CMS-10142_Attachment_E-2_CY2025_PD_BPT_Instructions

OMB Approved # 0938-0944 (Expires: 08/31/2025)

INSTRUCTIONS FOR COMPLETING
THE PRESCRIPTION DRUG PLAN
BID PRICING TOOL
FOR CONTRACT YEAR 2025

Draft December 15, 2023

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CMS-10142

TABLE OF CONTENTS
I. Introduction..................................................................................................................................................... 4
Background .................................................................................................................................................... 4
Document Overview ...................................................................................................................................... 4
New for Contract Year 2025 (CY2025) ......................................................................................................... 5
Bidding Resources ......................................................................................................................................... 7
II. Pricing Considerations................................................................................................................................... 8
Bidding/Pricing Approach ............................................................................................................................. 8
Specific Topics............................................................................................................................................... 8
Actuarial Equivalence ................................................................................................................................ 8
Base Period Experience.............................................................................................................................. 9
Credibility ................................................................................................................................................ 12
Direct and Indirect Remuneration (DIR).................................................................................................. 14
Enrollment ................................................................................................................................................ 14
Gain/Loss Margin..................................................................................................................................... 15
Non-Benefit Expenses .............................................................................................................................. 17
PBM Pricing ............................................................................................................................................. 19
Related-Party Arrangements .................................................................................................................... 19
Risk Score Development for CY2025 ...................................................................................................... 19
Sequestration ............................................................................................................................................ 21
Supporting Documentation ...................................................................................................................... 21
Types of Part D-Covered Drugs ............................................................................................................... 21
III. Data Entry and Formulas ........................................................................................................................... 23
Prescription Drug ......................................................................................................................................... 23
PD Worksheet 1 – Rx Base Period Experience................................................................................................ 26
Section I – General Information................................................................................................................... 26
Section II – Base Period Background Information ...................................................................................... 29
Section III – Part D Claims Experience ....................................................................................................... 30
Section IV – PMPM Non-Benefit Expenses ................................................................................................ 33
Section V – PMPM Premium Revenue........................................................................................................ 34
Section VI – IRA Part D Drug Experience .................................................................................................. 34
Section VII – PMPM Income Statement Summary ..................................................................................... 35
PD Worksheet 2 – Rx PDP Projection of Allowed/Non-Benefit ..................................................................... 36
Section I – General Information................................................................................................................... 36
Section II – Utilization for Covered Part D Drugs ....................................................................................... 36
Section III – Cost for Covered Part D Drugs ............................................................................................... 37
Section IV – Projected Allowed PMPM ...................................................................................................... 38
Section V – PMPM Non-Benefit Expense and Gain/Loss ........................................................................... 39
Section VI – Percentage of Revenue............................................................................................................ 40
Section VII – Related Party ......................................................................................................................... 40
PD Worksheet 3 – Rx Contract Period Projection for Defined Standard Coverage ........................................ 42
Section I – General Information................................................................................................................... 42
Section II – Projection Data ......................................................................................................................... 42
Section III – Part D Covered Drug Claims .................................................................................................. 42
Section IV – IRA Part D Drug Experience .................................................................................................. 45
Section V – Defined Standard Coverage Bid Development ........................................................................ 45
PD Worksheet 4 – Rx Standard Coverage with Actuarially Equivalent Cost Sharing .................................... 46
Considerations for Actuarially Equivalent Coverage................................................................................... 46
Section I – General Information................................................................................................................... 46
Section II – Projection Data ......................................................................................................................... 46
Section III – Development of Bid for Defined Standard Coverage ............................................................. 46
Section IV – Development of Bid Components and Tests for Actuarial Equivalence................................. 46

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Section V – Standard Coverage Bid Development with Actuarially Equivalent Cost Sharing ................... 47
PD Worksheet 5 – Rx Alternative Coverage.................................................................................................... 48
Considerations for Basic Alternative and Enhanced Alternative Coverage................................................. 48
Section I – General Information................................................................................................................... 48
Section II – Projection Data ......................................................................................................................... 48
Section III – Development of Bid for Defined Standard Coverage ............................................................. 48
Section IV – Development of Bid Components ........................................................................................... 49
Section V – Development of Actuarial Equivalence Test............................................................................ 49
Section VI – Tests for Alternative Coverage ............................................................................................... 50
Section VII – Development of Supplemental Premium ............................................................................... 50
Section VIII – Development of Induced Utilization Adjustment................................................................. 50
PD Worksheet 6 – Rx Script Projections for Defined Standard, Actuarially Equivalent or Alternative
Coverage .................................................................................................................................................. 51
Considerations.............................................................................................................................................. 51
Section I – General Information................................................................................................................... 51
Section II – Projections for Equivalence Tests ............................................................................................ 51
PD Worksheet 7 – Summary of Key Bid Elements ......................................................................................... 55
Section I – General Information................................................................................................................... 55
Section II – 2025 Defined Standard Benefit Parameters.............................................................................. 55
Section III – Summary of Key Bid Elements............................................................................................... 55
Section IV – Part D Bid Pricing Tool Contacts and Date Prepared ............................................................. 57
Section V – Working Model Text Box ........................................................................................................ 57
IV. Appendices................................................................................................................................................. 58
Appendix A – Actuarial Certification .............................................................................................................. 58
General ......................................................................................................................................................... 58
Appendix B – Supporting Documentation ....................................................................................................... 60
General ......................................................................................................................................................... 60
Submitting Supporting Documentation........................................................................................................ 61
Part D Checklist for Required Supporting Documentation .......................................................................... 71
Sample Supporting Documentation ............................................................................................................. 73
Appendix C – Employer/Union-Only Group (EGWP) Requirements ............................................................. 75
Appendix D – Calculation of National Average Monthly Bid Amount ........................................................... 76
Appendix E – Calculation of Low-Income Benchmark Premium Amounts .................................................... 77
Appendix F – Trending Risk Scores ................................................................................................................ 79

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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 requirement 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 a Medicare Advantage 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.
These bid instructions provide details on the bid submission elements required by
42 CFR 423.265.

DOCUMENT OVERVIEW
This document contains general pricing considerations and detailed instructions for completing
the BPT. The contents of each section are as follows:
•

•
•
•

Section I, “Introduction”: contains a list of key changes from the CY2024 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 seven
worksheets in the BPT and explains the formulas for calculated cells.
Section IV, Appendices A through F: contains requirements for Actuarial Certification
(Appendix A), Supporting Documentation (Appendix B), Employer/Union-Only Group
(EGWP) Requirements (Appendix C), Calculation of National Average Monthly Bid
Amount (Appendix D), Calculation of Low-Income Benchmark Premium Amounts
(Appendix E), and Trending Risk Scores (Appendix F).

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INTRODUCTION

NEW FOR CONTRACT YEAR 2025 (CY2025)
The key changes between the CY2024 and CY2025 Part D BPT are listed below. The changes
improve the usability and functionality of the BPT, reflect updated guidance, and incorporate
additional changes required by the Inflation Reduction Act (IRA).
•

Worksheet 1 – Rx BASE PERIOD EXPERIENCE
o Section II – Added risk score input cells split between LI and NLI (cells I14:I15).
Total risk score now a calculated cell.
o Section III - Adjusted benefit phases consistent with IRA (removal of GAP phase).
o Section III - Added Manufacturer Discount input cell G38- Grayed out as not
applicable until CY2027.
o Section III – Removed OON cells.
o Section IV - Added an input within Non-Benefit Expenses for Uncollected Cost
Sharing Payments from the Medicare Prescription Payment Plan. Grayed out until
CY2027.
o Added new Section VI for IRA Drug Experience – Includes Insulins, Vaccines,
Maximum Fair Price Drugs – Negotiated Drugs grayed out for CY2025.
o Cell M60 - Total Non-LI Brand Discount Amount will be removed for CY2027 as
will no longer applicable for a CY2025 base period. Remains in BPT for next two
years.

•

Worksheet 2 – Rx PROJECTION OF ALLOWED/NON-BENEFIT
o Section II and Section III - Added rows for Maximum Fair Price Drug projection
factors for both utilization and cost. Cells grayed out until CY2026.
o Section V - Added an input within Non-Benefit Expenses for Uncollected Cost
Sharing Payments from the Medicare Prescription Payment Plan.
o Sections V and VII - Moved Gain/Loss and Related Party cells from Worksheet 3 to
Worksheet 2.

