Kaiser Foundation Health Plan of the Mid-Atlantic States
State of Maryland
2019 Individual and Family Plan Rate Filing
Rates Effective January 1, 2019
HIOS Issuer ID 90296
Part III – Actuarial Memorandum and Certification

Table of Contents
1

Purpose.................................................................................................................................... 3

2

General Information Section ................................................................................................... 3
Company Identifying Information .......................................................................................... 3
Company Contact Information ............................................................................................... 3

3

Proposed Rate Increases ......................................................................................................... 4

4

Market Experience .................................................................................................................. 4
4.1

Experience Period Premium and Claims.......................................................................... 4

4.2

Benefit Categories ............................................................................................................ 5

4.3

Projection Factors ............................................................................................................. 5

Changes in Morbidity of the Insured Population .................................................................... 5
Changes in Benefits ................................................................................................................ 5
Changes in Demographics ...................................................................................................... 5
Other Adjustments – Changes in Cost Sharing....................................................................... 6
Trend Factors .......................................................................................................................... 6
4.4

Credibility Manual Rate Development ............................................................................ 6

4.5

Credibility of Experience ................................................................................................. 6

4.6

Paid to Allowed Ratio ...................................................................................................... 6

4.7

Risk Adjustment and Reinsurance ................................................................................... 7

Experience Period Risk Adjustment and Reinsurance Adjustments PMPM .......................... 7
Projected Risk Adjustments PMPM ....................................................................................... 7
Projected ACA Reinsurance Recoveries Net of Reinsurance Premium ................................. 8
Projected Risk Corridor Charges and Payments ....................Error! Bookmark not defined.
4.8

Non-Benefit Expenses and Profit & Risk ........................................................................ 8

Administrative Expense Load ................................................................................................. 8
The Supplemental Health Care Exhibit .................................................................................. 8
Page 1

 Kaiser Foundation Health Plan of the Mid-Atlantic States
State of Maryland - 2019 Individual and Family Plan Rate Filing
Part III – Actuarial Memorandum and Certification
Profit & Risk Margin .............................................................................................................. 8
Taxes and Fees ........................................................................................................................ 8
5

Projected Loss Ratio ............................................................................................................... 8

6

Application of Market Reform Rating Rules .......................................................................... 9
6.1

Single Risk Pool ............................................................................................................... 9

6.2

Index Rate ........................................................................................................................ 9

6.3

Market Adjusted Index Rate ............................................................................................ 9

6.4

Plan Adjusted Index Rates ............................................................................................... 9

6.5

Calibration ...................................................................................................................... 10

Age Curve Calibration .......................................................................................................... 10
Geographic Factor Calibration .............................................................................................. 10
Tobacco Use Rating Factor Calibration ................................................................................ 10
6.6
7

8

Consumer Adjusted Premium Rate Development ......................................................... 10

Plan Product Information ...................................................................................................... 11
7.1

AV Metal Values ............................................................................................................ 11

7.2

AV Pricing Values ......................................................................................................... 11

7.3

Membership Projections ................................................................................................. 11

7.4

Terminated Plans and Products ...................................................................................... 11

7.5

Plan Type........................................................................................................................ 11

7.6

Warning Alerts ............................................................................................................... 12

Miscellaneous ....................................................................................................................... 12
8.1

Effective Rate Review Information................................................................................ 12

8.2

Reliance .......................................................................................................................... 12

8.3

Actuarial Certification .................................................................................................... 13

Page 2

 Kaiser Foundation Health Plan of the Mid-Atlantic States
State of Maryland - 2019 Individual and Family Plan Rate Filing
Part III – Actuarial Memorandum and Certification

