non-benefit Expenses, Worksheet 2, cell E67.
39.2. Projected Avg Risk Score, Worksheet 3, cell H11.
39.3. Total Blended Allowed Cost, Worksheet 2, cell P56.
40. For an MA-PD plan, if the MA and Part D enrollment differ after taking into account
hospice and ESRD enrollees, justification that base period and projected enrollment in the
corresponding MA and Part D bids reflect the same underlying population. (Worksheets 1
and 3)

CY2021 Part D BPT Instructions

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APPENDIX B

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
Trend projection factor development
Manual rate development
Related-party arrangements
Input sheet(s) for pricing model
Bid audit results and compliance issues
Reliance information
VBID and/or MTM
Induced utilization factor development
Upon Request by CMS Reviewers

Related-party contracts
Reliance letter
OFM audit results
Actual to Projected
MA-PD enrollment

CY2021 Part D BPT Instructions

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APPENDIX B

SAMPLE COVER SHEET – SUBMITTED WITH INITIAL BID UPLOAD
Supporting Documentation Cover Sheet
CY2021 Bid Submission

Organization Name: Health One
Contract(s): Hxxxx, Hyyyy and Szzzz
Date: June 2, 2020

File Name
Cover Sheet 6-2-20.pdf
Cover Sheet 6-2-20.pdf
Cover Sheet 6-2-20.pdf

Location
within File
(if applicable)
Page 1
Pages 2-4
Page 5

Applies to: MA,
Part D, or Both
both
both
both

All bids

Cover Sheet 6-2-20.pdf

Page 6

both

All bids

AdminProfit.xls

Sheet1

both

All bids
All bids

AdminProfit.xls
Risk CY21.xls

both
both

All bids

Cover Sheet 6-2-20.pdf

Sheet2
MA-Sheet 1
PD-Sheet 2
Page 7

All bids
Hxxxx-003
Syyyy-001
Hxxxx-001
Hxxxx-004

Cover Sheet 6-2-20.pdf
Manual.xls

Page 7
Section II

both
PD

Manual.xls

Section I

MA

Documentation
Requirement
Cover sheet
Product narrative
Credibility
assumption
Cost sharing
mapping
Non-benefit
expenses
Gain/loss margins
Risk scores

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

Related-party
declaration
Sequestration
Manual rates
ESRD subsidy

CY2021 Part D BPT Instructions

both

Page 79 of 88

APPENDIX B

SAMPLE COVER SHEET – SUBMITTED AS A SUBSEQUENT SUBSTANTIATION UPLOAD
Supporting Documentation Cover Sheet #2
CY2021 Bid Submission

Organization Name: Health One
Contract(s): Hxxxx, Hyyyy, and Szzzz
Date: July 14, 2020
Documentation
Requirement
Cover sheet

Specific
Bid(s) or N/A
Hxxxx-001
Hxxxx-003
Hxxxx-004
Hxxxx-801
Hyyyy-001
Hzzzz-001

File Name
Cover Sheet 7-14-20.doc

Location
within File
(if applicable)
n/a

Applies to: MA,
Part D, or Both
both

SAMPLE FORMAT FOR RELIANCE ON INFORMATION SUPPLIED BY OTHERS

Bid
Hxxxx-002

MA or
Part D
or Both
both

Hxxxx-002

both

Source
(Name, Position, Company)
Joe Smith, Director of Finance,
ABC Health Plan
Jane Doe, Medicare Analyst,
ABC Health Plan

CY2021 Part D BPT Instructions

Type of
Information
Administrative
expenses,
gain/loss margin
Claim modeling,
risk score

Comments

I have not performed
any independent audit
or otherwise verified
the accuracy of these
data or information.

Page 80 of 88

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 $435 and $8,950;
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 CY2021, CMS does not require a Part D BPT for employer/union-only group plans.
For additional information on CY2021 EGWP bidding policy, please refer to the CY2021
Call Letter and Advanced Notice.

