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PREMIER BEHAVIORAL SYSTEMS OF TENNESSEE .. LLC.
STATEMENT OF OPINION ON ACCURACY AND COMPLETENESS OF RECORDS
December 31, 2008
I, Michael D. Fotinos, of Magellan Health Services hereby affirm that the records, listings, summaries of policies in force as of December 31, 2008, and other relevant data, prepared for and submitted to Ernst & Young, LLP, were prepared under my direction and, to the best of my lrnowledge and belief, are accurate and complete. I hereby affirm that the claims incurral dates, claims paid dates, and contract totals are, to the best of my knowledge and belief, accurately stated on the aforementioned records, listing, summaries, and other relevant data.
I further affitm that, to the best of my knowledge and belief, Premier Behavioral Systems of Tennessee, LLC. has no obligation or commitments with respect to which actuarial reserves are required or appropriate other than those to which data in the aforementioned records, listings, summaries, and other relevant data relate.
Michael D. Fotinos Finance Director, Public Sector Magellan Health Services Columbia, Maryland February 26, 2009
ill ERNST & YOUNG Quality In E.-erything We Do
Ernst & Young LLP 5 Times Square New York, New York 100366530
STATEMENT OF ACTUARIAL OPINION
February 25, 2009
Board of Directors Premier Behavioral Systems, LLC
Phone: (212) 773-3000 www.ey.com
I, Michael J. Cellini, am a member of the American Academy of Actuaries ("the Academy"), and a Senior Manager and Consulting Actuary with the firm of Ernst & Young LLP. I have been retained by Premier Behavioral Systems, LLC, ("the Company") to issue this opinion. I meet the Academy qualification standards for issuing this opinion, and I am familiar with the valuation requirements applicable to the Company.
I have reviewed the actuarial assumptions and actuarial methods used in determining the reserves and related actuarial items listed below and as shown in the Quarterly fmancial statement of the Company, as prepared by the management of the Company for filing with state regulatory officials, as of December 31, 2008. My responsibility is to express an opinion on these reserves and related actuarial items based on my review. The actuarial methods,· considerations and analyses used in forming my opinion conform to the appropriate Actuarial Standards of Practice and Actuarial Compliance Guidelines as promulgated by the Actuarial Standards Board, and form the basis of this statement of opinion.
Financial Statement Reference Item
Claims Unpaid
Page-Line
3-1
Amount
$6.434.188
The reserves and related actuarial items listed above represent the estimates made by management of the Company for all unpaid claims as of December 31, 2008. Considerable uncertainty and variability are inherent in such estimates, and, accordingly, the subsequent development of the unpaid claims liability may not conform to the assumptions used in the determination of the unpaid claims liability and therefore may vary from the amounts in the foregoing table.
I have relied on listings and summaries of claims and other relevant data, and upon management's representations regarding the collectibility of reinsurance recoverable amounts, as expressed in the attached statement. I have relied upon Mr. Michael D.
Fotinos, Finance Director, for the accuracy of the data, as expressed in the attached statement.
In other respects, my examination included such review of the actuarial assumptions and actuarial methods, including comparing prior years' estimates of unpaid claims liabilities to their subsequent development and such other tests of the actuarial calculations, as I considered necessary.
In my opinion, the reserves and related actuarial items identified above:
(a) Are computed in accordance with presently accepted actuarial standards consistently applied, and are fairly stated in accordance with sound actuarial principles, except that consideration of the adequacy of the Company's reserves and related actuarial items in conjunction with the assets which support them has not been performed;
·(b) Are based on actuarial assumptions relevant to contract provtstons and appropriate to the purpose for which the financial statement was prepared, and provide for all reasonably anticipated unpaid claims under the contracts;
(c) Meet the requirements of the insurance laws and regulations of the State of Tennessee;
(d) Are computed on the basis of assumptions consistent with those used in computing the corresponding items in the Annual Statement of the preceding year, with any exceptions noted below;
(e) Include provision for all actuarial reserves and related actuarial items which ought to be established; and,
(f) Make good and sufficie~t provision for all unpaid claims and other actuarial liabilities of the Company under the terms of its contracts and agreements, by which I mean that the estimated liabilities is an appropriate measure of reasonably anticipated payments on incurred claims under potentially moderately adverse development, although, consistent with the scope of my review, the adequacy of the Company's reserves and related actuarial items in conjunction with the assets which support them has not been considered,
My review did not include asset adequacy analysis, as such analysis is not in the scope of my assignment. I have not reviewed any of the Company's assets and I have not formed any opinion as to their validity or value. My opinion rests on the assumption that the Company's December 31, 2008 statutory-basis unpaid claims liability is funded by valid assets that have suitably scheduled maturities and/or adequate liquidity to meet future cash flow requirements.