1 Purpose
This document contains the Part III Actuarial Memorandum for Kaiser Foundation Health Plan
(KFHP) of the Mid-Atlantic States’ individual medical business in the State of Maryland, with
an effective date on or after January 1, 2019. These individual rates are guaranteed through
December 31, 2019, and the plans will be offered both on and off the Maryland Health Benefit
Exchange marketplace (Exchange). This actuarial memorandum is submitted in conjunction with
the Part I Unified Rate Review Template (URRT), and is in compliance with 45 CFR § 156.215.
The purpose of the actuarial memorandum is to provide certain information related to the
submission of premium rate filings, including support for the values entered in the Part I URRT.
This information is intended for use by the State of Maryland Department of Insurance, the
Center for Consumer Information and Insurance Oversight (CCIIO), and their subcontractors to
assist in the review of this individual rate filing. We recognize that this certification may
become a public document. This memorandum may not be appropriate for other purposes.
The plans covered by this filing are only non-grandfathered, and are open for new sales. All
plans are comprehensive medical plans and range from no-deductible HMO style plans to highdeductible H.S.A. qualified plans. All plans include pediatric dental benefits, and cover all
required Essential Health Benefits (EHB’s). The plans within scope of this filing are listed in
Exhibit 1, with their HIOS ID’s, applicable form numbers and metal levels.
This rate filing and the associated rates reflect the Maryland State and Federal statutes, rules,
regulations and guidance as of April 30, 2018. Changes to the applicable regulations, including
but not limited to changes to Risk Stabilization programs could have a significant impact on rate
development. Subsequent changes to these statutes, rules and regulations may make these rates
either deficient or excessive and would necessitate revisions to this filing.

2 General Information Section
Company Identifying Information
Company Legal Name: Kaiser Foundation Health Plan of the Mid-Atlantic States, Inc
State:
Maryland
HIOS Issuer ID:
90296
Market:
Individual Medical On and Off Exchange
Effective Date:
January 1, 2019
Company Contact Information
Primary Contact Name:
Primary Contact Telephone Number:
Primary Contact Email Address:

David Liebert, ASA, MAAA
503-593-8851
david.m.liebert@kp.org

Page 3

 Kaiser Foundation Health Plan of the Mid-Atlantic States
State of Maryland - 2019 Individual and Family Plan Rate Filing
Part III – Actuarial Memorandum and Certification

3 Proposed Rate Increases
Thirteen health benefit plans (plans) offered in 2018 are covered by this rate filing as renewing
plans for 2019. All plans, listed in Exhibit 1, were introduced by KFHP as new to the market
between 2014 and 2018. Three existing 2018 plans are being terminated for the 2019 plan year.
The rate changes for the plans renewing in 2019 are primarily driven by the claims experience of
the single risk pool, medical inflation, taxes and fees imposed on the issuer, membership changes
resulting from the removal of the Individual Mandate, and anticipated changes in payments from
and contributions to the Federal Risk Adjustment Program. Rate changes also vary by plan and
age, accounting for member cost share modifications necessary to comply with CMS Actuarial
Value calculations, as well as changes to the pricing model as addressed in AV Pricing Values
section.
The proposed average rate change for all renewing plans, range of rate changes for different
plans with and without demographic impacts, distribution of rate changes, and the average prior
rate changes are all shown in Exhibit 2. The average rate change does not indicate that every
member’s rate will change by this amount, as rates are affected by the ages of those covered and
the plan chosen.

4 Market Experience
4.1 Experience Period Premium and Claims
The experience period premium and claims for the single risk pool are shown in Exhibit 5, and
represent only the Maryland Individual medical single risk pool. No experience from other risk
pools has been used in the development of the Maryland Individual single risk pool rates.
The premium earned during the experience period for the renewing ACA plans has been
developed based upon earned premium data from our internal billing systems. The best estimate
of MLR rebates for the experience period have been developed based upon the federal MLR
templates. The earned premium has been adjusted by the expected MLR rebates to develop the
Premiums (net of MLR rebates) in the experience period. The experience period premium
reflected on Worksheet 1 of the Part I URRT has not been adjusted for estimated risk adjustment
transfers.
The experience period incurred claims is developed by accumulating the net medical expenses
for the experience period plans. The data is for the incurred period January 2017 through
December 2017 and paid through February 2018, including incurred but not reported estimates.
Net cost data from internal cost systems (i.e., the cost for medical services delivered within our
integrated delivery system), fee for service claims, and prescription drug claims are aggregated
to determine paid claims. For the experience period, allowed claims are calculated based on paid
claims divided by the paid to allowed ratio as discussed in the Paid to Allowed Ratio section in
this document.
A common reserve tool developed and maintained by KFHP Actuarial Services is used to set
KFHP’s IBNR reserves. KFHP’s common reserve tool uses historical claim lag averages to
project anticipated future payments. IBNR levels are set for line of business and service line
Page 4