•

Worksheet 3 – Rx CONTRACT PERIOD PROJECTION FOR DEFINED
STANDARD COVERAGE
o Section II – Added risk score input cells split between LI and NLI (cells H12:H13).
Total risk score now a calculated cell.
o Section III - Adjusted benefit phases consistent with IRA (removal of GAP phase).
GAP PMPM column also removed.
o Section III - Added Manufacturer Discount PMPM input cell N31. This is
calculated from WS6 Script Projection Inputs.
o Added Section IV for IRA Drug Experience – Includes Insulins, Vaccines,
Maximum Fair Price Drugs – Negotiated Drugs grayed out until CY2026.
▪ These cells will be calculated from inputs on WS6 Script Projection.
o Removed old lines 10 and 11 from Section III (Projected % OON).

•

Worksheet 4 – Rx Standard Coverage with Actuarially Equivalent Cost Sharing

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INTRODUCTION

o Section IV - Removed “Amounts in Gap” Column.
o Section IV - Updated several formulas for the changes to script projection
worksheet.
o Section IV - Hard coded 0% cost sharing above catastrophic, as no longer
applicable.
o Section IV - Adjusted net cost of benefit to net out the manufacturer discount
entered in script projection worksheet as this is not included in cost sharing in rows
above.
o Section IV - Removed Actuarial Equivalence test for catastrophic cost sharing and
coverage in the gap.
o Section IV – Removed Insulin AE Test, will be handled in PBP.
o Section V - Adjusted formula for Federal Reinsurance in L20 for IRA change.
•

Worksheet 5 – Rx ALTERNATIVE COVERAGE
o Section IV - Removed Type of Gap coverage and “Gap Amt” column.
o Section IV - Altered several formulas for the changes to script projection worksheet.
o Section IV - Adjusted net cost of benefit to net out the manufacturer discount
entered in script projection worksheet as this is not included in cost sharing in rows
above.
o Section IV – Removed Alternative Coverage ICL input cell.
o Section IV - Hard coded 0% cost sharing above catastrophic, as no longer
applicable.
o Section IV - Adjusted formula for Federal Reinsurance in M51:M52 for IRA
change.
o Section VI - Removed Coverage in Gap and Catastrophic Cost Sharing AE tests.
o Section VI – Removed Insulin AE Test, will be handled in PBP.

•

Worksheet 6 – Rx Script Projections for Defined Standard, Actuarially Equivalent, or
Alternative Coverage
o Restructured worksheet for changes in benefit phases as a result of the IRA.
o Moved vaccines and insulins from their own separate section to within each benefit
phase.
o Added manufacturer discount input cells within each phase.
o Removed Network Pricing inputs.
o Grayed out cost sharing above catastrophic, as no longer applicable.
o Added input cells for selected drug subsidy – Grayed out for CY2025.

•

Worksheet 7– SUMMARY OF KEY BID ELEMENTS
o Section II - Adjusted for new benefit phases as a result of the IRA.
o Section III - Replaced Prospective Brand Discount Amount with Manufacturer
Discount Amount in cell F30.
o Section III – Added new cell for Maximum Base Beneficiary Premium.
▪ This cell is an increase of 6% over CY2024 BPP.
▪ BPP entered in line 3 above must be less than or equal to the Max.

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INTRODUCTION

BIDDING RESOURCES
The following resources provide information on CY2025 bidding:
•

•

•
•

•

•

The CY2025 Advance Notice and Announcement are available at
https://www.cms.gov/medicare/payment/medicare-advantage-rates-statistics/
announcements-and-documents.
The Actuarial Bid Training is available at
https://www.cms.gov/medicare/payment/medicare-advantage-rates-statistics/actuarialbid-training.
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
CY2025 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 > CY2025 > Documentation > BPT Technical Instructions.
◦ The Bid Submission User’s Manual, also available in HPMS, under HPMS Home
> Plan Bids > Bid Submission > CY2025 > 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.

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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 gain/loss 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 CY2023, 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

Page
8
9

Credibility

12

Direct and Indirect Remuneration
(DIR)
Enrollment
Gain/Loss Margin
Non-Benefit Expenses

Topic
PBM Pricing
Related-Party Arrangements
Risk Score Development for
CY2025

Page
19
19

14

Sequestration

21

14
15
17

Supporting Documentation
Types of Part D-Covered Drugs

21
21

19

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), one test must be satisfied on
Worksheet 4, Section IV, line 16 to demonstrate actuarial equivalence:
•

The average coinsurance percentage for amounts between the deductible and
catastrophic threshold must be actuarially equivalent to 25 percent.
When the plan benefit type is Basic Alternative (BA) or Enhanced Alternative (EA), four tests
must be satisfied to demonstrate actuarial equivalence on Worksheet 5, Section VI, lines 1
through 4:
• 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.

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PRICING CONSIDERATIONS

•

•

The average alternative benefits for beneficiaries with allowed drug costs at the
catastrophic threshold are not less than the average DS benefits at the catastrophic
threshold.
The deductible is not greater than the DS deductible.

Base Period Experience

The experience data must be based on a calendar year 2023 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 2023,
regardless of the level of enrollment.
Must reconcile in an auditable manner to the plan-level Prescription Drug Event (PDE)
data submitted to CMS for payment and reconciliation and the Part D sponsor’s audited
financial statements.
Must include accepted PDEs, rejected PDEs that are expected to be accepted by CMS
upon resubmission, adjustments for Plan-to-Plan (P2P) transactions and, if appropriate,
transfer of over-the-counter (OTC) drug data from the base period experience to the
non-benefit expense component. The impacts of each of these considerations must be
quantifiable and must not be included in the completion factor.
Must be reported without adjustment. Adjustments may be made in Worksheet 2,
Sections II and III to accommodate population, benefit design or other changes from the
base period to the contract period.
May be reported in aggregate for a number of plans only when there are enrollment
changes associated with the dissolution of a plan and the retained members are
crosswalked into existing plans in the same contract or across contracts. Each contractplan-segment ID must be identified in Worksheet 1, 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.
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 crosswalks and enrollment shifts
depend on—
•

How enrollment changes are processed.
◦ In these Instructions, the term “formal crosswalk” refers to the crosswalk
process submitted in HPMS for plan consolidations (that is, consolidated
renewals), whereby members are automatically moved from one plan to

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PRICING CONSIDERATIONS

◦

◦

another (that is, to one plan only). Without an HPMS crosswalk 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 crosswalks, see the memorandum released via
HPMS titled “Process for Requesting an HPMS Crosswalk Exception for
Contract Year 2020.”

The requirements for reporting base period data for crosswalks and enrollment shifts are
described below.
✓ Rule 1 – Crosswalks

Base period data for more than one CY2023 contract number-plan ID must be
aggregated and reported on Worksheet 1 of the plan into which the members are
crosswalked only in the following circumstances:
•

When two or more plans are consolidated and the members are crosswalked into
an existing or new plan under a formal crosswalk.

Rule 1 applies when members are crosswalked within the same contract and when
members are crosswalked 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 crosswalk whether or not a plan is
terminated.

✓ Rule 3 – Partial Experience

Base period experience must be reported in total at the plan level for every
contract-plan ID; do not include partial plan experience on Worksheet 1.
✓ Rule 4 – Two-Year Perspective

Members may be crosswalked each contract year. For BPT reporting purposes, the
actuary must consider the crosswalks from the base period to the contract year (that
is, from CY2023 to CY2024 and from CY2024 to CY2025).
Example 1: Formal Crosswalk

A Part D sponsor offers plans 001, 002 and 003 in CY2023 and CY2024 and offers
plans 002 and 003 in CY2025. Plan 001 is consolidated and the membership is
formally crosswalked into plan 003 for CY2025 in accord with the limited
exceptions described in CMS annual renewal and non-renewal guidance. Base
period experience must be reported on Worksheet 1 of the CY2025 BPT as follows:
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PRICING CONSIDERATIONS

•
•

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 Crosswalk and Enrollment Shift

A Part D sponsor offers plans 001, 002 and 003 in CY2023 and CY2024 and offers
plan 003 and new plan 004 in CY2025. Plan 001 is consolidated and the
membership is formally crosswalked into plan 003 for CY2025 as submitted in
HPMS. Plan 002 is terminated for CY2025 and the certifying actuary expects the
membership in plan 002 to enroll evenly between plans 003 and 004; however, there
is no formal crosswalk or approved crosswalk exception in place. Base period
experience must be reported on Worksheet 1 of the CY2025 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: Crosswalks in Successive Years

A Part D sponsor offers plan 001 with 100 beneficiaries and plan 002 in CY2023. In
CY2024, 50 beneficiaries stayed in plan 001 and 50 beneficiaries were crosswalked
into plan 002 via MARx enrollment transactions. In CY2025, 25 beneficiaries
stayed in plan 001 and 25 beneficiaries were crosswalked into plan 002 via MARx
enrollment transactions. Base period experience must be reported on Worksheet 1 of
the CY2025 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 + 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.
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.