CY2021 Part D BPT Instructions

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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 CY2020 benchmarks will be based on the 2019 enrollments
applied to the 2020 bids.
The following table illustrates the impact of the weighted enrollment methodology for
two enrollment periods, June 2018 and February 2019. Recall that the 2019 benchmark was
calculated as 100 percent of the enrollment-weighted approach.
The same values are presented based on the February 2019 enrollment. Since the
2020 benchmarks will be based on 2019 enrollment, these values may be useful for estimating
the 2020 benchmarks. The left section of the table shows the actual 2019 benchmarks, which
were calculated based on June 2018 enrollment. The right section, titled “February 2019
Enrollment,” indicates how the 2019 benchmarks would have been calculated based on more
current enrollment data.
Enrollment Weighted Approach
June 2018
Enrollment

February 2019
Enrollment

National average monthly bid amount

$51.28

$49.61

Base beneficiary premium

$33.19

$32.14

Direct subsidy

$18.09

$17.47

This illustrative recalculation of the 2019 benchmarks is provided for the purpose of assisting
Part D sponsors in developing the projected 2020 national average monthly bid amount and
base beneficiary premium, which will be used in the calculation of the plan’s target premium.
The final 2020 benchmarks will be based on the 2019 enrollments applied to the 2020 bids.

CY2021 Part D BPT Instructions

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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 2018 and February 2019.

CY2021 Part D BPT Instructions

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APPENDIX E

Enrollment Weighted Approach
PD Region

State(s)

June 2018
Enrollment

February 2019
Enrollment

1

NH, ME

$33.20

$32.57

2

CT, MA, RI, VT

$36.20

$35.78

3

NY

$39.33

$38.74

4

NJ

$37.16

$37.23

5

DE, DC, MD

$29.98

$30.01

6

PA, WV

$37.03

$36.41

7

VA

$30.61

$30.38

8

NC

$28.91

$28.44

9

SC

$24.55

$23.27

10

GA

$25.68

$25.30

11

FL

$30.25

$29.98

12

AL, TN

$31.40

$31.19

13

MI

$32.91

$32.71

14

OH

$32.92

$32.80

15

IN, KY

$31.75

$31.91

16

WI

$40.80

$40.66

17

IL

$27.37

$26.73

18

MO

$32.06

$31.64

19

AR

$24.81

$25.10

20

MS

$26.85

$26.50

21

LA

$33.06

$33.01

22

TX

$23.96

$23.45

23

OK

$30.84

$30.07

24

KS

$32.46

$32.06

25

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

$35.78

$35.37

26

NM

$26.61

$25.08

27

CO

$32.00

$31.84

28

AZ

$32.62

$33.06

29

NV

$25.33

$25.79

30

OR, WA

$33.80

$33.57

31

ID, UT

$38.66

$38.13

32

CA

$34.79

$34.55

33

HI

$25.73

$25.57

34

AK

$33.60

$32.99

CY2021 Part D BPT Instructions

Page 84 of 88

APPENDIX F

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 CY2021.
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 CY2021. In CY2021, beneficiary cost sharing is reduced
from 37 percent to 25 percent for non-applicable (generic) drugs; the Part D sponsor’s liability
for DS coverage is increased to 75 percent. Beneficiary cost sharing remains 25 percent of the
negotiated price for applicable (brand) drugs, defined for purposes of the coverage gap discount
program as the gross drug cost minus the dispensing fee and vaccine administration fee, if any,
under 1860D-14A(g)(6) of the SSA, and 25 percent of the dispensing fee and vaccine
administration fee, if any. Pharmaceutical manufacturers will provide a 70 percent discount off
of the Part D sponsor’s negotiated price of the brand-name drug at the point-of-sale. Ninetyfive percent of the negotiated price of the drug and 25 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 75 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 (other than a product licensed under subsection (k)
of such section 351) using a biologics license application (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.

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APPENDIX F
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
CY2020 income thresholds will be indexed to the August 2019 CPI, which will be released in
September 2019. 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.

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APPENDIX G

APPENDIX G – TRENDING RISK SCORES
This appendix includes the following considerations for developing trends for coding and
population changes to project CY2021 risk scores.
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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.
◦ 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).
◦ 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.
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.
Note: If Part D sponsors compare scores within a single cohort, and the risk adjustment
models do not have the same denominator year, the raw risk scores should be
normalized to the same year. Otherwise, some portion of the ratio between the models
will be attributed to the more recent denominator, rather than a difference in predicted
risk.
Divide cohorts into meaningful subgroups using the same considerations used to
determine allowed costs and project enrollment in each subgroup to the payment year.
◦ Weight subgroup risk scores by enrollment in each subgroup per year to determine
annual risk scores for trending.
Compare year over year risk scores to obtain a trend factor. Unless the 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.
◦ 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.
◦ Use this trend factor to project from base period risk scores to payment (contract)
year raw risk scores.

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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.

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