 Kaiser Foundation Health Plan of the Mid-Atlantic States
State of Maryland - 2019 Individual and Family Plan Rate Filing
Part III – Actuarial Memorandum and Certification
breakouts. The completion factors used to complete the experience period external claims were
developed using KFHP’s overall commercial line of business by type of service. The claims are
incurred in 2017 and paid through February 2018. The work of KFHP reserving actuaries was
relied upon for the development of an IBNR estimate.
Premium and claims experience reflect only the members represented by this filing, in the state
of Maryland, although claims may have been incurred outside of Maryland.

4.2 Benefit Categories
Claims are assigned to one of the following benefit categories: Inpatient Hospital, Outpatient
Hospital, Professional, Other Medical, and Prescription Drugs. The categorization is derived
from each claim’s specific information on services rendered, the location of service, and the type
of provider type. The categorization is an automated process within KFHP’s data warehouse.
Examples include:
Benefit Category
Inpatient Hospital
Outpatient Hospital
Professional
Other Medical
Capitation
Prescription Drug

Services
Inpatient Facility, Inpatient Visits, Inpatient Surgery, Maternity
Outpatient Facility, Emergency/Urgent Care, Outpatient Surgery
Diagnostic Services, Office Visits, Cardiovascular, Dialysis, PT/OT/ST
Other Services
Dental
Pharmacy

4.3 Projection Factors
Changes in Morbidity of the Insured Population: The morbidity adjustment reflects the
change in the expected health risk from the 2017 experience period to the 2019 single risk pool,
independent of underlying demographic changes. The elimination of the Individual Mandate is
expected to have a significant impact, driving a large reduction in membership. The terminating
members are anticipated to have lower morbidity than the experience period membership as a
whole (see Exhibit 6). The new entrants to the pool (see Exhibit 6) are also expected to have
lower morbidity than the continuing members from the experience period.
Changes in Benefits: There are no benefit changes between the experience period and the
projection period.
Changes in Demographics: Experience period claims experience is adjusted for the average
mix of population by age in the experience period membership. The average age factor is
developed by applying the revised 2018 CMS standard age curve (Exhibit 9) to the 2017
monthly membership. The same calculation is performed for the projected 2019 membership,
which is based upon the emerging February 2018 KFHP membership distribution for the
Maryland individual market. The projected allowed claims are then multiplied by the change in
the average age factor between 2017 and 2019. The development of the average age factor is
shown in Exhibit 9.
Page 5

 Kaiser Foundation Health Plan of the Mid-Atlantic States
State of Maryland - 2019 Individual and Family Plan Rate Filing
Part III – Actuarial Memorandum and Certification
The average mix of population by gender, geography and tobacco use is not anticipated to
change between 2017 and 2019, making these factors unnecessary. (Exhibits 10 and 11)
Other Adjustments – Changes in Cost Sharing: Many plans have member cost sharing
changes between the experience period and the projection period, which generate different levels
of utilization adjustments when compared with the experience period plans. The net impact is
reflected as the change in average utilization in Exhibit 7. This is calculated by dividing the
average utilization in the projection period as determined by the pricing model described below
in the AV Pricing Values section, by the experience period average utilization in Exhibit 8.
Cost share changes, and their effects on both utilization and plan design value are shown in
Exhibit 14.
Trend Factors: The projected trend factors, developed on a regional basis, are based on a
mixture of expected industry trends, future fixed costs, expected internalization of services (i.e.,
movement of medical care delivery from contracted external providers to our integrated delivery
system) and projected Health Services Cost Review Commission (HSCRC) hospital
reimbursement rates. As an integrated health care provider, a large portion of KFHP's expenses
are the fixed costs associated with providing medical care through Kaiser owned facilities.
Therefore, the projected cost that is included in our total revenue requirement is largely based on
budgeting. For traditional carriers, projected claims trends are developed to project expected
costs. However, given KFHP's integrated structure, KFHP's projected claims trends stem from
the development of projected budgeted costs as well as projected external claims. See Exhibit 12
for a development of the composite cost and utilization components of the trend, which are used
in the Part I URRT. Exhibit 13 provides a three-year historic claims and premiums.