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PRICING CONSIDERATIONS

Information on the development of the CMS guidelines for full credibility can be found at
https://www.cms.gov/Medicare/Health-Plans/MedicareAdvtgSpecRateStats/Bid-Pricing-Toolsand-Instructions-Items/BidGuidance.
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

CMS Formula for
Partial Credibility
√

60,000 member months

member months
60,000

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.
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 2025
bids as posted on HPMS

125 beneficiaries

Beneficiary-level file to
support 2025 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.

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PRICING CONSIDERATIONS

Information on why it is inappropriate to use blended risk scores to adjust manual claims
experience can be found at https://www.cms.gov/Medicare/Health-Plans/
MedicareAdvtgSpecRateStats/Bid-Pricing-Tools-and-Instructions-Items/BidGuidance.
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.
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 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 (PBMs), 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.

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PRICING CONSIDERATIONS
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 the gain/loss margins for the Medicare Advantage (MA) and Part D
components of MA-PD bids to satisfy these Instructions.
Do not combine the gain/loss margins for bids in segmented plans to satisfy these Instructions.
See the “Instructions for Completing the Medicare Advantage Bid Pricing Tool for Contract
Year 2025” for gain/loss margin requirements that are specific to MA bids.
The gain/loss margin entered in the BPT must be determined in connection with other CMS
instructions such as Total Beneficiary Cost (TBC). If there is a conflict between satisfying
gain/loss margin requirements and other CMS instructions, flexibility will be given to the
gain/loss margin requirements only to the extent necessary to meet the other CMS instructions.
Such conflicts with the gain/loss margin requirements must be disclosed, fully explained and
supported. An exception must be approved by CMS.
Gain/loss margin requirements apply at two levels—the bid level and the aggregate level—and
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—
•

“Aggregate Part D gain/loss margin” refers to the projected enrollment-weighted
average BPT PMPM gain/loss margin applicable to either (i) Part D plans
without corresponding MA plans or (ii) MA-PD plans.

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 two types of coverage.
There is flexibility in setting the gain/loss margin at the bid level provided that—
•
•
•

The bid offers benefit value in relation to the gain/loss margin level;
Anti-competitive practices are not used; and
All aggregate-level gain/loss margin requirements described below are met.

The bid-level requirements below do not apply to Part D BPTs that have a
corresponding MA BPT; rather, these requirements 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 gain/loss margin level.

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PRICING CONSIDERATIONS

For a bid with a high gain/loss margin, consideration must be given to premium
changes that can be made in CY2025 to reduce gain/loss margin.
✓ Anti-Competitive Practices

Anti-competitive practices will not be accepted. For example, significantly low or
negative gain/loss margin for plans that have substantial enrollment and stable
experience, or “bait and switch” approaches to specific plan gain/loss margin
buildup, will be rejected, absent sufficient support that such pricing is consistent
with these Instructions.
Aggregate-Level Requirements
✓ 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 aggregate Part D gain/loss margin
as a percentage of revenue over the long term is consistent with the gain/loss margin
assumptions used for pricing. This requirement applies separately for (i) Part D
plans without corresponding MA plans and (ii) MA-PD plans.
✓ 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 bids, the aggregate Part D gain/loss margin as a percentage of revenue
must be calculated at the parent organization level and it must be disclosed. If such
margin is less than 0 percent or greater than 5.5 percent, then this condition must be
fully explained and supported, and it must be approved by CMS for CY2025.
✓ MA-PD Gain/Loss Margin Requirements

This requirement applies only to Part D BPTs that have a corresponding MA BPT.
There are two options for setting the Part D gain/loss margin of MA-PD bids. Only
one option may be used per parent organization.
Option A: Set the Part D gain/loss margins at the bid level. Specifically, an MA-PD

sponsor must—
•
•

Set the Part D gain/loss margin for a plan as a percentage of revenue within
1.5 percent of the gain/loss 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 gain/loss margins at the aggregate level. Specifically, an

MA-PD sponsor must—
•

Set the Part D gain/loss margins as a percentage of revenue equal for all plans,
and

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PRICING CONSIDERATIONS

•

Set the aggregate Part D gain/loss margin as a percentage of revenue within
1.5 percent of the aggregate MA gain/loss margin for all MA-PD bids. Do not
include MA-only bids.

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.
Non-Benefit Expenses

Non-benefit expenses consist of 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 at a
broader level) must take into consideration both the differences between the Part D bid and
other bids and the impact on the 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.
▪ 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 and Manufacturer Discount Program administration.
▪ Medicare Part D user fees, which are TBD per-member per-year (PMPY) or
TBD (PMPM) on a national basis for CY2025. The COB user fee will be
collected at a monthly rate of TBD PMPM for the first 9 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 sponsors may use the CMS estimate, which is the monthly rate of

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PRICING CONSIDERATIONS

•

•

•

TBD PMPM on a national basis for CY2025 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.
▪ 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.
▪ Human resources.
Net Cost of Private Reinsurance (that is, reinsurance premium less projected
reinsurance recoveries; however, for quota share reinsurance, the net cost of private
reinsurance must be entered as $0).
Uncollected Cost Sharing Payments from the Medicare Prescription Payment Plan. This
entry must not include any other types of bad debt. This entry must also not include any
administrative costs incurred from administering the Medicare Prescription Payment
Plan.

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” subsection of Section II, “Pricing
Considerations” for more information.
Start-up costs that are not considered capital expenditures under GAAP are reported as follows:
•

Expenditures for tangible assets (for example, a new computer system) must be
capitalized and amortized according to relevant GAAP principles.

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PRICING CONSIDERATIONS

•

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 CY2025, 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 entering into any type of
arrangement with or receiving services from, an entity that has 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, including any arrangement in which
the Part D sponsor does business with a related-party entity through a contract with one or more
unrelated parties, such as a pharmacy benefit manager.
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 such an arrangement must (i) enter related-party
expenses on lines 1 and 2 of Section VII of Worksheet 2, and (ii) provide additional
documentation for each related party in accord with the requirements in Appendix B.
Risk Score Development for CY2025

The projected CY2025 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 section.
Reflect the expected risk score trend at the bid level.
Be appropriate for the expected population.
Be adjusted for CY2025 normalization.

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PRICING CONSIDERATIONS
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
CY2025 payment model on 12 months of 2023 membership or the July 2023
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.
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 raw (not 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—

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PRICING CONSIDERATIONS

◦
◦

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.

Once projected to the contract year, the risk scores must reflect the CY2025 Part D
normalization factor. Note that if a raw (not normalized) risk score associated with a
different model calibration year is being normalized, the CY2025 Part D normalization
factor is not the appropriate normalization factor.
Risk Adjustment Information Sources

The following resources provide information on the development of projected CY2025
risk scores:
•
•
•
•

The CY2025 Advance Notice and Announcement found at
https://www.cms.gov/medicare/payment/medicare-advantage-rates-statistics/
announcements-and-documents.
Bid-level data and technical notes available after the publication of the CY2025
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 CY2025 Announcement.
Additional information found—
◦ Under the “Risk Adjustment” and “Ratebooks & Supporting Data” links at
https://www.cms.gov/medicare/payment/medicare-advantage-rates-statistics.
◦ At https://www.csscoperations.com/, including slides from Risk Adjustment
User Group Calls.

Other Considerations

See the “Credibility” pricing consideration for more information about the projection of
risk scores.
See Appendix F 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.

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PRICING CONSIDERATIONS
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 designated Specialty
tiering in the formulary and PBP in accord with CMS guidelines. The CMS guidelines
require that 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 TBD for CY2025.
When the plan has a decreased deductible or no deductible, then actuarially equivalent
coinsurance is permitted.
When designated Specialty tiering is used, all drugs classified as specialty-tier drugs on
the plan formulary must be reported by point-of-sale (retail or mail order as defined by
the PBP) in Worksheets 2 and 6 of the BPT. The drugs in the Specialty tiers 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 designated Specialty drug tiering 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 Worksheets 2 and 6 are not
completed.

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DATA ENTRY & FORMULAS

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

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

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

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

For all plans, complete Section I; for plans with claims experience in CY2023, complete
all sections.
✓ Worksheet 2

For plans with fully credible claims experience in CY2023, complete Sections II and
III; column o of Section IV; and Sections V and VII. For plans with partially credible
claims experience in CY2023, complete all sections. For new plans in CY2024 and
CY2025, complete Sections IV, V and VII.
✓ Worksheet 3

Complete all sections for all plans.
✓ Worksheet 6

Complete columns f, g, and h for all plans.
✓ Worksheet 7

Complete all sections for all plans.