As part of my review, I conducted analysis consistent with Section 3.6, "Follow-Up Studies", contained in ASOP Number 5, "Incurred Health and Disability Claims'', adopted by the Actuarial Standards Board in December 2000.
My review relates only to those reserves and related actuarial items identified herein, and I do not express an opinion on the Company's fmancial statements taken as a whole.
This opinion has been prepared solely for the Board and the management of the Company and for filing with state regulatory officials and is not intended for any other purpose.
Michael J. Cellini, ASA, FCA, MAAA Associate, Society of Actuaries Fellow, Conference of Consulting Actuaries Member, American Academy of Actuaries Ernst & Young, LLP 5 Times Square New York, New York 10036-6530 (212) 773-0873
02/24/2009 12:44 FAX 4109535205
liiiA G E L L A N • :: · · ·.,.· ~:i: .. H E A L T H S E R V I C E S"
0 ·:: •• • ~ • ~ ..... : l··. ' · .· ;' · :·:.;,':.Gmin& Bmtr AlJ rh~ Ttmr·
February 24, 2009
Mr. Michael Cellini, ASA, MAAA Ernst & Young LLP 5 Times Square New York, NY 10036
FIN DF.P Ia] 003
I, Michael Fotinos, Finance Director for Premier Behavioral Systems of Tennessee, LLC ("the Company"), hereby affirm that the listings and summaries of claims, exposures and other relevant data as of December 31, 2008, prepared for and submitted to Michael Cellini, aU of which are detailed in the attached schedule, were prepared under my direction and, to the best of my knowledge and belief, are accurate and complete, and are the same as or derived from the in force records and other data which form the basis for the Company1s 2008 Annual Filing. I further affirm that the line of business classifications, claim incurral dates, claim payment dates, development intervals, reinsurance data and premium rate infonnation contained in such listings, summaries, and related data are, to the best of my knowledge and belief, accurately stated. I further affrrm that the Underwriting and Investment Exhibit of the Annual Statement was prepared consistent with the claim incurral and claim payment dates of the data provided to support determination of the liability for unpaid claims. I further affmn that the listings, summaries, line of business classifications, to the best of my knowledge and belief, are compiled on a basis consistent with comparable data at December 31, 2007.
Policy reserves, the liability for unpaid claims, and tmearned premiums are net of reinsw-ance ceded amounts. All such reinsurance recoverable amounts are collectible at December 31, 2008. I am unaware of any material adverse change in the financial condition of the Company's reinsurers that might raise conce~n about their ability to honor their reinsurance commitments. The reinsurance contracts provided to you by the Company represent the Company's complete agreements ·with its ceding and assuming companies, and there are no modifications, either written or oral, of the tenns of the Company's reinsurance contracts or additional reinsurance agreements that have not been provided to you.