4.4 Credibility Manual Rate Development
Please see the Credibility of Experience section below. KFHP considers the experience period
data to be fully credible, and has not employed the use of additional, external claims data to
develop a manual rate.

4.5 Credibility of Experience
KFHP had over 646,000 member months in the experience period, for an average of over 53,800
members per month, which we consider material. Our rate development is based on the
composition of the projected 2019 single risk pool, which incorporates data from the 2017
Individual ACA single risk pool. KFHP considers the pool data to be fully credible, and has not
employed the use of additional, external claims data. Actuarial Standard of Practice #25 was
considered when making this determination.

4.6 Paid to Allowed Ratio
The projected 2019 paid to allowed ratio is calculated as the average benefit relativity (effective
plan design adjustment). The average benefit relativity, as developed in Exhibit 15, accounts for
the projected member distribution across the available plans, including members on Cost Share
Reduction plans. KFHP has increased claims liability for CSR plans relative to their respective
Page 6

 Kaiser Foundation Health Plan of the Mid-Atlantic States
State of Maryland - 2019 Individual and Family Plan Rate Filing
Part III – Actuarial Memorandum and Certification
base Silver plans. The development of the benefit relativities is discussed under the AV Pricing
Values section later in this document.

4.7 Risk Adjustment and Reinsurance
Risk Adjustment is based on preliminary estimates, with complete experience data being
available in the Summary Report of Transitional Reinsurance Payments and Permanent
Risk Adjustment Transfers for the 2017 Benefit Year as expected to be released by CMS
about June 30, 2018.
Experience Period Risk Adjustment and Reinsurance Adjustments PMPM:
Risk Adjustment
Based on an ongoing study by third-party consulting firm, KFHP expects a Risk Adjustment
transfer for the experience period as shown in Exhibit 17. This includes the metallic plans as well
as the Catastrophic plan, and has not been adjusted for fees or assessments.
Reinsurance
The temporary federal and supplemental state reinsurance programs ended with the 2016 plan
year, and as such, no recoveries are reported for the 2017 plan year.
Projected Risk Adjustments PMPM: See Exhibit 17b. The CMS risk adjustment formula, as
follows, was used to estimate the risk adjustment transfers for the projection period. All
components of this formula have been provided by CMS for the 2014 through 2016 experience
periods. 2017 data has been provided by a third-party market wide study (market study), and
will be updated with CMS data when available.
𝑇𝑇 = �

𝐴𝐴𝐴𝐴 × 𝐴𝐴𝐴𝐴𝐴𝐴 × 𝐼𝐼𝐼𝐼𝐼𝐼 × 𝐺𝐺𝐺𝐺𝐺𝐺
𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃 × 𝐼𝐼𝐼𝐼𝐼𝐼 × 𝐺𝐺𝐺𝐺𝐺𝐺
−
� 𝑃𝑃�
∑𝑖𝑖(𝑠𝑠𝑖𝑖 × 𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑖𝑖 × 𝐼𝐼𝐼𝐼𝐼𝐼𝑖𝑖 × 𝐺𝐺𝐺𝐺𝐺𝐺𝑖𝑖 ) ∑𝑖𝑖(𝑠𝑠𝑖𝑖 × 𝐴𝐴𝐴𝐴𝑖𝑖 × 𝐴𝐴𝐴𝐴𝐴𝐴𝑖𝑖 × 𝐼𝐼𝐼𝐼𝐼𝐼𝑖𝑖 × 𝐺𝐺𝐺𝐺𝐺𝐺𝑖𝑖 )