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DATA ENTRY & FORMULAS
Actuarially Equivalent Coverage
✓ Worksheet 1

For all plans, complete Section I; for plans with claims experience in CY2023, complete
all sections.
✓ Worksheet 2

For plans with fully credible claims experience in CY2023, complete Sections II and
III; column o of Section IV; and Sections V and VII. For plans with partially credible
claims experience in CY2023, complete all sections. For new plans in CY2024 and
CY2025, complete Sections IV, V and VII.
✓ Worksheet 3

Complete all sections for all plans.
✓ Worksheet 4

Complete all sections for all plans.
✓ Worksheet 6

Complete all columns 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 CY2023, complete
all sections.
✓ Worksheet 2

For plans with fully credible claims experience in CY2023, complete Sections II, III, IV
column o, V and VI; for plans with partially credible claims experience in CY2023,
complete all sections. For new plans for CY2024 and CY2025, complete Sections IV, V
and VII.
✓ Worksheet 3

Complete all sections for all plans.
✓ Worksheet 5

Complete all columns for all plans.
✓ Worksheet 6

Complete all columns for all plans.
✓ Worksheet 7

Complete all sections for all plans.

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DATA ENTRY & FORMULAS
Data Entry

Do not leave a field blank to indicate a zero amount. If zero is the intended value, then enter a
“0” in the cell.

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WORKSHEET 1

PD WORKSHEET 1 – RX BASE PERIOD EXPERIENCE
Worksheet 1 contains general information about the plan and summarizes the base period
Rx experience. Specifically, Section I collects general information about the plan that is
displayed on all Part D BPT worksheets; Section II collects base period background
information; Section III summarizes the base period Rx experience; Sections IV and V
summarize components of the base period non-benefit expense and premium revenue,
respectively; Section VI collects base period IRA drug experience; and Section VII is an
Income Statement Summary.
Section I must be fully completed for all plans. (Note that some fields may be prepopulated by the PBP software.) Sections II through VII must be completed for all plans
with experience data for 2023 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 must 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-D

If the plan is participating in the Value-Based Insurance Design (VBID) Demonstration,
enter “Y". Otherwise, enter ”N”.
Line 11 – ESRD-SNP

Enter “Y” if the plan is part of an ESRD-SNP MA-PD. Otherwise enter “N”.

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WORKSHEET 1
Line 12 – 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 13 – 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 14 – 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 15 – Payment Modernization Model

If the plan is participating in the Part D Payment Modernization Model (PMM), enter
“Y”. Otherwise enter “N”.

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WORKSHEET 1

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

CMS requires base experience data to be based on claims incurred in calendar year 2023
and at least 30 days of paid claims run-out; 2–3 months of paid claim run-out is preferable.
Line 2a – Total Member Months

The value is calculated automatically in the BPT from line 5 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 3a – Risk Score

The value is calculated automatically in the BPT from line items in section II.
Line 3b – LIS Risk Score

Enter the final average risk score for the LIS population represented in the base period
data using the Part D risk model that was used for payment year 2023. 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 2023,
which are included in the beneficiary-level files sent to Part D sponsors electronically
after the publication of the CY2025 Announcement.
Line 3c – NLI Risk Score

Enter the final average risk score for the NLI population represented in the base period
data using the Part D risk model that was used for payment year 2023. 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 2023,
which are included in the beneficiary-level files sent to Part D sponsors electronically
after the publication of the CY2025 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 in the first column 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. Cell K12 is automatically populated with the contract number, plan, and
segment ID in cells D5, D6, and D7; 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 in cells K12:K15 and M12:M14 the
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contract-plan-segment IDs of the plans with the greatest number of member months;
(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 10 include experience relating to Part D-covered drugs only. Lines 11
through 13 include experience for drugs that are covered by the plan but are not
Part D-covered drugs at the time they are dispensed.
Lines 1 through 4:
✓ Column d – Number of Members

Enter for each line the number of members with total allowed costs in the defined
standard allowed costs interval. For CY2023, the point at which beneficiaries
reach catastrophic coverage is to be estimated as when their true out-of-pocket
(TrOOP) costs less the gap discount is greater than $2,000. For example, if
7,000 members had total allowed costs between the deductible and catastrophic,
then enter "7,000" in line 3, column d. Do not include estimates for claims for
which the Part D plan is the secondary payer.
✓ Column e – Member Months

Enter for each line the number of member months associated with the number of
members in column d.
✓ Column f – Total Number of Scripts

Enter for each line the number of prescriptions filled for Part D-covered drugs for
the members in column d.
✓ Column g – Total Allowed Dollars

Enter for each line the total allowed dollars for the prescriptions filled for the
members in column d. 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.

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✓ Column j – Average Cost Sharing per Member

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

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

Enter for each line the average low-income cost sharing subsidy amount received
and receivable for the members in column d.
✓ Column m – Reimbursement for Federal Reinsurance per Member

Enter for each line the average federal reinsurance amount received and
receivable for the members in column d.
✓ 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 5, columns d through n – Subtotal

The values are calculated automatically in the BPT using values from lines 1 through 4
for each column.
Line 6 – PMPM Values
✓ Columns g, i, k, l and m

These values are calculated automatically in the BPT as the column total shown in
line 5 for each column, converted to a PMPM value using values from line 5,
columns d and e.
✓ Column n

The value is calculated automatically in the BPT as column i minus columns k
through m.
Line 7 – Minus Rebates
✓ Column g

Enter the total amount of rebates received as of the “Paid through” date in
Section II and expected to be received for the claims in lines 1 through 4. 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
✓ Column i

The value is calculated automatically in the BPT as column g divided by line 5,
column e.
✓ Column m

Enter the amount of rebates attributable to the federal reinsurance amount in
line 5.
✓ Column n

The value is calculated automatically in the BPT as column i minus column m.
Line 8 – 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. The term “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 5,
column e.
✓ Column n

The value is carried from column i.
Line 9 – Minus Manufacturer Discount
✓ Column g

Not applicable for CY2025.
✓ Column i

The value is calculated automatically in the BPT as column g divided by line 5,
column e.
✓ Column n

The value is carried from column i.
Line 10 – Net Average Paid Amount PMPM
✓ Column i

The value is calculated automatically in the BPT as line 6 minus line 7 plus line 8
minus line 9.
✓ Column k through m

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

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WORKSHEET 1
✓ Column n

The value is calculated automatically in the BPT as column i minus columns k
through m.
Line 11 – 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 5,
column e.
Line 12 – Rebates on Supplemental Drugs
✓ Column g

Enter the total amount of rebates received as of the “Paid through” date in Section
II and expected to be received for the claims in line 11. 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 5,
column e.
Line 13, columns i and n – Net PMPM on Supplemental Drugs

The value in column i is calculated automatically in the BPT as line 11 minus line 12 and
is carried to column n.

SECTION IV – PMPM NON-BENEFIT EXPENSES
Section IV summarizes all administrative expenses associated with the operation of the
prescription drug plan in the base period, including any expenses that were offset by
direct or indirect remuneration.
Lines 1 through 4, column g – Total

Enter the sales and marketing, direct administration, indirect administration and net cost
of private reinsurance average PMPM amounts for total coverage in lines 1 through 4,
respectively. Include uncollected enrollee premium, uncollected cost sharing and OTC
drugs in direct administration.

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WORKSHEET 1
Line 5, column g – Total

Enter the uncollected cost sharing payments associated with the Medicare Prescription
Payment Plan. Exclude all other types of bad debt and all administrative costs incurred
from administering the Medicare Prescription Payment Plan.
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 3, column e – Basic

Enter the CMS Part D direct subsidy payment, low-income premium subsidy and
member premium average PMPM amounts for basic coverage in lines 1 through 3,
respectively. The direct subsidy amount must account for the final risk-adjusted
reconciliation payment for CY2023, which will be received in mid-2024 and include the
impact of sequestration and PACE add-on, if applicable.
Line 3, column f – Supplemental

Enter in line 3 the member premium average PMPM amount for supplemental coverage.
Lines 1 through 3, column g – Total

The values are calculated automatically in the BPT as the sum of columns e and f.
Line 4 – Total Premium

The values are calculated automatically in the BPT as the sum of lines 1 through 3.

SECTION VI – IRA PART D DRUG EXPERIENCE
Section VI summarizes components of IRA Part D Drug costs for the base period.
Lines 1 through 2, columns e through g

Enter all base period experience for insulins and vaccines that are associated with IRA
drug experience. Include low-income cost sharing subsidy (LICS) and exclude the
coverage gap discount amounts. Experience in this section must also be included in
section III.
Line 3, columns e through g – Maximum Fair Price Drugs

Not applicable for CY2023.

