California Code of Regulations › Title 28 - Managed Health Care › Division 1 - The Department of Managed Health Care › Chapter 2 - Health Care Service Plans › Article 9 - Financial Responsibility › Risk-Bearing Organizations › Section 1300.77.2 - Calculation of Estimated Liability for Reimbursements

Current through Register 2024 Notice Reg. No. 28, July 12, 2024
(a) Each plan subject to subdivision (b) of
					 Section 1377 shall calculate the estimate
					 of incurred and unreported claims pursuant to a method held unobjectionable by
					 the Director. Such method may include a lag study as defined and illustrated in
					 subsection (c), an actuarial estimate as defined in subsection (d), or other
					 reasonable method of estimating incurred and unreported claims. The amount
					 required by Section
					 1300.77.1 to be accrued in the
					 plan's books and records must equal the estimated total of all claims incurred
					 but not yet received as of the end of the month as calculated in working
					 papers, schedules or reports prepared in support of the unobjectionable lag
					 study, actuarial estimate, or other method of estimating incurred and
					 unreported claims.
(b) Working
					 papers which support the incurred and unreported claims calculation shall be
					 maintained as part of the records of the plan. Lag study working papers shall
					 include a detailed allocation of all claims received each month to the various
					 months in which the services were performed. Actuarial estimate working papers
					 must detail all underlying assumptions and calculations in establishing the
					 actuarial rate. Any other method used to determine the amount of incurred and
					 unreported claims must be supported by adequate working papers, schedules or
					 reports which detail all aspects of the incurred and unreported
					 calculation.
(c) A "lag study" is a
					 schedule which analyzes historical claims information on an ongoing basis to
					 determine the length of time lag between the date of service and the date a
					 claim is submitted to the plan for payment. Such a study distributes all claims
					 received each month in which the services were performed. An example of a lag
					 study containing the minimum information necessary to be held unobjectionable
					 by the Director is as follows:
ABC HEALTH PLAN OF CALIFORNIA SCHEDULE TO CALCULATE
						HISTORIC PERCENTAGE OF INCURRED BUT UNREPORTED CLAIMS FOR PRIOR MONTHLY PERIODS
						WHICH HAVE BEEN FULLY OR SUBSTANTIALLY REPORTED JULY 31, 19X2
MONTH CLAIM RECEIVED
Same
								Month
2nd
3rd
4th
5th
6th
7th
Totals
								for Months of Service
Month of Service:
Oct.
								19X1
$150
$500
$200
$100
$50
$1,000
Nov.
								19X1
220
500
240
110
30
1,110
Dec.
								19X1
150
600
300
100
75
$25
1,250
Jan.
								19X2
210
750
375
105
60
1,500
Feb.
								19X2
230
670
290
85
100
75
1,450
Totals
$960
$3,020
$1,405
$500
$315
$100
$6,300
Percentages:
Monthly
15%
48%
22%
8%
5%
2%
Cumulative
15%
63%
85%
93%
98%
100%
Explanatory notes:
1. The above represents the first
								schedule that is prepared to determine the incurred and unreported claims for
								any month following February.
2. The schedule allocates claims as
								they are received to the month in which the service was performed. For example,
								in October, the plan received $150 of claims which had service dates in October
								(same month). Because this schedule begins in October, the $150 amount would be
								the only entry which the plan would be able to make in October. In November,
								the plan received $220 in claims which had service dates in November (same
								month), and $500 of claims which had service dates in October (second month).
								In December, the plan received $150 of claims which had service dates in
								December (same month), $500 of claims which had service dates in November
								(second month), and $200 in claims which had service dates in October (third
								month).