The market average premium factor, ∑𝑖𝑖(𝑠𝑠𝑖𝑖 × 𝐴𝐴𝐴𝐴𝑖𝑖 × 𝐴𝐴𝐴𝐴𝐴𝐴𝑖𝑖 × 𝐼𝐼𝐼𝐼𝐼𝐼𝑖𝑖 × 𝐺𝐺𝐺𝐺𝐺𝐺𝑖𝑖 ), as well as the KFHP
premium (𝐴𝐴𝐴𝐴 × 𝐴𝐴𝐴𝐴𝐴𝐴 × 𝐼𝐼𝐼𝐼𝐼𝐼 × 𝐺𝐺𝐺𝐺𝐺𝐺 ) factor, are trended forward based on the market study, with
the assumption that these values will not change materially through 2019. The market average
risk based premium factor, ∑𝑖𝑖(𝑠𝑠𝑖𝑖 × 𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑖𝑖 × 𝐼𝐼𝐼𝐼𝐼𝐼𝑖𝑖 × 𝐺𝐺𝐺𝐺𝐺𝐺𝑖𝑖 ), and the KFHP risk based premium
(𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃 × 𝐼𝐼𝐼𝐼𝐼𝐼 × 𝐺𝐺𝐺𝐺𝐺𝐺) are both trended forward with the change in population morbidity (Exhibit
8) applied equally to both. There are significant changes that have and will change the
coefficients that drive the PLRS numbers, and the assumption has been made that the KFHP
impact of those changes will be neutral relative to the market.
The market average premium (𝑃𝑃�) is trended forward based on actual 2016 and estimated 2017
market average premiums, with projected impacts of the 2018 and 2019 premium rate changes.

Page 7

 Kaiser Foundation Health Plan of the Mid-Atlantic States
State of Maryland - 2019 Individual and Family Plan Rate Filing
Part III – Actuarial Memorandum and Certification
A program change in 2018 will remove 14% from the market average premium to account for
administration charges, which are not directly tied to a member’s relative risk. This has been
reflected in Exhibit 17b.
The 2019 risk adjustment user fee is included in the development of the Market Adjusted Index
Rate as shown in Exhibits 3 and 19.
Projected ACA Reinsurance Recoveries Net of Reinsurance Premium: The temporary
federal reinsurance program ended with the 2016 plan year, and as such, no recoveries are
projected for the 2018 plan year. The state of Maryland is developing a reinsurance program for
2019 through a Section 1332 waiver. Program parameters have not been finalized, and no
material changes have been made to this filing or related rates. Filing changes will need to be
made once program parameters are finalized.

4.8 Non-Benefit Expenses and Profit & Risk
Administrative Expense Load: Administrative Expense includes broker commissions, medical
management costs, and health plan operating expenses. Experience period and development of
projection period administrative expenses are shown in Exhibits 18 and 19. Experience period
operating expenses have been trended forward at the annual trend shown in Exhibit 19.
Administrative expenses are allocated as a flat percentage of premium, and are applied uniformly
among all plans represented by this filing.
The Supplemental Health Care Exhibit: The administrative costs of programs that improve
health care quality as reported in the most recently filed Supplemental Health Care Exhibit as
well as the taxes, licensing and regulatory fees are shown in Exhibit 16. Note that the
Supplemental Health Care Exhibit is for all Maryland Individual business including the ACA
compliant line of business, which this filing is applicable to, as well as the individual
grandfathered line of business.
Profit & Risk Margin: The 2019 plans are priced to provide a projected margin as shown in
Exhibit 19. Based on actual Risk Adjustment results for 2016, and projected results for 2017, the
projected margin for 2019 shows an improvement over prior years, with a projected positive
margin after risk adjustment transfers.
Taxes and Fees: Total retention has been adjusted to reflect the required taxes and fees that will
apply in 2019 (Exhibit 19). Only those taxes and fees that may be subtracted from premiums for
purposes of calculating MLR are included.

5 Projected Loss Ratio
Exhibit 20 provides a demonstration of the projected Medical Loss Ratio (MLR) calculation
based upon assumptions in this rate filing, with a projected loss ratio based on the federally
prescribed methodology to be at least 80%. The Federal MLR would be expected to be slightly

Page 8

 Kaiser Foundation Health Plan of the Mid-Atlantic States
State of Maryland - 2019 Individual and Family Plan Rate Filing
Part III – Actuarial Memorandum and Certification
higher than the standard loss ratio due to the allowed adjustments to both claims and premium in
the federally prescribed methodology.