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SECTION VII – PMPM INCOME STATEMENT SUMMARY
Section VII is a summary of the prescription drug plan’s income, including the amount of
MA rebate allocable to Part D when applicable, for the base period.
Lines 1 through 9, column m

Enter in line 4 the average PMPM amount of the MA rebate dollars, including the impact
of sequestration, used to buy down the Part D premium. 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 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, as well as 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 contract period; Section VI calculates the ratios of claims,
non-benefit expenses and gain/loss margin to the total basic bid; and Section VII
summarizes related-party costs.

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 for each line 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, nonpreferred brand or Specialty).
✓ Column f – Allowed per Script

Enter the average allowed amount per script by type of script filled in the base
period for each line. The term “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 Allowed

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, total utilization change and total unit cost
change for each line.
Line 9, columns e through o – Maximum Fair Price Drugs

Not applicable for CY2025.
Lines 10 through 15, columns e through o

The values are calculated automatically in the BPT using information entered on lines 1
through 9 for each column.

SECTION III – COST FOR COVERED PART D DRUGS
Lines 1 through 8 – Components of Unit Cost Change
✓ Column e – Inflation Trend

Enter the factor that represents the impact on cost between the base period and
contract period because of changes in drug prices by type of script for each line.

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WORKSHEET 2
✓ Column f – Discount Change

Enter the factor that represents the impact on cost between the base period and
contract period because of changes in point-of-sale network pricing, including
discounts off of average wholesale price (AWP) and dispensing fees, by type of
script for each line.
✓ Column g – Formulary Change

Enter the factor that represents the impact on cost because of changes in the
formulary, including the addition, deletion or reclassification of drugs by type of
script for each line.
✓ Column h – Other Change

Enter the factor that represents the impact on cost of any differences between the
base period and contract period not included in the other components of unit cost
change, columns e through g, 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.
Line 9, columns e through k – Maximum Fair Price Drugs

Not applicable for CY2025.
Lines 10 through 15, columns e through k

The values are calculated automatically in the BPT using information entered on lines 1
through 9 for each column.

SECTION IV – PROJECTED ALLOWED PMPM
Lines 1 through 8
✓ Column l – Manual Utilization/1,000

When the base period experience is not fully credible, enter the projected
utilization per 1,000 members, based on a manual rate, by type of script for each
line.
✓ Column m – Manual Unit Cost

When the base period experience is not fully credible, enter the projected unit cost
per script, based on a manual rate, by type of script for each line.
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WORKSHEET 2
✓ Column n – Manual Rate PMPM

The value is calculated automatically in the BPT as column l times column m
divided by 12,000 by type of script for each line.
✓ Column o – Credibility

Enter the credibility percentage by point-of-sale and type of drug that is applied to
the projected PMPM allowed amount in Section III and blended with the PMPM
manual rate in Section IV 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, columns l through p

Not applicable for CY2025.
Lines 10 through 15, columns l through p

The values are calculated automatically in the BPT using information entered on lines 1
through 9 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 60,000, not to exceed 100 percent.

SECTION V – PMPM NON-BENEFIT EXPENSE AND GAIN/LOSS
Section V summarizes components of the contract period non-benefit expenses and
gain/loss.
Lines 1 through 4
✓ Column e – Projected Expenses

Enter the projected non-benefit expense by component for each line.
Line 5 – Uncollected Cost Sharing Payments M3P
✓ Column e – Projected Expenses

Enter the uncollected cost sharing payments associated with the Medicare
Prescription Payment Plan. Exclude all other types of bad debt and all
administrative costs incurred from administering the Medicare Prescription
Payment Plan.
Lines 6 through 8, column e – Non-Benefit Expenses

The values are calculated automatically in the BPT using values from lines 1 through 5
and using values from Worksheet 5.

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WORKSHEET 2
Lines 9 through 10, column e – Gain/(Loss)

The values are calculated automatically in the BPT using values from Worksheets 2 and
5.
Line 11 – Total Gain/(Loss)

Enter the estimated PMPM amount of gain or loss projected during the contract period.

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 margin to the total basic bid.
Lines 1 through 3, column j

The values are calculated automatically in the BPT using values from Worksheets 3, 4,
and 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.

SECTION VII – RELATED PARTY
Section VII summarizes the components of related party.
Line 1 – Related-Party Allowed Cost PMPM

Enter the best estimate of the plan sponsor’s total allowed PMPM cost for the sum of the
following:
1) All related-party pharmacy services in the bid, and
2) Services that are provided by entities with the same tax identification number and
that are reported in the bid.
This entry must reflect the expected allowed costs consistent with actual contracts,
capitation and risk arrangements, and financial reporting. This entry should be based on
the plan benefit. For defined standard plans, the related-party allowed cost PMPM should
be based on the defined standard benefit. For alternative benefit plans, these costs should
be based on the alternative benefit.

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Line 2 – Related-Party Non-Benefit Expense PMPM

Enter the best estimate of the plan sponsor’s total PMPM cost for all related-party nonbenefit expenses reported in the bid. This entry must reflect the expected non-benefit
expenses for all related parties, consistent with actual contracts and financial reporting.
This entry should be based on the plan benefit. For defined standard plans, the relatedparty non-benefit expense PMPM should be based on the defined standard benefit. For
alternative benefit plans, these costs should be based on the alternative benefit.

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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 collects
information pertaining to IRA Part D drug experience; and Section V summarizes
components of the defined standard bid amount.
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 Total Member Months

The value is carried from Section III, line 5, 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 1a – 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 1b – Projected non-LIS Member Months

The value is calculated automatically in the BPT as projected total member
months minus projected low-income subsidy member months.
Line 2 – Projected Average Risk Score

The value is calculated based on the risk scores entered in lines 2a and 2b.
✓ Line 2a – Projected LIS Risk Score

Enter the estimated average Rx risk score for the enrollees who will qualify for
and obtain LIS status in the contract period.
✓ Line 2b – Projected NLI Risk Score

Enter the estimated average Rx risk score for the non-LIS population.

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.

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WORKSHEET 3
Lines 1 through 4
✓ 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 CY2025, the “Total Covered
Part D Spending at OOP Threshold for Non-Applicable Beneficiaries” of $TBD
and “Estimated Total Covered Part D Spending at OOP Threshold for Applicable
Beneficiaries” of $TBD 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 that are expected in the contract period that
are 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 k through m for each line.
Lines 2 through 4
✓ 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 k
throughl 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 catastrophic limit for the members in column d for each line.

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WORKSHEET 3
✓ Column o – Federal LICS 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.
Line 4, 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 in Section II, line 1 for each
line.
Line 5 – Subtotal

The value is calculated automatically in the BPT using values from lines 1 through 4 for
each column.
Line 6 – Minus Rebates
✓ Column g

Enter the total amount of rebates expected to be received for the claims in lines 1
through 4. 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 5,
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 7 – 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 5,
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 8, column n – Minus Manufacturer Discount

The value is calculated automatically in the BPT using values from Worksheets 3 and 6.
Line 9, columns g through o – Total

The values are calculated automatically in the BPT using values from lines 5 through 8
for each column.

SECTION IV – IRA PART D DRUG EXPERIENCE
Section IV summarizes components of IRA Part D Drug costs for the contract period.
Lines 1 through 2, columns d through f

The values are calculated automatically in the BPT using values from Worksheet 6.
Line 3, columns d through f – Maximum Fair Price Drugs

Not applicable for CY2025.

SECTION V – DEFINED STANDARD COVERAGE BID DEVELOPMENT
Section V summarizes the components of the defined standard bid amount.
Lines 1 through 5, columns k and l

The values are calculated automatically in the BPT using values in Worksheets 2 and 3.

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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
(AE). The test that must be satisfied to demonstrate actuarial equivalence is:
•

The average coinsurance percentage for amounts between the deductible and the
catastrophic threshold must be actuarially equivalent to 25 percent.

CONSIDERATIONS FOR ACTUARIALLY EQUIVALENT COVERAGE
Although the average cost sharing between the deductible and catastrophic threshold
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 benefit
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 Worksheet 6. The distribution
of utilization between generic and brand, and between retail and mail, must be reasonable
given the proposed benefit. Significant changes to the benefit are expected to result in
meaningful differences in utilization when compared to the DS bid.

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 information entered on Worksheet 3, Sections III and V.

SECTION IV – DEVELOPMENT OF BID COMPONENTS AND TESTS FOR
ACTUARIAL EQUIVALENCE
Lines 1 through 14, columns e, i and l

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

The value is calculated automatically in the BPT and is prorated for reinsurance.

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WORKSHEET 4
✓ Column l

Enter the estimated total amount of rebates expected to be received by the plan.
Line 16 – Test for Actuarial Equivalence

The actuarial equivalence test is 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 and from
values on Worksheet 3. 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 (BA) or
Enhanced Alternative (EA). The four 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
catastrophic threshold are not less than the average DS benefits at the catastrophic
threshold.
The deductible is not greater than the DS deductible.

