Proposed Repeal of Actuarial Standard of Practice No. 31

Documentation in Health Benefit PlanRatemaking

TRANSMITTAL MEMORANDUM

September 2008

TO:  Members of Actuarial Organizations Governed by the Standards of Practice of the Actuarial Standards Board and Other Persons Interested in Health Benefit Plan Ratemaking

FROM:  Actuarial Standards Board (ASB)

SUBJ:  Proposed Repeal of Actuarial Standard of Practice (ASOP) No. 31

This document is an exposure draft of a proposed repeal of ASOP No. 31, Documentation in Health Benefit Plan Ratemaking. 

Please review this exposure draft and give the ASB the benefit of your comments and suggestions related to the proposed changes. Each written response and each response sent by e-mail to the address below will be acknowledged, and all responses will receive appropriate consideration by the drafting committee in preparing the final document for approval by the ASB.

The ASB accepts comments by either electronic or conventional mail. The preferred form is e-mail, as it eases the task of grouping comments by section. However, please feel free to use either form. If you wish to use e-mail, please send a message to comments@actuary.org. You may include your comments either in the body of the message or as an attachment prepared in any commonly used word processing format. Please do not password protect any attachments. Include the phrase “ASB COMMENTS” in the subject line of your message. Please note: Any message not containing this exact phrase in the subject line will be deleted by our system’s spam filter.

If you wish to use conventional mail, please send comments to the following address:

ASOP No. 31 Repeal
Actuarial Standards Board
1100 Seventeenth Street, NW, 7th Floor
Washington, DC 20036-4601

The ASB posts all signed comments received to its website to encourage transparency and dialogue. Unsigned or anonymous comments will not be considered by the ASB nor posted to the website. The comments will not be edited, amended, or truncated in any way. Comments will be posted in the order that they are received. Comments will be removed when final action on a proposed standard is taken. The ASB website is a public website and all comments will be available to the general public. The ASB disclaims any responsibility for the content of the comments, which are solely the responsibility of those who submit them.

Deadline for receipt of responses in the ASB office:  December 31, 2008

Background

ASOP No. 31, Documentation in Health Benefit Plan Ratemaking, was effective in 1998 and relied heavily on Interpretative Opinion No.3 of the Guides and Interpretative Opinions as to Professional Conduct of the American Academy of Actuaries.

In 2002, the ASB repealed Interpretative Opinion 3: Professional Communications of Actuaries when the Board adopted ASOP No. 41, Actuarial Communications, which supersedes the guidance of Interpretative Opinion No. 3. ASOP No. 41 is applicable to all areas of actuarial practice and provides guidance with respect to written, electronic, or oral communications.

The Health Committee of the ASB has reviewed ASOP No. 31 and compared its guidance to ASOP No. 41 and other ASOPs. The committee concluded that the guidance in ASOP No. 31 is addressed in ASOP No. 41 (both the existing version and the one currently being exposed for revision) and other ASOPs.

The ASB reviewed this draft at its September 2008 meeting and approved its exposure.

Health Committee of the ASB

Paul R. Fleischacker, Chairperson

                      Mike S. Abroe                                                    John C. Lloyd

                      Gary L. Brace                                                    Cynthia S. Miller

                      Robert G. Cosway                                              Nancy F. Nelson

                      James M. Gutterman

Actuarial Standards Board

Stephen G. Kellison, Chairperson

                      Albert J. Beer                                                       Robert G. Meilander

                      Alan D. Ford                                                        James J. Murphy

                      Patrick J. Grannan                                               Godfrey Perrott

                      David R. Kass                                                      Lawrence J. Sher

 

The ASB establishes and improves standards of actuarial practice. These ASOPs identify what the actuary should consider, document, and disclose when performing an actuarial assignment. The ASB’s goal is to set standards for appropriate practice for the U.S. 

Appendix

Note: This appendix is prepared for informational purposes only.

The Health Committee prepared the following grid, which identifies provisions of section 3 of ASOP No. 31 cross referenced against the current ASOP No. 41, Actuarial Communications, and other ASOPs to reflect where pertinent actuarial guidance already exists.