6 Application of Market Reform Rating Rules
6.1 Single Risk Pool
The projection period reflects the experience of policies that we anticipate will be enrolled in the
Single Risk Pool. The Single Risk Pool reflects all covered lives for every non-grandfathered
product/plan combination for KFHP in the Maryland Individual market.

6.2 Index Rate
Exhibit 3 provides the development of both the 2018 and 2019 experience and projection period
Index Rates for the non-grandfathered ACA compliant individual line of business. Covered
benefits in excess of the EHB’s are excluded. The difference between the Index Rate and the
total allowed claims PMPM on Worksheet 1 of the Part I URRT, is due to covered benefits in
excess of essential health benefits, as described below as Non-EHBs.

6.3 Market Adjusted Index Rate
Exhibit 3 provides the development of both the 2018 and 2019 Market Adjusted Index Rates for
the non-grandfathered ACA compliant individual line of business. The calculation of the market
adjusted index rate is the compilation of the Index Rate and the market-wide adjustments, which
includes Risk Adjustment administration fees, projected Risk Adjustment transfers, Federal
Reinsurance contributions, Federal and Supplemental Reinsurance credits, and Exchange fees
(Marketplace User fee). Exhibit 4 provides a crosswalk between the 2018 and 2019 Market
Adjusted Index Rates.

6.4 Plan Adjusted Index Rates
The Plan Adjusted Index Rates are calculated as the product of the Market Adjusted Index Rate,
a Utilization Adjustment, plan specific AV Pricing Values (cost-sharing adjustment), non-EHB
Adjustments for covered benefits in excess of the EHB requirement, a Catastrophic Factor
(Impact of Eligible Population) if applicable, and an adjustment for Administrative Expenses.
The calculations are provided in Exhibit 21.
Non-EHB Adjustment: An adjustment has been made to the base period allowed amount to
remove the Non-EHB covered benefits from the base rates. This multiplier is calculated by
summing the allowed amount for Non-EHB covered benefits in the base period and dividing by
total allowed.
2019 Plan specific multipliers are used to add back non-EHB covered benefits when calculating
the Plan Adjusted Index Rate for each plan. Benefits have not changed from the experience
period to the projection period, leading to a non-EHB adjustment that is the same for both
periods.

Page 9

 Kaiser Foundation Health Plan of the Mid-Atlantic States
State of Maryland - 2019 Individual and Family Plan Rate Filing
Part III – Actuarial Memorandum and Certification
Catastrophic Factor: No additional adjustment is applied to the Catastrophic Plan to account for
the impact of eligible population.
Administrative Expenses: Administrative expenses are applied uniformly to all plans, on and off
the Exchange, in the calculation of the Plan Adjusted Index Rates.

6.5 Calibration
Calibration of the Plan Adjusted Index Rates, Exhibit 21, is necessary to calculate Consumer
Adjusted Premium Rates. The Plan Adjusted Index Rates are developed for the average
individual within the Single Risk Pool. Based upon the allowable rating parameters, factors are
developed to calibrate the Plan Adjusted Index Rates and generate Consumer Adjusted Premium
Rates. The calibrated Plan Adjusted Index Rates have been defined as Base Rates, and the
calibration factors are applied uniformly to all plans in the single risk pool.
Age Curve Calibration: The determination of the calibration factor is based upon the new CMS
Standard Age Curve for 2018, and KFHP internal enrollment data for February 2018. A
weighted average age factor is calculated as the product of the enrollment by age and the
unadjusted CMS age factors. The Plan Adjusted Index Rates are then divided by this factor to
adjust to an Individual aged 21, for which the age factor is 1.00. The development of the
weighted average age for the projected single risk pool, rounded to the whole number, and
average age factor is shown in Exhibit 9.
KFHP charges premiums for no more than the three oldest covered children under age 21 for a
family policy. The percentage of the impacted membership is shown in Exhibit 9, although no
adjustment has been made to the rates to account for this cap.
Geographic Factor Calibration: KFHP does not vary rates in the Maryland individual market
by geographic area (Exhibit 10).
Tobacco Use Rating Factor Calibration: KFHP does not vary rates in the Maryland individual
market for tobacco use (Exhibit 11).