CONSIDERATIONS FOR BASIC ALTERNATIVE AND ENHANCED ALTERNATIVE
COVERAGE
Although the average cost sharing between the deductible and catastrophic threshold
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 nonpreferred brand utilization.
Part D sponsors must model the differences between the BA or EA benefit and the DS
benefit 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 Worksheet 6. The
distribution of utilization between generic and brand, and between retail and mail, must
be reasonable given the proposed benefit. Significant changes to the benefit are expected
to result in meaningful differences in utilization when compared to the DS bid.
BA and EA plans may reduce the value of the deductible. Since the value of coverage up
to the catastrophic threshold 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.

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, Sections III and V.

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WORKSHEET 5

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.
Lines 4 through 21

The values in columns f 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 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.

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WORKSHEET 5
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 four actuarial equivalence tests to certain values in Sections III
through V to determine whether the proposed benefit plan qualifies as alternative
coverage.

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

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

The value is carried from Worksheet 2.
Line 7 – Additional Gain/Loss Margin

The value is carried from Worksheet 2.

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 – RX 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 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 10 must reflect the utilization for the
AE, BA or EA plan for members expected to have allowed costs less than or equal to the
catastrophic threshold. 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.

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 40. 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 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 10 – Population Not Exceeding the Catastrophic Threshold

All utilization for members with projected total allowed costs less than or equal to the
catastrophic threshold 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 D22 plus D23, using the cost sharing structure of the DS plan by point-ofsale (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. Exclude claims subject to the deductible, which are
reported in line 12. Exclude insulins and vaccines in lines 1 through 8. Report
insulins and vaccines in lines 9 and 10.
✓ 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 D22 plus D23, 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. Exclude claims subject to the
deductible, which are reported in line 12. Exclude insulins and vaccines in lines 1
through 8. Report insulins and vaccines in lines 9 and 10.
Line 11, columns f through k – Total

The values are calculated automatically in the BPT as the sum of lines 1 through 10 for
each column.
Line 12, columns f, g, i and j – Claims Subject to Deductible (<=Catastrophic
Threshold)

For the population with allowed costs less than or equal to the catastrophic threshold,
enter the number of scripts that are subject to the deductible in columns f and i.
For the population with allowed costs less than or equal to the catastrophic threshold,
enter allowed costs that are subject to the deductible in columns g and j.
Line 13, columns g and j – Manufacturer Discount (<=Catastrophic Threshold)

For the population with allowed costs less than or equal to the catastrophic threshold,
enter the manufacturer discount in columns g and j.
Lines 14 through 23 – Population Exceeding the Catastrophic Threshold

All utilization for members with projected total allowed costs greater than the
catastrophic threshold must be reported on these lines.

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WORKSHEET 6
✓ 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,
cell D24, using the cost sharing structure of the DS plan by point-of-sale and type
of drug in columns f, g and h, respectively, for each line. Calculate the cost
sharing as if there were no deductible and LIS subsidy. Exclude claims subject to
the deductible, which are reported in line 25. Exclude insulins and vaccines in
lines 14 through 21. Report insulins and vaccines in lines 22 and 23.
✓ 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, cell D24, using the cost sharing structure of the AE, BA
or EA plan by point-of-sale and type of drug in columns i, j 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. Exclude
claims subject to the deductible, which are reported in line 25. Exclude insulins
and vaccines in lines 14 through 21. Report insulins and vaccines in lines 22 and
23.
Line 24, columns f through k – Total

The values are calculated automatically in the BPT as the sum of lines 14 through 23 for
each column.
Line 25, columns f, g, i and j – Claims Subject to Deductible (>Catastrophic Threshold)

For the population with allowed costs greater than the catastrophic threshold, enter the
number of scripts that are subject to the deductible in columns f and i.
For the population with allowed costs greater than the catastrophic threshold, enter
allowed costs that are subject to the deductible in columns g and j.
Line 26, columns g and j – Manufacturer Discount (>Catastrophic Threshold)

For the population with allowed costs greater than the catastrophic threshold, enter the
manufacturer discount in columns g and j.
Lines 27 through 36 – Amounts Allocated up to the Catastrophic Threshold for the
Population Exceeding the Catastrophic Threshold

All utilization for total allowed costs up to the catastrophic threshold for members with
projected total allowed costs greater than the catastrophic threshold must be reported on
these lines. These amounts are a subset of the amounts reported in lines 14 through 23.
✓ 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 catastrophic threshold, for
the population identified in Worksheet 3, Section III, cell D24, using the cost
sharing structure of the DS plan by point-of-sale and type of drug, in columns f, g
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WORKSHEET 6

and h, respectively, for each line. Calculate the cost sharing as if there were no
deductible and LIS subsidy. Exclude claims subject to the deductible, which are
reported in line 25. Exclude insulins and vaccines in lines 27 through 34. Report
insulins and vaccines in lines 35 and 36.
✓ 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
catastrophic threshold, for the population identified in Worksheet 3, Section III,
cell D24, using the cost sharing structure of the AE, BA or EA plan by point-ofsale 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. Exclude claims subject to the
deductible, which are reported in line 25. Exclude insulins and vaccines in lines
27 through 34. Report insulins and vaccines in lines 35 and 36.
Line 37, columns f through k – Total

The values are calculated automatically in the BPT as the sum of lines 27 through 36 for
each column.
Line 38, columns g and j – Manufacturer Discount (Amounts Allocated up to the
Catastrophic Threshold for the Population Exceeding the Catastrophic Threshold)

The values are calculated automatically in the BPT as the difference between line 26 and
line 40.
Line 39, columns f, g, i and j – Amounts Allocated over the Catastrophic Coverage

These values are calculated automatically as the difference between line 24 and line 37.
Line 40, columns g and j – Manufacturer Discount (Amounts Allocated over the
Catastrophic Threshold)

The manufacture discount for total allowed costs over the catastrophic threshold for
members with projected total allowed costs greater than the catastrophic threshold must
be reported on this line.
Line 41, columns i through k – Non-Part D-Covered Drugs - All Spending

When the plan benefit type is EA and the plan covers non-Part D drugs, enter the
projected total number of scripts, total allowed dollars and total cost sharing, for the
population identified in Worksheet 3, Section III, using the cost sharing structure of the
EA plan by point-of-sale and type of drug, in columns i, j and k, respectively, for each
line.
Line 42, columns i through k – Subsidy for Selected Drugs
Not applicable for CY2025.

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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 – 2025 DEFINED STANDARD BENEFIT PARAMETERS
Line 1 – Deductible

The cell is pre-populated with the deductible for the DS plan benefit type.
Line 2 – Out-of-Pocket Maximum

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 NAMBA at the time of bid submission. The final
NAMBA for CY2025 will be calculated and published by CMS after the initial June bid
submission.
Line 3 – Base Beneficiary Premium (BBP)

Enter the Part D sponsor’s estimate of the BBP. The NAMBA, basic Part D A/B rebate
allocation reported on the MA BPT for MA plans and BBP will determine the plan’s basic
Part D target premium. This value must be less than or equal to the value in Line 4.
Line 4 – Maximum Base Beneficiary Premium

This value is automatically calculated as the product of 1.06 and the Base Beneficiary Premium
for CY2024. The input value in Line 3 of this section must be less than or equal to the value on
this line.

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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 5 is calculated as line 1 minus line 2
plus line 3. Line 6 reflects the value of the basic Part D premium from line 5 after the rounding
rule selected on line 13 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 final NAMBA and BBP that are
calculated and published by CMS after the initial June bid submission.
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 7 is carried from Worksheet 5 of the BPT. Line 8 reflects the value of the supplemental
Part D premium from line 7 after the rounding rule selected on line 13 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 Amount 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 – Manufacturer Discount Amount

The value is carried from Worksheet 6 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 the 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 e-mail 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 that person
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
CY2025 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 provide all substantiation pertaining to the
bid as required in this appendix, 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 provide 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 > CY2025 > (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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•

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 in the base period and/or the projection period.
4. Support for the effect of sequestration on the bid, including a detailed qualitative and
quantitative description of how sequestration is reflected in pricing assumptions.
5. Support for the claims credibility assumptions (Worksheet 2), including—
5.1. A statement of the credibility methodology used—for example, the CMS guidelines.
5.2. An actuarial report of the credibility procedure used if it varies from the CMS
guidelines.
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). 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 specified in the PBP, including
days supply and point-of-sale.
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 Worksheet 6.
6.4. A quantitative description of the development of the total scripts, allowed dollars, and
cost sharing for insulins and vaccines for the base period and projection period.
6.5. A quantitative description of the development of the Manufacturer Discount PMPM
for both LI and NLI members for the projection period.
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.

