48161MO0070062

48161MO0070063
48161MO0080003

-11.75%
n/a
n/a

B. Reasons for Rate Increase

Rates for these products are updated to reflect the following:
Impact of medical claim trend (including increases in provider unit costs and increased
utilization of medical cost services);
Revisions to our assumptions about population morbidity and the projected population
distribution;
Changes in cost sharing levels to ensure that plans comply with Actuarial Value
requirements
3. Experience Period Data
A. Experience Period
The base period experience is ALIC small group incurred claims for calendar year 2013, paid through
May 2014.
B. Earned Premium
Experience period premiums are date-of-service premiums from our actuarial experience databases
for non-grandfathered small group business in Missouri. As indicated in the 6/1/2014 MLR reports, no
MLR rebates were due in Missouri; hence, no adjustment was made to premiums to account for
expected rebates. Earned Premium in Worksheet 1 is $22.2 M.
C. Allowed Incurred Claims
The following table reports incurred claims:
Aetna Claim System
IBNR
Total

Allowed
$ 22.1M
$ 0.2M
$ 22.3M

Incurred
$ 15.9M
$ 0.2M
$ 16.1M

Allowed and incurred claims come directly from the ALIC claim records for hospital and physician
services. Capitated benefits use the capitation rate for incurred claims and the allowed claims are
calculated as the incurred claims plus estimated cost sharing.
Incurred claims are developed through the process of estimating the incurred but not paid (IBNP)
reserves using aggregate block of business paid claims. Paid claims are adjusted using the IBNP
completion factors. More specifically, historical claim payment patterns are used to predict the
ultimate incurred claims for each date-of-service month. The IBNP is estimated using actuarial
principles and assumptions which consider historical claim submission and adjudication patterns, unit
cost and utilization trends, claim inventory levels, changes in membership and product mix,
seasonality, and other relevant factors including a review of large claims. This same process is used
to develop IBNP estimates for allowed claims.
As noted above, the experience period reflects three months of paid claim run-off to reduce the
impact of IBNP estimates in the most recent incurred month. As a result, the IBNP reserves account
for approximately 1% of the experience period incurred claims.

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4. Benefit Categories
Claim tagging is used to fit all fee-for-service medical claims into four categories: Hospital Inpatient,
Hospital Outpatient, Physician Services, and Other Medical. Other medical services include
ambulance services, home health, durable medical equipment, and prosthetics. The utilization for
these services are counted by service type and rolled up into one utilization number for the total
category. Inpatient utilization is counted as days; outpatient and other medical utilization is counted
as services; physician utilization is counted as services; and pharmacy is counted as prescriptions.
Capitated services are paid on a per member per month (PMPM) basis and have no utilization values
attached.
5. Projection Factors
A. Change in the Morbidity of the Population Insured
Effective January 1, 2014, all policies issued in the individual and small group market are subject to
new rating rules, including guaranteed issue and no medical underwriting The change in the
morbidity of the future insured population relative to the current population in the experience period is
based on changes in underwriting and rating factors.
In addition, under Missouri state law, small groups will have the opportunity to elect to retain existing
coverage instead of purchasing ACA-compliant coverage. It is expected that groups who elect to
retain existing coverage have appreciably lower rates than those being offered through this filing on
comparable products, due to favorable underwriting. Therefore, ALIC has adjusted the expected
morbidity of the ACA-compliant Single Risk Pool to compensate for this impact.
B. Changes in Benefits
Compared to the 2013 experience, the filed products include additional benefits to comply with
Missouri Essential Health Benefits (EHBs) according to the benchmark plan. The benefit changes
determined to have an impact on rates include the following:

Expansion of Biofeedback coverage anticipated to cost

Changes to private duty nursing coverage anticipated to
Hearing aid coverage anticipated to cost
Expansion of pediatric vision benefits covered anticipated to cost
Coverage of services at Residential Treatment Centers anticipated to cost
Pediatric Dental benefits expected to cost

The estimated net allowed impact of these changes relative to the current individual base period
experience is
of claims cost.
The impact on utilization trend due to changes in benefits is described below under trend factors.
C. Changes in Demographics
Experience data was normalized for projected changes in the 2015 age gender mix using Aetna
demographic factors. Experience data was normalized for rating area comparing the current and
projected member distributions by county using our company-specific market defined rating area
factors.
D. Other Adjustments

