44527MO0180064

44527MO0180066
44527MO0180065
44527MO0180063
44527MO0180068
44527MO0180067
44527MO0180054
44527MO0180052
44527MO0180051
44527MO0180053
44527MO0190062
44527MO0190056
44527MO0190061
44527MO0190058
44527MO0190057
44527MO0190060
44527MO0190055
44527MO0190059
44527MO0190064
44527MO0190066
44527MO0190065
44527MO0190063
44527MO0190068
44527MO0190067
44527MO0190054
44527MO0190052
44527MO0190051
44527MO0190053
44527MO0200062
44527MO0200056
44527MO0200061
44527MO0200058
44527MO0200057
44527MO0200060
44527MO0200055
44527MO0200059
44527MO0200064
44527MO0200066
44527MO0200065
44527MO0200063
44527MO0200068

n/a
9.18%
10.64%
n/a
8.14%
13.81%
-1.37%
n/a
n/a
-1.45%
12.29%
17.89%
n/a
8.59%
n/a
n/a
n/a
7.43%
n/a
12.53%
14.08%
n/a
11.44%
17.37%
1.86%
n/a
n/a
1.69%
8.86%
14.32%
n/a
5.41%
n/a
n/a
n/a
4.18%
n/a
9.22%
10.64%
n/a
8.11%

Page F-2

44527MO0200067
44527MO0200054
44527MO0200052
44527MO0200051
44527MO0200053

13.81%
-1.30%
n/a
n/a
-1.40%

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 CHL-MO 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 $115M.
C. Allowed Incurred Claims
The following table reports incurred claims:
Coventry Claim System
External Vendor Claim System
IBNR
Total

Allowed
$ 83.6M
$ 22.6M
$ 1.0M
$107.1M

Incurred
$ 66.1M
$ 16.9M
$ 0.8M
$ 83.8M

Allowed and incurred claims come directly from the CHL-MO 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.

Page F-3

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 0.9% of the experience period incurred claims.
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. In addition, subsidies will
be available to many individuals and families who are currently uninsured. 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, as well as expected sources of market
expansion (including Medicare, Medicaid, individual insurance, small group employer insurance, large
group employer insurance, and the high risk pool).

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, Coventry 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

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

The estimated net allowed impact of these changes relative to the current individual base period
experience is
or
of claims cost.

Page F-4

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 Coventry
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
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. An anticipated increase
in the utilization and average cost of Hepatitis C treatments is expected to increase pharmacy costs
.
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 8.5% from the experience to the pricing period.
A

6. Credibility/Manual Rate
A. Manual rate
Because CHL-MOs 2013 small group experience was deemed to be fully credible, a manual rate was
not developed for the purposes of this rate filing.
B. Credibility
As noted on Worksheet 1, CHL-MOs 2013 small group experience contains 344,142 member
months. This experience meets Coventrys standard for full credibility and therefore was assigned
100% 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
75% in the 2015 projection.
8. Risk Adjustment and Reinsurance
A. Projected Risk Adjustment PMPM

Page F-5

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. This contribution of $3.67 PMPM has been reflected in Section III of Worksheet
1.
9. Non-Benefit Expenses and Profit and Risk
A. Administrative Expense Load
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
premium load does not vary by product.

The percent of

Cost containment programs and quality improvement activities represent 0.9% of premium.
B. Commissions

C. Profit and Risk Margin

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
Exchange User Fees
PCORI Tax
State Premium Tax
Other State Taxes
Federal Income Tax
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), CHL-MO 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

Page F-6

A. Experience Period Index Rate

The index rate in the experience period is based on the CHL-MO 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
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.
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
models
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
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. Non-Tobacco Adjustment
.
E. Catastrophic Plan Eligibility
Not applicable. CHL-MO is not offering Catastrophic plans as part of this filing.

Page F-7

F. Distribution and Administrative Costs

Further 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.
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

. 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. Exhibit G displays the projected
membership by area and the projected average area factor of
. The Geographic Factor
Calibration is the reciprocal,
.
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

Page F-8

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-9

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
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:
44527MO003
44527MO005
44527MO009
44527MO010
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 CHL-MO 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:
ASOP No. 5, Incurred Health and Disability Claims

Page F-10

 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
CHL-MO 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.

___________________________

___________________
(Date)

Page F-11