6.6 Consumer Adjusted Premium Rate Development
Age Factors: The age factor table (Exhibit 9) used to develop age specific rates is consistent with
the 2018 CMS Standard Age Curve.
Geographic Rating Factors: KFHP does not vary rates in the Maryland individual market by
geographic area (Exhibit 10).
Tobacco Factor: KFHP does not vary rates in the Maryland individual market by tobacco use
status (Exhibit 11).
Summary Rate Calculation: Exhibit 22 provides a sample calculation of a Consumer Adjusted
Premium Rate. Premiums are charged for no more than the three oldest covered dependent
children under age 21 when enrolled on a family plan.
Page 10

 Kaiser Foundation Health Plan of the Mid-Atlantic States
State of Maryland - 2019 Individual and Family Plan Rate Filing
Part III – Actuarial Memorandum and Certification

7 Plan Product Information
7.1 AV Metal Values
The AV Metal Values as used in Worksheet 2 of the Part I URRT were produced with the final
2019 CMS Actuarial Value Calculator. Screen shots of the calculation results have been
included as an exhibit separate from the Part III Exhibits.

7.2 AV Pricing Values
The AV pricing values, as seen in Exhibits 15 and 16, include plan specific adjustment factors
for both utilization and effective plan design. The utilization and effective plan design
adjustment pieces of the AV pricing values are calculated using a proprietary pricing model,
which reflects a standard population and KFHP specific cost, service utilization, and induced
utilization data. The utilization factors have been normalized to an average of 1.00 to account
for the Market Adjusted Index Rate, which represents the average allowed costs. The pricing
method is consistent among all plans.
The AV pricing values have changed from 2017 to 2019 plans due to both cost sharing changes
(Exhibit 14) and uniform changes to the pricing model. The uniform changes include updates for
more recent experience and a better pharmacy model. The cost share and model changes have
varying effects on each plan design, which leads to non-uniform rate changes between the plans.
The AV pricing values for the on-Exchange Silver plans has been adjusted to account for the
non-funding of the CSR program. The final AV pricing values for these plans are calculated as
the member weighted averages of the respective Base and related CSR plan AV pricing values
(see Exhibits 15 and 28).

7.3 Membership Projections
The total membership projection for 2019 includes retention assumption of 82% of KFHP
February 2018 ACA members enrolling on the 2019 plans. The retention assumption is lower
than in previous years to account for the removal of the Individual Mandate. An assumption for
new entrants to the KFHP single risk pool is an estimate to reflect an improved rate position
within the market resulting from this filing. See Exhibit 23.
The projected allocation of members by plan follows the emerging distribution of members for
February 2018. The further projected allocation of members between on-Exchange Silver level
plans and Cost Share Reduction plans, Exhibit 23, also follows the emerging distribution of
members for February 2018. Members from terminating plans are mapped as shown in Exhibit
26.

7.4 Terminated Plans and Products
See Exhibit 26 for a list of terminated plans.

7.5 Plan Type
Only standard plan types have been used on Worksheet 2, Section 1 of the Part I URRT.

Page 11

 Kaiser Foundation Health Plan of the Mid-Atlantic States
State of Maryland - 2019 Individual and Family Plan Rate Filing
Part III – Actuarial Memorandum and Certification

7.6 Warning Alerts
No Warning Alerts exist on Worksheet 2 of the Part I URRT.

8 Miscellaneous
8.1 Effective Rate Review Information
Additional information has been provided consistent with reviewer requests from prior filings.

8.2 Reliance
All data and assumptions were prepared by a team of KFHP employees which includes the
certifying actuary. Relative risk information from the experience period, relevant to the risk
adjustment estimates, has been provided by Wakely Consulting.