Section 3. Analysis of Issues and Recommended Practices

Current Section

Cross Reference

3.1 Introduction ASOP No. 41 (3.1, 3.3.3)
3.2 Extent of Documentation ASOP No. 41 (3.3.3, 3.6)
3.3 Documentation Issues Related to Risk ASOP No. 41 (3.3.3, 3.6)
3.3.1 Reinsurance ASOP No. 41 (3.3.3, 3.6); ASOP No. 5 (3.3.3); ASOP No. 8 (3.2.2(i)); ASOP No. 26 (3.4.1(b))
3.3.2 Operational Changes ASOP No. 41 (3.3.3, 3.6); ASOP No. 5 (3.2.1, 3.2.3); ASOP No. 8 (3.2.3)
3.3.3 External Influences ASOP No. 41 (3.3.3, 3.6); ASOP No. 5 (3.2.2, 3.2.5); ASOP No. 18 (3.3)
3.3.4 Risk Classification Plan ASOP No. 41 (3.3.3, 3.6); ASOP No. 5 (3.2.4); ASOP No. 12 (3.4); ASOP No. 26 (3.4.1)
3.3.5 Ratemaking Process and Exposure Distribution ASOP No. 41 (3.3.3, 3.6); ASOP No. 8 (3.2.2-3.2.6, 3.2.9); ASOP No. 26 (3.4.1)
3.3.6 Experience Rating Process ASOP No. 41 (3.3.3, 3.6); ASOP No. 8 (3.2.4)
3.3.7 Investment Income ASOP No. 41 (3.3.3, 3.6); ASOP No. 5 (3.3.1 (d)); ASOP No. 8 (3.2.2(e)); ASOP No. 18 (3.2.6)
3.3.8 Risk Provision ASOP No. 41 (3.3.3, 3.6); ASOP No. 5 (3.3.1(c)); ASOP No. 18 (3.3)
3.3.9 Cost of Capital ASOP No. 41 (3.3.3, 3.6)
3.4 Documentation Issues Related to Data ASOP No. 41 (3.3.3, 3.6)
3.4.1 Experience Period ASOP No. 41 (3.3.3, 3.6); ASOP No. 8 (3.2.4)
3.4.2 Experience Data ASOP No. 41 (3.3.3, 3.6); ASOP No. 5 (3.3.1(b), 3.4); ASOP No. 8 (3.2.4); ASOP No. 18 (3.2.1)
3.4.3 Credibility ASOP No. 41 (3.3.3, 3.6); ASOP No. 8 (3.2.4); ASOP No. 18 (3.2.1); ASOP No. 25 (Section 3)
3.4.4 External Data ASOP No. 41 (3.3.3, 3.6); ASOP No. 5 (3.4); ASOP No. 18 (3.2.1)
3.5 Documentation Issues Related to Determination of Experience Period Costs ASOP No. 41 (3.3.3, 3.6)
3.5.1 Exposure Units ASOP No. 41 (3.3.3, 3.6); ASOP No. 8 (3.2.2-3.2.4)
3.5.2 Claim Administration Expense ASOP No. 41 (3.3.3, 3.6)
3.5.3 Large Claims (Shock Loss Claims) ASOP No. 41 (3.3.3, 3.6); ASOP No. 5 (3.3.4)
3.5.4 Policy and Provider Contract Provisions ASOP No. 41 (3.3.3, 3.6); ASOP No. 5 (3.2.1, 3.2.2, 3.3.1(a), 3.3.6); ASOP No. 8 (3.2.2, 3.2.4, 3.2.5); ASOP No. 18 (3.1, 3.2.1); ASOP No. 26 (3.4.1)
3.5.5 Mix of Business ASOP No. 41 (3.3.3, 3.6)
3.6 Documentation Issues Related to Expenses ASOP No. 41 (3.3.3, 3.6)
3.6.1 Categorization of Expenses ASOP No. 41 (3.3.3, 3.6); ASOP No. 8 (3.2.2(d)); ASOP No.18 (3.2.4)
3.6.2 Start-Up Costs ASOP No. 41 (3.3.3, 3.6); ASOP No. 8 (3.2.2d); ASOP No. 18 (3.2.4)
3.7 Documentation Issues Related to Trending Procedures ASOP No. 41 (3.3.3, 3.6)
3.7.1 Trend Measurement ASOP No. 41 (3.3.3, 3.6); ASOP No. 8 (3.2.2, 3.2.4)
3.7.2 Claim Cost Trend Factors ASOP No. 41 (3.3.3, 3.6); ASOP No. 8 (3.2.2, 3.2.4)
3.7.3 Other Trend Factors ASOP No. 41 (3.3.3, 3.6); ASOP No. 8 (3.2.2, 3.2.4)
3.7.4 Trend Selection ASOP No. 41 (3.3.3, 3.6); ASOP No. 8 (3.2.2, 3.2.4)

Print Friendly, PDF & Email
LinkedInTwitterFacebookMore...