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Pricing model for Milliman which is an actuarial consulting firm.
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M I L L I M A N
Commercial Rating Structures
The Milliman Health Cost Guidelines—Commercial Rating Structures are used to determine claim costs for health benefits provided through traditional fee-for-service plans, alternative delivery systems (such as HMOs, PPOs or systems using modified fee-for-service reimbursement methods), and freestanding or integrated prescription drug programs.
H I G H L I G H T S
The Commercial Rating Structures have several features to enhance their flexibility and usefulness, including:
• TheManagedCareRatingModel(MCRM)isanautomatedspreadsheetdevelopedprimarilyfromtheManagedCareRatingsectionoftheRatingStructures.TheMCRMalsoincorporatesmanyratingvariablesandworksheetsdescribedinothersectionsoftheRatingStructures,includingtheproviderreimbursementworksheetsandclaimprobabilitydistributions.
• AseparatePrescriptionDrugratingsectionprovidesformoredetailedanalysisofprescriptiondrugcostsandbenefits.Variouscostperprescriptioncontinu-ancetablescanbeusedtomodelunitpricevariationandtheeffectiveness(expectedversusnominal)ofhigherstatedplancopays.ThePrescriptionDrugRatingsectionisaccompaniedbythePrescriptionDrugRatingModel,whichautomatestheentireprescriptiondrugratingprocess.
• TheRatingStructuresareupdatedandexpandedannually.TheRatingStructuresarecontinuouslymonitoredasweusetheminmeasuringtheexperienceorevaluatingtheratesofourclients,andaswecomparethemwithotherdatasources.
F E AT U R E S
• Major Medical Rating Structure
• Managed Care Rating Structure
• Prescription Drug Rating Structure
• Basic Tables
• Deductible Tables
• Trend Factors
• Cost Management
• Mandated Benefits
• Rating Examples
• Appendices
• Managed Care Rating Model
• Rx Rating Model
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M I L L I M A N
Commercial Rating Structures
Major Medical Rating Structure
TheMajorMedicalRatingStructureprovidesaflexiblebasisforestimatingclaimcostsfortraditionalhealthplanssuchasComprehensiveMajorMedical,Base,BasePlusSupplementaryMajorMedical,SupplementaryMajorMedical,Wrap-aroundandSuperimposedplans.Usingthisratingstructure,claimcostsmaybedevelopedforvariousbenefitpackageswithvarioustypesandamountsofdeductibles,coinsuranceprovisions,planmaximums,andcontractprovisions.Detailedratingworksheetsandstep-by-stepinstructionsareincludedtoguidetheuserinthecalculations.
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M I L L I M A N
Commercial Rating Structures
Major Medical Rating Structure continued
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M I L L I M A N
Commercial Rating Structures
Managed Care Rating Structure
TheManagedCareRatingStructureisusedtocalculateclaimcostsfordetailedbenefitcategoriesonacompositepermemberpermonthbasis.Thisratingstructureallowsausertomodifythecompositeclaimcostforage/gendermixofthemembers,geographicarea,healthcaremanagement,benefitplancoverage,trendandnegotiatedreimbursement.Wellmanagedtargetsprovideabasisforbenchmarkingexperienceandmodelingchangesinclaimcostwithimprovementsinefficiency.
TheManagedCareRatingStructureincludesworksheetsanddatatablestoassistinthecalculationofprovidercapitationrates,premiumratecalculationsbyratingtier,andopen-networkrating.Inaddition,theManagedCareRatingStructureincludesadiscussionoftheissuestobeconsideredwhenratingbenefitplanscontainingbothmanagedcare(i.e.copays)andmajormedical(i.e.deductibleandcoinsurance)features.
TheManagedCareRatingStructureincludesthesectionConsumer Driven Health Plan Rating Considerations. Inaddition,thesectionPoint-of-Service/Preferred Provider Organi-zation Plans includesadiscussionofselectionissuesinvolvedwithsuchplans,aswellasotheremployeechoiceoptions.
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M I L L I M A N
Commercial Rating Structures
Managed Care Rating Structure continued
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M I L L I M A N
Commercial Rating Structures
Prescription Drug Rating Structure
ThePrescriptionDrugRatingStructureandaccompanyingratingmodelcanbeusedtodetermineclaimcostsforawidevarietyofprescriptiondrugbenefitplans.TheRatingStructurerecognizesvariablesforage/gendermix,area,benefitcoverage,reimbursement,pharmacyandphysicianincentives,mailorderavail-ability,andcostmanagementprograms.Additionalinformationisprovidedbydrugtherapyclassandforhighlyutilizeddrugs.