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APPENDIX B

7.2. A description of the expenses included in each non-benefit expense category in the
BPT.
7.2.1. For the “Net Cost of Private Reinsurance” category, disclose whether or not
there is reinsurance. For reinsurance, even if the net cost of private reinsurance
is entered as $0, the required elements include the type of reinsurance and
applicable benefits, attachments points, maximums, ceding commissions, and
other information pertinent to the reinsurance coverage.
7.3. Detailed support for the development of projected non-benefit expenses. The required
elements include—
7.3.1. 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, disclosure of
the aggregate Part D gain/loss margin at the time of the initial bid submission.
8.2. For a Part D plan without a corresponding Medicare Advantage plan, support for the
aggregate Part D gain/loss margin if the aggregate Part D gain/loss margin as a
percentage of revenue is below 0 percent or above 5.5 percent. The required elements
include—
8.2.1. A description of the reasons supporting aggregate Part D gain/loss margin.
8.2.2. An aggregate-margin numeric (non-PDF) business plan showing the current
bid submission and next year. The required elements include—
a. Projected member months, risk scores, CMS revenue, Part D premium,
claims expense, non-benefit expenses, and gain/loss margin.
b. Projected gain/loss margin as a percentage of revenue from the previous
year’s business plan(s), if applicable.
8.3. A demonstration of consistency between the projected and the actual aggregate
Part D gain/loss margins as a percentage of revenue over the long term. This
requirement applies separately for (i) Part D plans without corresponding MA plans
and (ii) MA-PD plans. Include an explanation of how that knowledge was
incorporated into the current bid submission, if the gain/loss margins have been
inconsistent historically.
8.4. A detailed justification of the need for flexibility in the gain/loss margin
requirements in order to satisfy other CMS instructions such as Total Beneficiary
Cost (TBC).
8.5. For a Part D plan without corresponding Medicare Advantage plans, support for how
the aggregate Part D gain/loss margin does not jeopardize financial solvency, if the
aggregate Part D gain/loss margin is negative. Quantify the projected aggregate loss
and demonstrate numerically that this loss does not jeopardize financial solvency.

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8.6.

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 as a
percentage of revenue at the bid level is greater than 11.5 percent. The required
elements include—
8.6.1. A comparison of premiums for CY2025 and CY2024, if applicable. Include
the Part D basic premium and Part D supplemental premium.
8.7 For an MA-PD plan, a description of the approach for setting the Part D gain/loss
margin in relation to the MA gain/loss 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 CY2025 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 CY2025 Part D risk scores, including—
9.2.1. Identification of the source of the starting risk score and, if the CMS-provided
risk scores were not used, 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 for developing the CY2025
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 method is more appropriate than the CMS preferred approach.
9.6. A statement of the credibility approach used—for example, the CMS guidelines.
9.7. A description of the credibility methodology used if it varies from the CMS
guidelines.
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, reinsurance and LICS. The required elements
include—

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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 an accounting period, the data need not be based
on an audited GAAP financial basis.
10.3. Crosswalk information regarding data aggregation (Worksheet 1). The required
elements include—
10.3.1. A list of all bids that are involved in approved crosswalks for CY2024 and
proposed crosswalks for CY2025 and that are considered for base period data
aggregation.
10.3.2. A statement of the intention to submit a crosswalk exception for CY2025, 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. The Part D sponsor’s experience.
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—
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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) that
was used to develop the manual rate.
12.2. An analysis justifying the reasonableness of the Part D manual rate, if the manual rate
is based on experience of less than 60,000 member months of exposure.
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 CY2025.
12.5. All other applicable factors and/or adjustments.
13. A Part D sponsor in a related-party arrangement must provide the following:
13.1. Declaration of every related-party arrangement in the base period and projection
period.
13.2. Disclosure of all services provided in every related-party arrangement in the base
period and projection period.
13.3. A summary that explains the relationship of the parties involved and common
ownership, control and investment in the base period and projection period.
13.4. If the ratio of the total related-party expenses on Worksheet 2 (cell N61 plus cell N62)
to total blended allowed PMPM on Worksheet 2 (cell P56) plus total non-benefit
expenses Worksheet 2 (cell E67) is greater than 30 percent, provide a summary of the
contractual terms for the five largest related parties declared in the projection period,
including a description of the services provided and money exchanged in the
projection period. The five largest related-party relationships are to be determined by
their share in the total related-party expenses on Worksheet 2 (cell N61 plus cell
N62).
13.5. If the ratio of the total related-party expenses on Worksheet 2 (cell N61 plus cell N62)
to total blended allowed PMPM on Worksheet 2 (cell P56) plus total non-benefit
expenses Worksheet 2 (cell E67) is greater than 30 percent, provide items 13.5.1 and
13.5.2 for the five largest related parties declared in the projection period. The five
largest related-party relationships are to be determined by their share in the total
related-party expenses on Worksheet 2 (cell N61 plus cell N62).
13.5.1. The PMPM cost of services or benefits consistent with the contractual
arrangement and the number of member months eligible for the contract, and
13.5.2. A comparison for each contractual arrangement to the cost of the services or
benefits in the absence of a related party or to actual cost. Acceptable forms
of comparison are as follows:
a. Actual Cost Method for Administrative Services
Show the actual cost of the non-benefit services provided by the related
party excluding the gain/loss margin of the related party and provide a

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APPENDIX B

qualitative and quantitative summary of the development of the related
party’s expenses to provide the administrative services.
b. Actual Cost for Benefit Costs
Show the actual cost of the related party to provide the benefit services
excluding the gain/loss margin of the related party and provide a
qualitative and quantitative summary of the development of the related
party’s expenses to provide the benefit services.
c. Market Comparison through Part D Sponsor Method
Demonstrate through analysis and contract terms, that the fee associated
with the benefit or administrative services from the Part D sponsor’s
related-party arrangement is comparable to the fee for providing the same
service to a Medicare population in an arrangement between the Part D
Sponsor and an unrelated entity.
d. Market Comparison through Related-Party Method
Demonstrate through analysis and contract terms, that the fee associated
with the benefit or administrative services from the Part D sponsor’s
related-party arrangement is comparable to the fee for providing the same
service to a Medicare population in an arrangement between the Part D
sponsor’s related party and an unrelated entity.
e. Alternative Comparison
If the Part D sponsor is not able to meet the requirements of 13.5.2a
through 13.5.2d, the Part D sponsor must show a comparison for
administrative services or benefit costs as outlined in 13.8 or 13.9 even if
the fees associated with the arrangement are not within 5 percent of the
comparison.
13.6. 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
expenses for the related party to provide the administrative services, excluding the
gain/loss margin of the related party, compared to the cost in the bid.
13.7. A Part D sponsor that chooses the Actual Cost Method for Benefit Costs must—
13.7.1. Provide a qualitative and quantitative analysis of the development of the
related party’s gain/loss margin reflected in the benefit costs, in which the
related party’s gain/loss margin is defined as the allowed amount of the
related party entered in the BPT less the cost of purchasing pharmaceuticals
and dispensing prescriptions. The gain/loss margin must be reconcilable to
the related party’s audited financial statements.
13.7.2. 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.
13.8. A Part D sponsor that chooses the Market Comparison through Part D Sponsor
Method must—

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APPENDIX B

13.8.1. Provide an analysis that clearly explains the terms of each contract in the
comparison and how the financial results are not significantly different from
those that are achieved in the absence of the related-party relationship.
13.8.2. Show that results of pricing at least two quarters of the Part D plan’s
experience through the related-party and unrelated-party contracts are within
plus or minus 5 percent.
13.8.3. Show that both contracts in the comparison are associated with sufficient
costs to be considered valid contracts.
13.9. A Part D sponsor that chooses the Market Comparison through Related-Party Method
must—
13.9.1. Provide an analysis that clearly explains the terms of each contract in the
comparison and how the financial results are not significantly different from
those that are achieved in the absence of the related-party relationship.
13.9.2. Show that results of pricing at least two quarters of the Part D plan’s
experience through the related-party and unrelated-party contracts are within
plus or minus 5 percent.
13.9.3. Show that both contracts in the comparison are associated with sufficient
costs to be considered valid contracts.
13.9.4. Provide a signed attestation from the related party stating that the actual
contracts will be available for review upon request by CMS.
13.10. The following requirements apply to support for a related party:
13.10.1. Benefit and administrative services must be supported in a separate and
independent demonstration for all methods used.
13.10.2. Only one method may be used to support the benefit or administrative
component of each related-party arrangement.
13.10.3. Two arrangements under comparison are recognized as comparable when
the terms are identical.
13.10.4. When demonstrating that the fees for each service for a related-party and
unrelated-party arrangement are within 5 percent, all of the services in the
related-party arrangement must also be included in the unrelated-party
arrangement. The unrelated-party arrangement may also include services
that are not in the related-party arrangement but that are similar to those
services.
13.10.5. When demonstrating that results from the same utilization priced through a
related party and unrelated-party arrangement are comparable, all of the
services in the related-party arrangement must also be included in the
unrelated-party arrangement. The unrelated-party arrangement may also
include services that are not in the related-party arrangement but that are
similar to those services.
13.11. When a Part D sponsor has an arrangement for benefit services within their tax ID
number and does not submit bid data that matches the reporting of these internal
transactions in their financial statements, then the plan sponsor must submit
supporting documentation—required by Appendix B, items 13.1 to 13.10—that
explains and compares how these costs are reflected in the bid versus the Part D
sponsor’s financial statements.