I further affirm that, to the best of my knowledge and belief, the Company has no obligations or commitments at December 3 1, 2008 with respect to which actuarial reserves are required or appropriate, except those for which reserves and liabilities are included in the following exhibits and line items on page· 3 of the Company's 2008 Annual Filing:
Claims unpaid
Finance Department
$6,434,188
-~D-~ Michael D. Fotinos/ Finance Director
6950 Columbia Gateway Drive Columbia. Maryland 21046
4101953-1000 tel 410/953-5205 fax www.MagellanHealth.com
Premier Behavioral Systems ReconcilaUon of Net Premium Income and Uncollected Premiums A: December 31, 2008
Gross Rovenuo Paid Chango In Rotro Revenuo Accrual Total Reveue
Retro Revenue Accrual Balance, December 31,2007 2008 Change In Balance Balance, December 31, 2008
Uncal!ocll!d Pmmlums December 2008 2.5% Withhold Retro l;levenuo Accrual Miscellaneous Difference Total
1.2
1,2
Jan-08 7,806,769.01
(23.440.97) 7,783,328.04
1,204,729.01 (163.313.18)
1,041,415.84
124,537.17 1,041,415.84
1,165,953.01
f!!l:2! 7,301,444.8!1
329.765.88 7,7t1,210.n
Ml!r:2i &u:.lli 8,087,551.20 7,013,841.82 (336 467.76) __ _.1....,1,:::.24.:.:2:.:..;.4:::.2
7, 751,083.44 7,825,084.24
~ 7,846,517.90
8,693.90 7,855,21 t.BO
Jun-08 8'Jii7.644.73 (240.170.73)
7,858,474.00
1. DUB to liming ol priority status assessment being submitted to U1o Stnto and entered Into payments system, at the limo ollnlllel payment certain mombors w110 would quallly (or payment al the higher priority rates 81e paid at the non priority rates. PBS records an accrual related to lhls mlsclasslllcallon.
2. AIID'Nanc8 lor retroactive member additions. Comparison of romiltance to eligibility
~ 8,058.553.67 (510,815.74)
7,547,737.93
Aug-08 8,435,497.57 (872.935.23)
7,562,562.34
~ 6,746,697.48 1,621,817.35 8,358,514.83
Oct-08 7,627,127.45
103,840.06 7,730,967.51
Nov-08 ~ !g!!! 5,005,681.94 4,981,486.98 87,898,814.64 (521.832.92> ----'2""7_,.5.:::.990=.56:.::. --~P""'G3~,3""1'-3:..;..ta::~)
4,483,849.02 5,257,477.54 87,735,601.46
PREMIER BEHAVIORAL SYSTEM 12/31/2008 IBNR
FFS Claims FFS PAD CMHC Claims Cutoff
Reinvestment ·
TOTAL
Premier 4,310,628
301,747 588,696
1,094,303 6,295,373
138,815
6,434,188
TennCare Partners Program Reconcilation of IBNR per MLR to Quarterly Filing December 31,2008
PBS TBH
IBNR Per MLR Report 4,899,323 1,232,128
Adjustments Claims Cutoff ( 1 ) 1,094,303 647,404 FFS PAD (2) 301,747 59,367 Reinvestment Reserve 138,815 427,050
Total Adjustments 1,534,865 1,133,821
IBNR Per Monthly Filing 6,434,188 2,365,949
(1) Claims processed during month but not paid until January. Included as a component of paid claims on the MLR reports.
(2) Ernst & Young requiring a 7% PAD above point estimate for FFS IBNR. Is an allowance for adverse deviation. Not reflected in MLR reports.
East
13,095,876
2,257,480 652,869
2,910,349
16,006,225
TennCare Partners Program Reconcilation of Medical Expense per MLR to Quarterly Filing December 31,2008
PBS
Medical Expense Per MLR Report 72,665,033
Adjustments Adjustment to Prior Period IBNR (1) (1 ,840,030) FFS PAD (2) 301,261
Total Adjustments (1,538,769)
Medical Expense Per Monthly Filing 71,126,264
TBH 30,519,261
(2, 119,040) 59,349
(2,059,691)
28,459,570
(1) Adjustment to IBNR for 12/31/07 and prior dates of service. Ties to underwriting and investment exhibit.
(2) Portion pertaining to 2008 only.
East
123,592,335
(1 ,867,590) 638,275
(1,229,315)
122,363,020
TennCare Partners Program Reconcilation of Revenue per MLR to Quarterly Filing December 31,2008
Revenue Per MLR Report
Adjustments 2007 retro membership {1)
Total Adjustments
Revenue Per Monthly Filing
PBS
87,641,422
94,079
94,079
87,735,501
TBH East
38,219,223 160,951,375
~189,302) {463,501)
(189,302) (463,501)
38,029,921 160,487,874
(1} Change in 2007 revenue between December 2007 MLR report and December 2008 MLR report.