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M I L L I M A N
Commercial Rating Structures
Basic Tables
TheBasicTablessummarizetheunderlyingutilizationandchargelevelassump-tionsusedthroughouttheRatingStructures.Utilizationandchargelevelinfor-mationisprovidedbyageandgenderforemployees,spousesandchildrenforeachofthe60benefitcatagories.Additionalinformation,suchaslengthofstay,isprovidedwhereappropriate.
Compositecostsareexpressedonaperemployee,perspouse,peradult,perchildandpermemberbasis.Employeecompositecostsarebasedonanemployeedistri-butionrepresentativeoftheU.S.adultlaborforce.
TheBasicTablesformaternityservicesarepresentedinadifferentformatthantheothertablestoreflectthevaryingincidenceofpregnancybetweenfemaleemployeesandfemalespouses.
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M I L L I M A N
Commercial Rating Structures
Deductible Tables
TheDeductibleTablesprovidepermemberdeductiblevaluesforvariousbenefitcombinationsanddeductiblelevels.Alsoshownisthemonthlyclaimcostforthesamebenefitcombinationsanddeductiblelevels.AlternateDeductibleTablesareprovidedforSupplementaryMajorMedicalplansthatcannotdirectlyusetheDeductibleTables.
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M I L L I M A N
Commercial Rating Structures
Trend Factors
TheclaimcostspresentedintheRatingStructuresarerepresentativeofclaimsincurredonJuly1.ForanexperienceperiodwithamidpointotherthanJuly1,anadjustmentisnecessarytoreflectestimatedchangesintheutilizationandcostofmedicalcare.
Medicaltrendassumptionswillvarysignificantlydependingonfactorsthatareoftenuniquetoeachsituation.Suchfactorsincludetypeofplan,benefitstructureandgeographicarea.Moreover,thesefactorstendtobedynamic,requiringcontinuousanalysisandsubjectiveevaluation.Forthesereasons,itisdifficulttoestablishasetofrecommendedtrendfactorsforallusersoftheRatingStructures.Rather,wehavedevelopedaframeworkforestablishingtrendassumptionsforavarietyofsituations.
Thissectionincludesconsiderationsinestablishingtrendassumptions,guidelinesforcurrentyearseculartrendfactorsandatrendassumptionworksheet.
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M I L L I M A N
Commercial Rating Structures
Cost Management
Thestartingclaimcostsareintendedtoberepresentativeofutilizationandchargelevelsforhealthbenefitplansprovidedthroughalooselymanagedhealthcaredeliverysystem.
Manyhealthcareplansofferedtodayincludecostcontainmentfeaturesthatmayresultinsignificantchangesintheseunderlyingutilizationandcostassumptions.
Theeffectivenessofcostmanagementprogramswillvarywidelydependinguponanumberoffactors,includingtheenvironmentinwhichtheprogramisimple-mented,thenatureoftheprogram,andthedurationsinceimplementation.Forthisreason,itisnotpossibletoestablishasetofcostmanagementadjustmentfactorsthatwouldapplyuniformlyforallplans.
Theinformationinthissectionisintendedtoassisttheuserindevelopingcostmanagementadjustmentfactorsappropriateforthespecificsituationinvolved.Thissectionincludesconsiderationofthemajorfactorsaffectingcostmanagementsavingsandadiscussionofthegeneraleffectivenessofvariouscostmanagementprograms.
Mandated Benefits
Statemandatedbenefitswerefirstintroducedduringthe1960s.Today,everystaterequires“mandatedbenefits”or“mandatedofferings,”resultinginover800suchmandatesintotalforallstatescombined.
Themandatesapplicabletoeachstatearecontinuallychanging,sotheRatingStructuresdonotattempttoidentifywhichmandatesareapplicableineachstate.TheRatingStructurescontaindetailedclaimcostinformationonsome,butnotall,mandates.
TheclaimcostsassociatedwithmanymandatescanbedevelopedfrominformationcontainedintheRatingStructures.Theinformationinthissectionisintendedto:
• Definemandatedbenefitsandmandatedofferings;
• Providegeneralinformationaboutthetypesofmandatescurrentlyineffect;
• Provideinformationabouttheapplicabilityofthesemandates;
• Identifygeneralconsiderationsindeterminingtheclaimcoststobeexpectedforthesemandates,orinterpretingtheclaimcostsincludedintheRatingStructures;and
• Providespecificutilizationandclaimcostinformationconcerningseveral ofthesemandates.