Page 12

 Kaiser Foundation Health Plan of the Mid-Atlantic States
State of Maryland - 2019 Individual and Family Plan Rate Filing
Part III – Actuarial Memorandum and Certification

8.3 Actuarial Certification
I, David Liebert, Actuarial Manager for Kaiser Foundation Health Plan (KFHP) am a member in
good standing of the American Academy of Actuaries. I meet the qualification standards for
certifying Regulatory Filings for Rates and Financial Projections for Health Plans.
This Actuarial Certification applies to the attached filing for an approval of premium rates for
Individual plans sold on and off the Exchange. This actuarial memorandum documents the
assumptions and sources of data pertaining to the development of KFHP premium rates effective
January 2019.
•
•

•
•

•

•
•
•
•

The index rate is in compliance with all applicable Maryland State and Federal Statutes
and Regulations, including 45 CFR part 156, §156.80(d)(1) and 45 CFR part 147.102.
When accounting for the risk margin as shown in Exhibit 19, the rating methodologies
produce premiums that are reasonable in relation to benefits being provided and the
populations being covered and are based on generally accepted actuarial rating principles
for rating blocks of business, and are not excessive, deficient, or unfairly discriminatory.
The index rate and only the allowable modifiers as described in 45 CFR part 156,
§156.80(d)(1) and 45 CFR part 156, §156.80(d)(2) were used to generate plan level rates.
The revised final 2018 AV Calculator was used to determine the AV Metal Values shown
in Worksheet 2 of the Part I Unified Rate Review Template for all plans. The
development of the Federal actuarial value is based on the acceptable alternative method
outlined in 156.135(b)(2) for those benefits that deviate substantially from the parameters
of the AV Calculator and have a material impact on the AV. The AV Metal Values have
also been developed in accordance with ASOP No. 50.
The allocation of the essential health benefit portion of the premium amounts, including
the total premium that represents essential health benefits included in Worksheet 2,
Sections III and IV is appropriate for the calculation of advanced payment of premium
tax credits (APTCs) and was calculated in accordance with Actuarial Standards of
Practice.
Geographic rating factors have not been used in the development of this filing.
This filing is in conformity with all applicable Actuarial Standards of Practice, including
ASOP No. 8.
This filing is consistent with KFHP’s internal business plans.
The adjusted community rate charged can be reasonably expected to result in a medical
loss ratio that meets or exceeds the standard of eighty percent.

All rates, calculations and values were developed accordance with generally accepted actuarial
principles and methodologies and in accordance with the Code of Professional Conduct and the
following Actuarial Standards of Practice:
•
•
•

ASOP No. 5, Incurred Health and Disability Claims
ASOP No. 8, Regulatory Filings for Health Plan Entities
ASOP No. 11, Financial Statement Treatment of Reinsurance Transactions Involving
Life or Health Insurance
Page 13

 Kaiser Foundation Health Plan of the Mid-Atlantic States
State of Maryland - 2019 Individual and Family Plan Rate Filing
Part III – Actuarial Memorandum and Certification
•
•
•
•
•
•
•

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
ASOP No. 45, The Use of Health Status Based Risk Adjustment Methodologies
ASOP No. 50, Determining Minimum Value and Actuarial Value under the Affordable
Care Act

This actuarial opinion is qualified such that the information contained within this filing reflects
the Maryland State and Federal statutes, rules, regulations and guidance as of April 30, 2018.
Changes to the applicable regulations, including but not limited to changes to Risk Stabilization
programs could have a significant impact on rate development. Subsequent changes to these
statutes, rules and regulations may make these rates either deficient or excessive and would
necessitate revisions to this filing.
This actuarial opinion is qualified to state that the URRT does not demonstrate the process used
by KFHP to develop the 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
for Federally-facilitated Marketplaces, and for certification that the Index Rate is developed in
accordance with Federal regulation and used consistently and only adjusted by the allowable
modifiers.

David Liebert, ASA, MAAA
Actuarial Manager
Kaiser Foundation Health Plan
April 30, 2018

Part III Rate Filing Documentation and Actuarial Memorandum 04-30-2018

Page 14