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APPENDIX B

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 CY2024 bid audit findings 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.
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, including an explanation for
and a demonstration of elements that affect projected costs.
18. Detailed quantitative support for the development of the induced utilization factor
(Worksheet 5).
19. – 33. 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:
34. Support for how the pricing of the bid is not anti-competitive, including a comparison of the
bid benefits and premium to the benefits and premium of competitors.
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 as a percentage of revenue
at the bid level is less than or equal to 11.5 percent. The required elements include the
elements listed in 8.6.
39. For the projected bid values listed below, an analysis of the relationship between bid level
actual and projected experience for CY2021, CY2022 and CY2023, 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 Average Risk Score, Worksheet 3, cell H11.
39.3. Total Blended Allowed Cost, Worksheet 2, cell P56.

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APPENDIX B

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).
41. A detailed breakout of “Claims subject to the deductible” listed in line 12 and line 25 of
Worksheet 6. This documentation should include the details underlying all values in
lines 12 and 25 and be set up similarly to the way in which the breakouts for “Claims Not
Subject to the Deductible” are set up in rows 1-10 and 14-23.

PART D CHECKLIST FOR REQUIRED SUPPORTING DOCUMENTATION
Initial June Bid Submission – Required for All Bids

1 Cover sheet
2 Product narrative
3 Related-party declaration
4 Sequestration assumptions
5 Claims credibility assumption
6 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
7 Non-benefit expenses
8 Gain/loss margin
9 Projected risk scores
Initial June Bid Submission – Required for All Bids with Specified Assumptions

10 Base period experience and projections
11 Trend projection factor development
12 Manual rate development
13 Related-party arrangements
14 Input sheet(s) for pricing model
15 Bid audit results and compliance issues
16 Reliance information
17 VBID Model
18 Induced utilization factor development
19 – 33 Not applicable

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APPENDIX B
Upon Request by CMS Reviewers

34 Bid not anti-competitive
35 Related-party contracts
36 Reliance letter
37 OFM audit results
38 Benefit value/margin
39 Actual to Projected
40 MA-PD enrollment
41 Claims subject to deductible

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APPENDIX B

SAMPLE SUPPORTING DOCUMENTATION
SAMPLE PD Cover Sheets
Part D Cover Sheet #1 - CY2025 Initial Bid Submission

Organization Name: Health One
Contract(s): Hxxxx, Hyyyy and Szzzz
Date: June 3, 2024

Documentation
Requirement
1 Cover sheet
2 Product narrative
3 Related-party
declaration
4 Sequestration
5 Credibility
assumption
6 Cost sharing
mapping
7 Non-benefit
expenses
8 Gain/loss margin
9 Risk scores

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

File Name
Cover Sheet 6-3-24.pdf
Cover Sheet 6-3-24.pdf
Cover Sheet 6-3-24.pdf

Location
within File
(if
applicable)
Page 1
Pages 2-4
Page 7

All bids
All bids

Cover Sheet 6-3-24.pdf
Cover Sheet 6-3-24.pdf

Page 7
Page 5

both
both

All bids

Cover Sheet 6-3-24.pdf

Page 6

both

All bids

AdminProfit.xlsx

Sheet1

both

All bids
All bids

AdminProfit.xlsx
Risk CY25.xlsx

both
both

12 Manual rates

Hxxxx-003
Syyyy-001
Hxxxx-001
Hxxxx-004

Manual.xlsx

Sheet2
MA-Sheet 1
PD-Sheet 2
Section II

Manual.xlsx

Section I

MA

24 ESRD subsidy

CY2025 Part D BPT Instructions

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

PD

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APPENDIX B
Part D Cover Sheet #2 - CY2025 Subsequent Bid Submission

Organization Name: Health One
Contract(s): Hxxxx, Hyyyy, and Szzzz
Date: July 14, 2024
Documentation
Requirement
1 Cover sheet

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

File Name
Cover Sheet 6-3-24.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

CY2025 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 74 of 80

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 may–
•
•
•

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 $TBD and $TBD;
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 CY2025, CMS does not require a Part D BPT for employer/union-only group plans.

CY2025 Part D BPT Instructions

Page 75 of 80

APPENDIX D

APPENDIX D – CALCULATION OF NATIONAL AVERAGE MONTHLY
BID AMOUNT
The CY2025 benchmarks will be based on the 2024 enrollments applied to the 2025 bids.
The following table illustrates the impact of the weighted enrollment methodology for
two enrollment periods, June 2023 and March 2024. Recall that the 2024 benchmark was
calculated as 100 percent of the enrollment-weighted approach.
The same values are presented based on the March 2024 enrollment. Since the
2025 benchmarks will be based on 2024 enrollment, these values may be useful for estimating
the 2025 benchmarks. The left section of the table shows the actual 2024 benchmarks, which
were calculated based on June 2023 enrollment. The right section, titled “March 2024
Enrollment,” indicates how the 2024 benchmarks would have been calculated based on more
current enrollment data.
Enrollment Weighted Approach
June 2023
Enrollment

March 2024
Enrollment

National average monthly bid amount

$64.28

TBD

Base beneficiary premium

$34.70

TBD

Direct subsidy

$29.58

TBD

This illustrative recalculation of the 2024 benchmarks is provided for the purpose of assisting
Part D sponsors in developing the projected 2025 national average monthly bid amount and
base beneficiary premium, which will be used in the calculation of the plan’s target premium.
The final 2025 benchmarks will be based on the 2024 enrollments applied to the 2025 bids.

CY2025 Part D BPT Instructions

Page 76 of 80

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 CY2006 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 of 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 are to 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 2023 and March 2024.

CY2025 Part D BPT Instructions

Page 77 of 80

APPENDIX E

Enrollment Weighted Approach
PD
Region

State(s)

June 2023
Enrollment

March 2024
Enrollment

1

NH, ME

$35.99

TBD

2

CT, MA, RI, VT

$43.53

TBD

3

NY

$48.72

TBD

4

NJ

$45.51

TBD

5

DE, DC, MD

$41.29

TBD

6

PA, WV

$40.16

TBD

7

VA

$38.46

TBD

8

NC

$46.89

TBD

9

SC

$45.73

TBD

10

GA

$44.23

TBD

11

FL

$37.74

TBD

12

AL, TN

$41.43

TBD

13

MI

$35.85

TBD

14

OH

$40.87

TBD

15

IN, KY

$42.34

TBD

16

WI

$48.07

TBD

17

IL

$32.79

TBD

18

MO

$43.65

TBD

19

AR

$35.74

TBD

20

MS

$40.11

TBD

21

LA

$46.17

TBD

22

TX

$28.37

TBD

23

OK

$42.22

TBD

24

KS

$43.31

TBD

25

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

$42.16

TBD

26

NM

$35.64

TBD

27

CO

$46.59

TBD

28

AZ

$43.18

TBD

29

NV

$31.98

TBD

30

OR, WA

$40.60

TBD

31

ID, UT

$44.41

TBD

32

CA

$40.98

TBD

33

HI

$40.80

TBD

34

AK

$38.76

TBD

CY2025 Part D BPT Instructions

Page 78 of 80

APPENDIX F

APPENDIX F – TRENDING RISK SCORES
This appendix includes the following considerations for developing trends for coding and
population changes to project CY2025 risk scores.
•
•
•
•
•
•

•

•

•

•

Include the most recent annual consecutive calendar risk scores that are available.
Use raw risk scores that are not normalized.
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.
When a Part D sponsor is 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.
If Part D sponsor compares 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 to a difference in predicted
risk.
Divide cohorts into meaningful subgroups using the same considerations that are 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 2 years of
risk scores will help minimize the effect of random changes in coding patterns and
enrolled population. If deviations from the 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.

CY2025 Part D BPT Instructions

Page 79 of 80

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.

CY2025 Part D BPT Instructions

Page 80 of 80