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The expected mix of business for 2015 was projected and used to determine a projected market
average rate. The effect of the change in mix of business due to differences in benefits,
demographics, area, and network is shown in the Other adjustment column.
E. Trend Factors
Allowed medical trend includes known and anticipated changes in provider contract rates, severity
and medical technology impacts, and expected changes in utilization. The impact of benefit
leveraging is accounted for separately in the projected paid-to-allowed ratio. The change in projected
utilization trend due to changes in benefits is also considered.
Pharmacy trend considers the impact of patent expirations, new drugs, other general market share
shifts, and overall utilization trend. Changes to the current network are included in the Other Trend.
We project an average annual allowed claim trend of 8.9% from the experience to the pricing period.
).
6. Credibility/Manual Rate
A. Manual rate
Because ALIC intends to adopt the utilization management and cost containment capabilities
currently employed by Coventry Health & Life Insurance Co. (CHL), it was determined that CHLs
Missouri experience provides a relevant and suitable manual rate for the 2015 projection. The manual
rate contains
B. Credibility
Due to the significant change in utilization management, provider networks, and cost containment
anticipated between the experience and projection period, it was determined that ALICs 2013
experience should be assigned zero credibility.
7. Paid to Allowed
The projected paid to allowed ratio in the projection is based on the projection of members by benefit
plan on Worksheet 2. Assuming the migration in Section 14, the paid-to-allowed ratio is approximately
73.1% in the 2015 projection.
8. Risk Adjustment and Reinsurance
A. Projected Risk Adjustment PMPM
Since the products were developed to be an attractive option across the entire spectrum of risk, the
risk adjustment PMPM, net of risk adjustment user fees, is expected to be
B. Projected ACA Reinsurance Recoveries (Net of Reinsurance Premium)
The ACA Reinsurance program does not distribute funds to Small Group plans but only collects the
program contribution. Therefore, no reinsurance recovery was projected.
9. Non-Benefit Expenses and Profit and Risk
A. Administrative Expense Load

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The methodology used to determine the appropriate administrative expense PMPM for this product
line involved forecasting 2015 administrative expenses and membership nationally. Administrative
expenses were based on historical expense levels and the changes expected with the requirements
of PPACA.
The projected administrative expense
of premium load does not vary by product.

of premium. The percent

Cost containment programs and quality improvement activities

B. Commissions

C. Profit and Risk Margin

The target gain/loss for this product is

of premium. The target does not vary by product.

D. Taxes and Fees

Taxes and fees include only the amounts eligible to be subtracted from premiums for the purposes of
calculating MLR rebates. They are as follows:
Insurer Tax
Reinsurance Program Fee
Exchange User Fees
PCORI Tax
State Premium Tax
Other State Taxes
Federal Income Tax

The reinsurance charge of

is not included in the amounts listed above despite its
treatment as a claim, in the MLR calculations.
10. Projected Loss Ratio
Under the current pricing assumption, the average MLR, as defined by PPACA, is projected to be
11. Single Risk Pool
In compliance with 45 CFR part 156, 156.80(d), ALIC proposes a market-wide index rate, universal
to all covered lives and modified only by those Permitted Plan-Level Adjustments described in 45
CFR part 156, 156.80(d)(2), and described in detail herein.
12. Index Rate
A. Experience Period Index Rate
The index rate in the experience period is based on the ALIC allowed claims experience PMPM. All
benefits within the experience period are assumed to be EHBs; therefore, no allowed claims from the
experience period were removed.
B. Projection Period Index Rate

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The index rate reflects the projected mix of business by plan. The AV pricing values for each plan are
set based on the actuarial value and cost-sharing design of the plan, the impact of induced utilization,
and the plans provider network, delivery system characteristics, and utilization management
practices. Rates do not differ for any characteristic other than those allowable under the regulations
as described in 45 CFR Part 156, 156.80(d)(2). No variation in administrative costs is considered
for plans within a product.
Small Group Market Trend Adjustments: The following table illustrates the quarterly trend factors, the
resulting index rate for effective dates during each calendar quarter, the projected membership
distribution by effective date, and the weighted-average index rate.

