+-----------------------------------------+----------------------------+
| **FEHB Program Carrier Letter**         | **U.S. Office of Personnel |
|                                         | Management**               |
| **Community-rated Carriers**            |                            |
|                                         | **Office of Insurance      |
|                                         | Programs**                 |
+-----------------------------------------+----------------------------+
| **Letter No. 1999-015** **Date:** March |                            |
| 26, 1999                                |                            |
|                                         |                            |
| Fee-for-service \[ n/a \]               |                            |
| Experience-rated HMO \[ n/a \]          |                            |
| Community-rated \[ 13 \]                |                            |
+-----------------------------------------+----------------------------+

**SUBJECT:** **[Correction]{.underline} to Reconciliation Instructions
For 1999 Rates --**

**Community-Rated Carriers**

On March 19, 1999, we sent you Carrier Letter 1999-014 with
reconciliation instructions for your 1999 Federal Employees Health
Benefits Program rates. Page 55 was inadvertently not sent; page 65 had
a typographical error in the heading; and there were formatting problems
on pages 38, 39, 40, 46, 52, and 57. Replacement pages are enclosed.

We apologize for any inconvenience this may have caused you. For more
information, contact Agnes Kalland at 202/606-0745.

Sincerely,

*(signed)*

##  Frank D. Titus

Assistant Director

for Insurance Programs

Enclosures

### 

### Attachment IIIB, Section 2

QS13. (continued)

## **EXAMPLE TCR and CRC COMPARISON SHEET**

Federal Group SSSG #1 SSSG #2

1\. Group Renewal Date 1-1-99 1-1-99 2-1-99

2\. Rating Method (a) CRC CRC CRC

(TCR,CRC,ACR)

3\. Capitation (b) \$100.00 \$98.00 \$101.00

4\. Age/Sex Factor .92 .98 1.04

5\. Industry Factor (c) .95 .95 .98

6\. Other Discounts .95 1.00 .95

7\. Total Discount (d) .95 x .98 .95 x 1.00 .95 x .98

8\. 1st Level 1.30 1.12 1.22

Step-Up Factor (e)

9\. **Self Rate**(f) \$111.35 \$102.19 \$119.31

10\. Family/Self Ratio 2.71 2.80 2.55

11\. **Family Rate** \$301.76 \$286.13 \$304.24

\(a\) If all three methods are not the same, explain why.

\(b\) **IMPORTANT! If these capitation rates are not the same, explain
why in QS14.**

> \(c\) The Federal group receives the lowest industry factor \< 1.0
> given to an SSSG.

\(d\) **IMPORTANT**: The Federal group receives the lowest total
discount given to an SSSG. In this case, one SSSG received a total
discount of (.95 x 1.00) and the other received a total discount of (.95
x .98) Therefore the Federal group would get a discount of (.95 x .98) ,
the lower of the two.)

\(e\) Show How Factors Are Derived.

(f) \$100 x .92 x (.95 x .98) x 1.3 = \$111.35

38-

#### 

#### 

#### **Attachment IIIB, Section 2**

QS13. (continued)

####### COMPARISON SHEET - TCR AND CRC

Federal Group SSSG #1 SSSG #2

39-

##### 

##### 

##### **Attachment IIIB, Section 2**

QS13(continued)

###### EXAMPLE - ACR COMPARISON SHEET

This shows one way you might present your ACR rate development. You
should modify this example to fit your particular ACR procedure. Note
that although this example is for the Federal group only, your
comparison sheet must include the SSSGs as well as the Federal group.

Federal Group SSSG #1 SSSG #2

a\. Rating Method ACR

b\. Group Renewal Date 1/1/99

c\. Experience Period 1/1/97-12/31/97

d\. Paid Claims \$10,000,000

e\. Annual Trend (if different, explain) 12%

f\. Trend From Experience Period 27%

To Renewal Period \[(1+ .12/12)^24^

g\. Expected Claims \[(d) x 1.27\] \$12,700,000

h\. Administration (if different, explain) 15%

i\. Claims + Administration \[(g)/(1-.15)\] \$14,941,176

j\. Members 100,000

k\. Per/Person Rate \[(i)/(j)\] \$149.41

l\. First Level Step-Up Factor 1.2

m\. Bi-weekly Self Rate \[(l) x (k) x 12/26\] \$82.75

n\. Family/Self Ratio 2.6

o\. Family Rate \[(m) x (n)\] \$215.15

p\. Discount 10%

q\. Rates After Discount Self \$74.48

Family \$193.64

40-

### 

### **Attachment IIIB, Section 3**

QT6. How did you derive the above step-up factors? Explain briefly (a
numerical formula for each factor is the preferred form of explanation).

QT7. Do you use step-up factors for all groups?

\[ \] YES

\[ \] NO

> If No, explain the criteria that you use to determine when step-up
> factors are applicable.

QT8. If you use enrollment-mix or other demographic assumptions at any
point in the development of the 1999 Federal group rates, (including
development of step-up factors), what are they?

\% Self Contracts \_\_\_\_\_\_\_\_\_\_

\% Family Contracts \_\_\_\_\_\_\_\_\_\_

Family Size \_\_\_\_\_\_\_\_\_\_

Other:

46-

######## 

######## 

######## **Attachment IIIB, Section 4**

QC8. Are the above step-up factors the same as those used in the 1999
rate proposal (which you submitted in May 1998)?

\[ \] YES

\[ \] NO

> If No, is the reason because the carrier revised its community-wide
> demographics after the 1999 rate proposal was made (and used the
> revised step-up factors for its SSSGs)?

\[ \] YES

\[ \] NO

> If No, what was the reason for the change in the step-up factors?
>
> QC9. How did you derive the above step-up factors? Explain briefly (we
> prefer a numerical formula for each factor as the explanation).

52-

**Attachment IIIB, Section 4**

QC14. If both SSSGs have industry factors greater than 1.00, did you
apply an industry factor of 1.00 to the Federal group rates?

\[ \] YES

\[ \] NO

If No, explain.

> QC15. Explain how you derive the \"relative utilization factors\"
> associated with your age/sex distribution sheet.
>
> Note that we would expect the factors to be based on the utilization
> experience of the different age groups of the total employee
> population the carrier services. In some cases, a carrier might use
> factors based on some other large population. Please make it clear to
> us exactly where your relative utilization factors come from, and on
> what population they are based.

###  **IMPORTANT! DO NOT SKIP THIS QUESTION**

55-

######### Attachment IIIB, Section 4

QC17. Show the calculations behind the rates that you have on line 1 on
the reconciliation sheet. [**DO NOT REFER US TO ANOTHER SHEET FOR THIS
CALCULATION. WHAT WE WANT HERE IS A SIMPLE EXPLANATION OF THE LINE 1
RATES**.]{.underline}

57-

######### 

######### 

**Attachment VI**

**Carrier Contacts**

For information about your reconciliation, we should contact:

Name
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

Phone Number
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

Fax Number
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

E-Mail
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

OR

Name
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

Phone Number
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

Fax Number
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

E-Mail \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

65-