3. The schedule indicates that $6,300
								in claims were received which had service dates of October through February. Of
								this amount, $960 was received during the month of service (same month), $3,020
								in the following (second) month, $1,405 in the third month, $500 in the fourth
								month, etc. By converting these amounts to percentages of the total claims, the
								schedule indicates that on the average, 15% ($960 / $6,300 =) of all claims
								incurred during any month are received in the same month, 48% are received in
								the following (second) month, for a cumulative total of 63% (15% + 48% =) of
								all claims incurring during any month being received in the same and second
								months. By employing these cumulative percentages, the amount incurred but
								unreported claims can be estimated as of July 31, after the claims information
								for the current but incomplete monthly periods is analyzed, as illustrated in
								the following schedule:
ABC HEALTH PLAN OF CALIFORNIA SCHEDULE TO ESTIMATE
						THE AMOUNT OF INCURRED BUT UNREPORTED CLAIMS FOR THE CURRENT BUT INCOMPLETE
						MONTHLY PERIODS WHICH HAVE NOT BEEN FULLY OR SUBSTANTIALLY REPORTED JULY 31,
						19X2
MONTH CLAIM RECEIVED
Same
								Month
2nd
3rd
4th
5th
6th
7th
Totals
								for Months of Service
Month of Service:
Mar.,
								19X2
$225
$720
$300
$120
$50
$1,415
April,
								19X2
250
700
330
110
1,390
May,
								19X2
240
750
350
1,340
June, 19X2
250
775
1,025
July, 19X2
270
270
Total Claims received for period March
								1 through July 31
$5,440
COMPUTATION OF INCURRED BUT UNREPORTED CLAIMS AS OF
						JULY 31
(A)
(B)
(C)
(D)
(E)
Month of Service
Total claims received for each month of service as of July
								31
Claims received as of July 31 as a cumulative
								percentages of total claims to be received
Total
								claims to be received (B-C)
Incurred But unreported
								(D-B)
July
$270
(i)
15%
$1,800
$1,530
June
1,025
(ii)
63%
1,625
600
May
1,340
(iii)
85%
1,575
235
April
390
(iv)
93%
1,495
105
March
1,415
(v)
98%
1,440
25
February
1,450
(vi)
100%
1,450
0
Total incurred but unreported claims as
								of July 31
$2,495
Explanatory notes:
(i) Represents July claims received in
								July.
(ii) Represents June claims received in
								June and July.
(iii) Represents May claims received in
								May, June and July.
(iv) Represents April claims received
								in April, May, June and July.
(v) Represents March claims received in
								March, April, May, June and July.
(vi) Represents February claims
								received in February, March, April, May, June and July.
(d) An "actuarial estimate" is a calculation
					 of incurred and unreported claims which is based on adequate and reasonable
					 assumptions with respect to risk factors and trends which have been found to be
					 applicable to the plan, such as utilization patterns of the plan's enrollees,
					 the average benefit which will be payable, the enrollment mix in terms of age
					 and sex of enrollees and geographic location, actual plan contract experience,
					 and any other factors reasonably believed to affect the amount of incurred and
					 unreported claims. Actuarial estimates must be supported by an actuarial
					 certification, consisting of a signed declaration of any actuary who is a
					 member in good standing of the American Academy of Actuaries in which such
					 actuary states that the assumptions used in calculating the incurred and
					 unreported claims are appropriate and reasonable. If the plan employs an
					 actuarial study to estimate the amount of the incurred and unreported claims,
					 it must compare the actual claims amounts to those estimated, and make
					 adjustments at least quarterly whenever a 5% difference from actual experience
					 is noted.
(e) A plan may employ any
					 other unobjectionable alternative method of estimating the amount of incurred
					 and unreported claims other than the "lag study" or "actuarial estimate," so
					 long as such alternative method accurately estimates incurred and unreported
					 claims. For example, a plan may receive daily reports of actual hospital
					 admissions and referrals, thereby permitting the plan to compare these reports
					 to the actual invoices and calculate the estimated amount due hospitals for the
					 enrollees whose claims had not been received by the plan at that
					 time.
1. New
						section filed 3-3-83; effective thirtieth day thereafter (Register 83, No.
						10).
2. Change without regulatory effect amending subsections (a)
						and (c) filed 7-18-2000 pursuant to section
						100, title 1, California Code of
						Regulations (Register 2000, No. 29).
Note: Authority cited: Section
						  1344,
						  Health and Safety Code. Reference: Sections
						  1375.1,
						  1376
						  and
						  1377,
						  Health and Safety Code.