Effective Dates

Membership

Trend Factor

Index Rate

1Q 2015

67%

$516.60

2Q 2015

14%

1.023

528.45

3Q 2015

11%

1.046

540.58

4Q 2015

8%

1.070

552.99

100%

1.014

523.83

Combined Total
13. Market-Adjusted Index Rate

The Market Adjusted Index Rate reflects the Projected Period Index Rate adjusted for the expected
Risk Adjustment impact only.
14. Plan-Adjusted Index Rates
The Plan Adjusted Index Rates are developed using plan-specific adjustments to the Market Adjusted
Index Rate. The following briefly describes how each set of adjustments was determined.
A. Actuarial Value and Cost Sharing
We used
to estimate the impact of
different cost sharing designs. We also reviewed the projected experience and the projected
membership by plan to estimate an overall paid-to-allowed ratio. The result of these analyses was
plan specific cost sharing adjustments that were applied to reflect the impact of the different levels of
cost sharing on the use of medical services. These adjustments are based on
and have been normalized to result in an aggregate
factor of 1.0 when applied to the projected 2015 membership.
B. Provider Network, Delivery System, and Utilization Management
Network adjustments were applied to reflect the estimated impact of differences in the network size,
efficiency, and provider contract terms. We worked with our contracting area and other subject
matter experts to review the impact of these differences and estimated the expected impact on
allowed claims.
C. Benefits in addition to EHBs
The products discussed in this filing provide coverage for only those benefits defined as Essential
Health Benefits (EHB). These products do not provide coverage for non-EHBs.
D. Catastrophic Plan Eligibility

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Not applicable. ALIC is not offering Catastrophic plans as part of this filing.
E. Distribution and Administrative Costs
Adjustments were made for projected administrative costs and profit margin. These are discussed
above in the Non-Benefit Expenses and Profit & Risk section, and exclude the Reinsurance
Contribution, Risk Adjustment User Fee, and Exchange User Fee, which are reflected elsewhere.
These expense and profit assumptions do not vary by plan.
F. Tobacco load

15. Plan-Adjusted Index Rates Calibration

A. Age Curve Calibration
The age factors are based on the HHS Default Standard Age curve.
We projected an average age factor for the 2015 membership of
factor of
by determining the

. We determined a calibration

B. Geographic Factor Calibration

For this rate filing, we have relied on our currently filed Small Group rating area factors, modified
based on information received from our Network Management team which indicated the expected
savings associated with improved unit cost arrangements with contracted facilities and providers
within each applicable rating area.
Exhibit G summarizes the rating area definitions and factors.
membership by area and the projected average area factor
Calibration is the reciprocal, or

Exhibit G displays the projected

. The Geographic Factor

16. Consumer-Adjusted Premium Rate Development

Rates are determined using the prescribed member build-up approach. In the event that a family
includes more than three dependents under age 21, only the three oldest dependents will be
considered in determining the familys premium. Additional dependents (non-billable members) will
not be included in the rate calculation.
The premium for each billable member is calculated as:
Calibrated Plan Adjusted Index Rate * Age Factor * Area Factor * Trend Factor
As an example of this calculation, consider a family living in St. Louis County that enrolls in the MO
Silver PPO 500 70/50 plan on January 1, 2015. Assume that the parents are ages 42 and 40 and
have children ages 13, 11, 8, and 6, and no family member uses tobacco. The rate for this family is
calculated as:

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The familys final monthly rate is the sum of the member rates,
. Consistent with the limit
on the number of billable dependents, no premium will be charged for the youngest family member in
this example.
17. AV Metal Values
The AV Metal Values on Worksheet 2 were based on the AV calculator. There were adjustments
made to reflect benefit features not handled by the AV calculator. Attached is the certification required
by 45 CFR Part 156, 156.135.
Adjustments made to plan design entry within the AV Calculator (Certification Option 1)

Different pharmacy copays for preferred pharmacies, non-preferred pharmacies and mail
order. Copays entered into the AV calculator as a weighted average of the copays across
pharmacy types.
Tier 1A (preferred generics). Subclass of generic drugs for which we collect a lower copay
than other generics. Copays entered into AV calculator for generic drugs as a weighted
average of preferred generics and other Tier 1 drugs.
Tiers 4 and 5 (preferred and non-preferred specialty drugs). Pharmacy coinsurance for
specialty drugs entered into AV calculator as a weighted average of Tiers 4 and 5.
Stepped Specialist office visits. Used continuance table for specialist office visits to determine
the average coinsurance level to load into AV calculator. For copay plans converted copays
to effective coinsurance before calculating average coinsurance level and converting back to
copays for consistency with the rest of the plan in the AV calculator.
Outpatient Facility sub-categories. The Outpatient Facility benefit is made up of two subcategories; OP surgical hospital and OP surgical freestanding. The average effective
coinsurance using the weightings of the internal sub-categories was entered.