BllO ~nllet Reba vi~~ lena on~nnes:ICC u.c
RtP«Ilm: Month l.le<.OS
s-IIDOI
Ttaac.:.n Capllallou PayaHAI
Pa,_at. C.r.Moatal Raallh aaol Su- AIM,.. S.,.icu !or lho Moalh l:piZioa Pa,_ brllz CJama "'-"' Syrtem Outpllxa l'lyn;eaU b7Uoo Clailm ~ Sys~em S.,.,....l!ouiac Payo"""" by lllo Clama Pt..-.q S)"Wtl .._,,.. OWpaDcz& Pay .. ,.. by lllo a.m."""'-"" Syaam Paai&l ~Paymo.u bylllo C1lllm s-ial Syoocm llliAMno Pa,.,.... bylllo Clama --SJ*ID ~Pay..-.t>rllzCWmr.~Sf1'em ,-_,..n...JiocuPay- tor tbo ewn. """-iq $)Wm
OIHCc.p.toaoDPa-Otbo<Capilatioo~
GAAPa-Noa-R'S .. atiot ~Paynaaa (..,Motuilic<ltllud-.-..Mcoo S.rvM& ........ .,.p.,.....,,. Oilier Pay-.IA4Juot""tLI to Mooull"'-!lh ud SUb ...... A ..... CotLI
Ina:
"'"-lld>-Roc:owrioo 1101 &!kcl&d in Payn•,..l>r lllc c.;... 8yslom
TCUI Pa,- tortbo m>W. ~JDNRtortbo~
Pa)-.a aaol Jt.a~ainU.,lJINR !or tho manlb
MdlaiL-Jt.llo
MEDICAL LOSS RATIO REPORT. TOTAL MII)I)Llt WI!ST .IIKCIONS
JUn., l'oriad
611·1~1.91
1:10.116.660
27.11SI.I63 S.C1 .. 7$6 ol.lm.ool4 1.39«.975
32t.l34 l.»f.H5 7,927,224
39,901 q,-17.1l17-'40 17,234,675
0 ::.J(7,160
0 Yri!JJ'j
0
.506.-404 117,7:10.629
ll7.73!U2'l
IUt.Y .. EhWI:ztll 121J1/l002
UUS4.711
s...axm• ll.Hl.ll'Jt t.JOU17 3.100.~
$64,1.19
5,737,061
'~ 2L7M
.,.00.~
l&,m,on ::S..S31,•21 I,41UI3 :z.m.m
0
I.JJJ.uo
l,l9U/6
!46 .• il6.7CO
z•uU.740
lb...,Y .. l!nlcd1~1 12/JII3lOJ
260.'1UJ5
&U9:Z.II7 11.9Jl.u& ,,,,161 1,7l0.402
&a:!.U6 5,&40,7&1 ~)t
... ,S7 SI,41J,4JO
4L27ol.9A Zol.693.4JJ 6,m.m 1,100.976
0
2.75:1,340
741,1V
W.l/11.605
U1.1111.60$
F..._Y_ i'AWI2/J1 1~1t.llllol
2\l.m,,,.
