B EYOND THE N UMBERS ASOP #5 True BUSINESS PowerPoint Presentation Template PRESENTED BY Robert Lang, ASA, MAAA 11/16/2018 Page 1 Dagny Grillis, ASA, MAAA
Agenda ASOP 5 . . . ASOP 5 . . . ASOP 5 Page 4
ASOP 5 – History of Revisions Page 5
ASOP 5 – History Original ASOP 5 - 1988 1 st Revision - 1991 2 nd Revision - 2000 3 rd Revision - 2011 4 th (current) Revision – 2017 Page 12
ASOP 5 – History Original ASOP 5 - 1988 • Provided clarity regarding commonly accepted proper actuarial practice concerning: • Plan benefits • Trend • Determination of Incurral Date • Claim Settlement Expenses • Time Value of Money • In 1990, the standard was reprinted as part of the actuarial standards of practice binder. • Available as ASOP No. 5 Doc. 007. Page 13
ASOP 5 – History 1 st Revision ASOP 5 - 1991 • In 1991, the original ASOP 5 was reformatted by the Health Committee of the Actuarial Standards Board (ASB) and adopted by the ASB. • Set forth areas of analysis and inquiry that actuaries must consider. • Section of definitions was added. • Not prescriptive of methods or procedures. • Available as ASOP No. 5 Doc. 028. Page 14
ASOP 5 – History 2 nd Revision ASOP 5 – 2000 • Discusses incurred health and disability claims in total (includes paid portion). • Explicitly discusses long-term claim products. • Removed claim settlement expenses section. • Also, explicitly excludes deficiency reserves and policy reserves. • Available as ASOP No. 5 Doc. 089. Page 15
ASOP 5 – History 3 rd Revision ASOP 5 - 2011 • Available as ASOP No. 5 Doc. 126. • Updated for deviation language Which ASOP was this standard updated to refer to? A) ASOP 1 B) ASOP 23 C) ASOP 41 Page 16
ASOP 5 – History 3 rd Revision ASOP 5 - 2011 • Available as ASOP No. 5 Doc. 126. • Updated for deviation language Which ASOP was this standard updated to refer to? ASOP 41: Actuarial Communications Page 17
ASOP 5 – History 4th Revision ASOP 5 – 2017 • Published March 2017. • Emailed from the ASB April 27, 2017. • Applies to work on or after September 2017. • Available as ASOP No. 5 Doc. 186. • Updated certain definitions and added others for clarity and for consistency with other standards Page 18
ASOP 5 – History 4th Revision ASOP 5 – 2017 • Explicitly addresses certain considerations in estimating and analyzing incurred claims, including: • behavior of claimants • claim seasonality • credibility • payments and recoveries under government programs, and • the purpose and intended use of the unpaid claim estimate. Page 19
ASOP 5 – History 4th Revision ASOP 5 – 2017 • Expanded guidance regarding provider contractual arrangements. • Made standard consistent with the revised guidance in ASOP 1 regarding use of the language “should consider”. • Added a requirement to disclose any explicit provision for adverse deviation. Page 20
ASOP 5 – History 4th Revision ASOP 5 – 2017 SCOPE From: “This standard applies to actuaries who estimate or review incurred claims under health benefit plans on behalf of insured or noninsured entities” To: “This standard applies to actuaries who estimate or review incurred claims under health benefit plans on behalf of risk-bearing entities …” Page 21
ASOP 5 – History 4th Revision ASOP 5 – 2017 Section 4 Communications and Disclosures • Expanded with reliance on ASOP 41 •4.1 Actuarial Communications - The actuary should include the following items, as applicable, in an actuarial communication. LIST OF 7 ITEMS FOR INCLUSION Page 22
What’s Next? Actuarial Standards- Setting Process Final Document Comments & Review Exposure Draft Committee or Task Force Project Proposals Page 23
References http://www.actuarialstandardsboard.org Page 24
ASOP 5 – Current Revision Page 25
ASOP 5 Overview - Section 1 Purpose: - A guide for estimating or reviewing incurred claims under a health benefit plan Page 26
ASOP 5 Overview - Section 1 When does this apply? ✔ ✖ Applies to actuaries who estimate or Does not apply to actuaries regarding review incurred claims under health reserves such as policy reserves, benefit plans on behalf of risk-bearing premium reserves, or claim settlement entities expense reserves Applies to the actuary only with respect to incurred claim estimates that are communicated as an actuarial finding Page 27
ASOP 5 Overview - Section 1 Page 28
ASOP 5 Overview - Section 1 Examples 1. Appraisals 2. Cash Flow Testing 3. Financial Analysis, Projections, Reserving, Reporting 4. Group Benefits 5. Product Development, Ratemaking, Pricing 6. Regulatory Filings 7. Reinsurance 8. Social Insurance Page 29
ASOP 5 Overview - Section 1 Examples 1. Appraisals 2. Experience Studies 3. Financial Analysis, Projections, Reserving, Reporting 4. Investment-Related Activities 5. Product Development, Pricing Page 30
ASOP 5 Overview - Section 1 Examples 1. Financial Analysis and Valuation Services 2. Social Insurance 3. Due Diligence Page 31
ASOP 5 Overview - Section 3 Considerations for Estimating Incurred Claims: 1. Health Benefit Plan Provisions and Business Practices 2. Economic and Other External Influences 3. Behavior of Claimants 4. Organizational Claims Administration 5. Claim Seasonality 6. Credibility 7. Risk Characteristics and Organizational Practices 8. Legislative Requirements 9. Carve-Outs 10. Special LTC Considerations Page 32
ASOP 5 Overview - Section 3 Analysis of Incurred Claims Considerations: 1. Categories of Incurred Claims 2. Reinsurance 3. Large Claims 4. COB 5. Provider Contractual Arrangements Page 33
ASOP 5 Overview - Section 3 Methods for Estimating Incurred Claims 1. Development Method 2. Projection Methods 3. Tabular Method Page 34
ASOP 5 Overview - Section 4 Communications • Important Dates • Limitations • Uncertainties • PAD • Provider Insolvency Risk • Follow-up Studies • Changes in Assumptions, Procedures, Methods, Models Page 35
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