Calculations made outside the AV Calculator for plan design impact (Certification Option 2)

ER visits not subject to deductible. Used continuance table for ER visits to determine the
percent of visits that would not be subject to deductible and adjusted overall impact of
deductible to account for that difference. An out-of-model adjustment was made to the AV
calculation to account for this plan design feature.
Different cost-sharing for X-Ray and lab services by place of service. Used Coventry data to
calculate the percent of these services that are performed by place of service and adjusted
overall member cost-share to account for that difference. An out-of-model adjustment was
made to the AV calculation to account for this plan design feature.

18. AV Pricing Values

The Actuarial Calculator produces Actuarial Values (AVs) that reflect the portion of costs that will be
paid by the carrier versus the member, on average. The AV Pricing Value includes the following
allowable, plan level adjustments to the index rate

Paid to allowed ratio for the plan

Plan Specific Network Discounts
Administrative Costs
Commission / Distribution Costs
Additional Plan Benefits Above the EHBs

The allowable plan level adjustments were applied to the index rate to develop plan level rates for
each benefit plan.

Page F-8

The utilization adjustments discussed in Section 13.A. were applied to reflect expected differences in
utilization due to metal tier and plan design.
19. Membership Projections
Projected membership is assumed to come from the following sources of potential members:
currently insured individual and small group members, the uninsured, current Medicaid members and
high risk pool members. Membership projections are based on historical experience, enrollment in
ACA-compliant plans through May 2014, and our expectations for future sales as additional members
move to these plans from grandfathered and transitional plans.
20. Terminated Products
All products with existing membership in 2013 will be retired in 2014. In compliance with Missouri
state law, existing groups may elect to retain these plans or purchase an ACA-compliant plan. New
small groups must choose an ACA-compliant plan.
The HIOS Products that were discontinued at the end of 2013 are:
48161MO001
48161MO003
21. Plan type
The plan types in the drop down boxes on Worksheet 2 adequately identify the products in the
projection period.
22. Warning Alerts

23. Reliance On Others

While I have reviewed the reasonableness of the assumptions in support of both the preparation of
the Part I Unified Rate Review Template and the assumptions in support of the rate development
applicable to the products discussed in this filing, I relied on the expertise of the following noted
individuals, along with work products produced at their direction, for the following items:

24. Actuarial Certification:

I,
, am an actuary of Aetna, of which ALIC is a wholly owned subsidiary. I am a
member of the American Academy of Actuaries and I meet the Academy qualification standards for
rendering opinions of this type.
I hereby certify in my opinion, that:
This filing is in conformity with all applicable Actuarial Standards of Practice, including, but not limited
to:

Page F-9

 ASOP No. 5, Incurred Health and Disability Claims

ASOP No. 8, Regulatory Filings for Health Plan Entities
ASOP No. 12, Risk Classification
ASOP No. 23, Data Quality
ASOP No. 25, Credibility Procedures Applicable to Accident and Health, Group Term Life, and
Property/Casualty Coverages
ASOP No. 26, Compliance with Statutory and Regulatory Requirements for the Actuarial
Certification of Small Employer Health Benefit Plans
ASOP No. 41, Actuarial Communications.

The projected index rate is:

a. In compliance with all applicable State and Federal Statutes and Regulations (45
CFR 156.80(d)(1))
b. Developed in compliance with the applicable Actuarial Standards of Practice
c. Reasonable in relation to the benefits provided and the population anticipated to be
covered
d. Neither excessive nor deficient

The index rate and only the allowable modifiers as described in 45 CFR 156.80(d)(1) and 45
CFR 156.80(d)(2) were used to generate plan level rates.

The percent of total premium that represents essential health benefits included in Worksheet
2, Sections III and IV were calculated in accordance with actuarial standards of practice.

Qualification The Part 1 Unified Rate Review Template does not demonstrate the process used by
ALIC to develop rates. Rather it represents information required by Federal regulation to be provided
in support of the review of rate increases, for certification of qualified health plans and for certification
that the index rate is developed in accordance with federal regulation and used consistently and only
adjusted by the allowable modifiers.

___________________________

______9-8-2014_____________
(Date)

Aetna

Page F-10