37.112.129 ll~1.1S1
l,Q)..I'U
),25'1,16)
274,45)
3.Jt2."' 3,9)2.601
ss.na IQUUI7
J.u77.KS
'J:lJJ47W 6,151.114
ts.._7H 0 z.,,.,,l
:!43.719 lll.m.lta
!ll.lttl91
l'orb.Y&dall:ztl1 12131/2005
l2S.l1&.9U
lJ.IS6.66J ICI,IU.272 f.:zA<,IOl
:Z.W.:St 192.~
ol.l$7.!110 .s,dS,ll&
14,134 61.263,767 lG,OOS.3I6
17,1Jt,lll U27.15&
7&7.311
231-'21
IIJ,2U.701
IJI3.2U.701
Fccm.Y .. lblodi2/JI l:ztltal06
m.JOt • .SI
47,54) ... )
1.409,927 6-'H.SO 2.27Uil
67.4:7 :z.m.:u 5,2H,l'N
S.9S7 GI!JJ',7U
21,7S7,m ll.ol0,774
0 105.1&2
0
6S.711
175.l!.t.l75
17S.ZU,I75
lbh~ Fccmo~ &dod 1:/131 &dodl:/131 l:ztllllW7 12/lJflOOI
129.739.417
36.WI.224 S.21U21 :.us.ua l,ltMU
n,rn 3,9&1,165
2.S72.11l 'Z,Q'
37,2UU7J 0
I.U6.U6
401,94t 0
IU,lU
~1.622ml
6.943 9t.67Jt.976
7.7a3,157
'1.5 .... &47 llol.&M 174,l01t 67,15f IQ,lO$
29ol.SU t7,9st
0
2.:91.605 0
503.5U 0
:1&.011
I.SSI
6,llS.6to
3.099 6.340.719
7.111.159
:1,30!,091
JOS.4l5 170.731 '/1,415 ,..,
l:IIUJt 107.$11
~'Zia:n• 0
503,$&4
Zol.ru 0
600
6.090,016
7.:39 6,W/.JI•
7,703.1:!0
:Z.UI,S'/3 lll.lll :!0'1,116 &a.m
191 J)l,l)lO
IOU27
2.301.4&7
&76.675 0
2ol.990 0
(6,122)
6.l1ol.631 10,604
6,121.2JS
7,911,Ul
Z.&71.71J l46-'61 21M.6U 0,210
416
:rii.SOS la.&SI
l.417.35S 0
•n.m
:c.u2 0
2,402
6.5)S.'!S
tM611 6.57:!.00
t.022.0t7
Z.Siof.$71 155,9" 223,106 SJ.096
420.2.,
1&2,412 0
Z,3ol2.911
•77.nl 0
2ol.119 0
1,132
6.!al ... ~ 17.612
6.651.51:7
l.lm-'611
:Z.f60.'24 359.570 237,2U
61.110 0
.4()5,10.1
14s.1l0 0
2,351.1)43 0
lClUII
25 .... 3 0
3JI2
'-'3J.l95 13.331
'.salm
,,,..no
:!.)U.OII
:ri6.0ZJ la.~Wt
S&,'l67 0
363.330 lf'.UOZ
2,337,l05
cti,JU 0
lol.rn
6,163
Ul$,964
190.'/CO 6.606.7U
,,....70S
l.lll,l:ll
IU.all 2)),)91
5).117 0
:r/S,I&S
137.251 0
'Z.Ils.J74
40,417
0 24,494
Q
:!.UI
6,09:1,200
(1;11.269
6.699 ... 9
7.6-4t.U3
:z.w.m 115.130 217,927 5!,4lS ,.
400,.1£9
UI.S21 0
2,401,:139
a:JO.I74 0
2S.m
IIJ14
6.32&.ZU 42SM6
6,7SUIO
7,763.777
2.164-'21 JU!JJ4 190.601 51.$11 1,423
417.717 165.651
0
2.271,241
UJ,al1 0
24,90$ 0
1.911
6.131,~1
0'724.17 UlO.att
4.715,till
1199,9'13
171.U4 IUJO 2L2))
395,412
56-'07
l,ll.UOG
1&&.111 0
5.214 0
ol.427
2.s..t0,621 713-lll
l-'SMJI
ol.ln.l<S
01,711
""" 1.7"-2 9-'IS
0
4L74J
IP/&,432
150.171 0
S.941 0
3,1)62
L.,.9.019
::.::03.602 1 •• ~'1.621
!7.641.422
Zol.S70.9&7 J,IIOUII
'Z.I2S.M7 '<O.ffl llJJO
ol.l0036 1.46(1.610
0
2!,36C.Ol2
5nnou
261.601 0
3ol.4tl
17.771.65} ... 1'92310
n.o<s~.o"
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