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M I L L I M A N
Commercial Rating Structures
Rating Examples
TheRatingExamplessectioncontainsdetailedillustrationsoftraditionalandmanagedcareratingprocedures.Thismaterialisoftenusedasatrainingtoolfornewusers.
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M I L L I M A N
Commercial Rating Structures
Appendices
Theappendicescontainthefollowing:
• Adetaileddescriptionoftheapproximately60benefitcategories,including anyassumedcoveragelimitationsaswellasCPT-4andHCPCScodemappings.
• ThedemographicassumptionsunderlyingtheBasicTablesdetailedbyrating tier(one-tierthroughfive-tier).
• Adiscussionofproviderreimbursementstructures,includingaphysicianfee scheduleanalysisworksheet.
• Hospitallength-of-staydistributiontablesforvariousinpatientbenefitsandlevelsofaveragelengthofstay.
• Informationforadjustingclaimcostsfromalargegroupbasistoan individualorsmallgroupbasis.
• Adiscussionofthegroup-specificexperienceratingprocess,including variousconsiderationswhenusingcredibilityinrating.
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M I L L I M A N
Commercial Rating Structures
Managed Care Rating Model
TheManagedCareRatingModel(MCRM)isamenu-drivenExcel-basedspread-sheetthatincorporatesallaspectsofthemethodologydescribedintheManagedCareRatingsectionoftheCommercialRatingStructures.TheMCRMsimplifiestheapplicationofareafactors,trendfactors,age/genderfactors,contractualandcoverageutilizationadjustments,andnegotiatedreimbursementadjustmentsforavarietyofproviderreimbursementarrangements.Themodelalsoallowsforsimpleapplicationofhealthcaremanagementadjustments.TheMCRMisincludedwiththeleaseoftheCommercialRatingStructures.
Copays (Steps 30 a and b)In-Network
Fixed PercentageType of Service Copay Copay
Hospital InpatientMedical $0.00 0.0%Surgical 0.00 0.0%Psychiatric 0.00 0.0%Alcohol & Drug Abuse 0.00 0.0%Maternity Deliveries 0.00 0.0%Maternity Non-Deliveries 0.00 0.0%Skilled Nursing Facility 0.00 0.0%
Hospital OutpatientEmergency Room $0.00 0.0%Surgery 0.00 0.0%
PhysicianMaternity Deliveries $0.00 0.0% 10 Number of Visits/CopaysMaternity Non-Deliveries 0.00 0.0% 3 Number of Visits/CopaysOffice/Home Visits 0.00 0.0%Urgent Care Visits 0.00 0.0%Therapeutic Injections 0.00 0.0% 0.3 Copays per ServiceAllergy Testing 0.00 0.0% 20 Tests Per VisitAllergy Immunotherapy 0.00 0.0% 0.6 Copays per ServiceImmunizations 0.00 0.0% 0.5 Copays per ServiceWell Baby Exams 0.00 0.0%Physical Exams 0.00 0.0%Vision Exams 0.00 0.0%Hearing/Speech Exams 0.00 0.0%Consults 0.00 0.0% 20% Inpatient ConsultsPhysical Therapy 0.00 0.0% 3 Procedures Per VisitChiropractor 0.00 0.0%Podiatrist 0.00 0.0%Outpatient Psychiatric 0.00 0.0%Outpatient Alcohol & Drug Abuse 0.00 0.0%
OtherAmbulance $0.00 0.0%Durable Medical Equipment 0.00 0.0%Prosthetics 0.00 0.0%Glasses/Contacts 0.00 0.0%
Out-of-Network
For indemnity plans, use the "Aggregate Deductible and Out-of-Pocket Maximum" section to the right.
For managed care plans, click here to enter copays
NOTE: Percentage copays apply to the average reimbursement less the fixed copay.
It is Common to Have Copays on the Services Listed Above. Click Here to Enter Copays For Other Line Items.
Out-of-Network plans are usually indemnity plans instead of managed care plans (i.e., coinsurance and deductibles apply instead of copays).
Per Day User NavigatorClick on Appropriate Areas Below to Travel
Through User Input Sections
Demographics
Coverage Utilization Adjustments
Trends
Level of Healthcare Management
Headings and Documentation
General Model Setup
Contractual Utilization Adjustments
Hospital Outpatient Reimbursement
Physician Reimbursement
Hospital Inpatient Reimbursement
Prescription Drug Reimbursement
Other Reimbursement
Copays
Retention
Aggregate Deductible and Coinsurance
Allocation of Claim Costs
POS/PPO Plans
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