Part III Actuarial Memorandum and Certification

General Information
This filing is for the 1-50 small group market, with an effective date of 1/1/2015.
Company Identifying Information:
Company Legal Name:
State:
HIOS Issuer ID:
Market:
Effective Date:

Company Contact Information:

Humana Insurance Company

MO
Primary Contact Name:
30613
Primary Contact Telephone Number:
Small Group
Primary Contact Email Address:
1/1/2015

Jacob Epp
920-337-5330
jepp@humana.com

Purpose:
The purpose of the actuarial memorandum is to provide certain information related to the submission, including support for
the values entered into the Part I Unified Rate Review Template, which supports compliance with the market rating rules and
reasonableness of applicable rate increases.
In addition, this actuarial memorandum provides required actuarial certifications related to:
the methodology used to calculate the AV Metal Value for each plan
the index rate is developed in accordance with federal regulations and the index rate along with allowable modifiers are
used in the development of plan specific premium rates
This filing should be used for no other purposes.
This memorandum was prepared by a qualified actuary, and is intended to be reviewed by a qualified actuary.
Please note that, to the best of our knowledge, this filing complies with the current regulations and guidance. However, to
the extent that laws, rules or guidance change after the submission of this filing, amending this filing may be necessary.

Proposed Rate Increase(s)

The proposed overall annual rate increase from 1/1/2014 to 1/1/2015 associated with this filing is 17.0% and will range from
15.2% to 18.6% throughout 2015.
This was derived by using the projected premium weighted average of 12-month accumulated rate actions throughout 2015.
For example, the January 12-month accumulated rate action is 11 months of trend in 2014 plus the January 2015 rate action.
The July 2015 12-month accumulated rate action is 5 months of trend in 2014 plus the January rate action plus the April and
July trend rate actions.
The January rate action includes a 7.3% increase and changes for additional benefits displayed below.
0.3% New State Mandates
0.17% Embed 24 Hour Coverage Rider

This increase is not applied uniformly to all plans as combining our medical and Rx factors introduced volatility at a plan level,
but overall has no impact. See the rate manual for the plan-by-plan impact of combining our medical and Rx factors.

Actuarial Memo 1

Experienced Period Premium and Claims

Experience Period:

From 1/1/2013 to 12/31/2013

Paid Through Date:

4/30/2014

Premiums (net of MLR Rebate) in Experience Period:

Premiums net of MLR rebate:
MLR Rebates:

$36,541,700
$563,236

The basis for the Humana Small Business rebate forecast is forecasted membership, premium, claims (including quality
improvement expenditures), and expenses at the state and legal entity level. These forecasted metrics are run through a
simulated rebate model, where the various components of rebate legislation are applied. The most impactful adjustments
include the credibility adjustment (based on forecasted member months) and the adjustment to remove taxes and licensing
fees from premium. These items are combined to estimate the Minimum Loss Ratio (MLR), which is then compared against
the 80% threshold for the Small Business segment to calculate final expected rebates.

Allowed and Incurred Claims Incurred During the Experience Period:

Allowed Claims

Incurred Claims

37,112,450
0
492,541

29,253,397
0
388,239

Claims that were processed through the issuer's claim system

Claims that were processed outside the issuer's claim system
Claims incurred but not paid as of paid through date

Allowed claims come directly from an issuer's claims system after eligibility and network discounts are applied, allowed
medical claims, allowed Rx claims, and member capitation payments are combined to populate the experience period data
above. Member cost sharing is removed from the allowed claims to report the incurred claims entered above.
To estimate incurred claims, all commercial claims experience is segregated by legal entity, processing platform, product,
geography and claim category so that appropriate balance of homogeneity and credible size is maintained. The segmentation
logic is reviewed at least annually or when significant changes in the block occur (e.g. acquisitions). The paid-to-incurred claim
triangles for each block are used to develop completion factors that are applied to each incurred month to estimate ultimate
incurred amounts. Estimated ultimate incurred claims for the most recent twelve months are then adjusted for pended
claims if there is a material variance from historical levels. Finally, the completion factors and estimated ultimate incurred
claims are reviewed and may be changed to account for known anomalies in the data that may have distorted the calculation.
The difference between the estimated ultimate incurred claims and the current paid-to-date amounts is the estimate of the
incurred but not paid claims for each incurred month. In the calculation process, completion factors, per typical actuarial
practice, are not permitted to be greater than 1.00. That is, no coverage month is permitted to have an incurred claim
estimate less than the amount of claims paid to date even though historical experience may indicate that this is likely due to
future claim recoveries.

Actuarial Memo 2

For each month of incurred, the incurred but not reported amount equals the incurred claims estimate minus claims paid to
date. Follow-up studies, including monthly historical reserve restatement analyses, are regularly performed to test the
accuracy of the reserving methodology and suggest possible improvements.
Allowed but not reported estimates are developed utilizing the combination of the incurred but not reported estimate and
the incurred to allowed ratio of historical claims. [Allowed Claims not paid as of paid through date] = [Allowed Claims
processed through the claim system] / [Incurred Claims processed through the claim system] * [Incurred Claims not paid as
of paid through date].

Benefit Categories
The Benefit Categories are defined as follows:

Inpatient Hospital: Includes non-capitated services for medical, surgical, maternity, mental health and substance abuse,
skilled nursing, and other services provided in an inpatient facility setting and billed by the facility.

Outpatient Hospital: Includes non-capitated services for surgery, emergency room, lab, radiology, therapy, observation
and other services provided in an outpatient facility setting and billed by the facility. The Outpatient Hospital benefit
category uses a combination of both visits and services to determine the utilization per 1,000. For items such as Outpatient
Surgery and Emergency Room, where multiple services are rendered and can be billed together, visits are used for the
measurement units. For single items that can be billed separately, such as Outpatient Therapy or MRI, services are used for
the measurement units.

Professional: Includes non-capitated primary care, specialist, therapy, laboratory, radiology, and other professional services
not billed by the facility. The Professional benefit category uses a combination of both visits and services to determine the
utilization per 1,000. For items such as Primary Care or Specialist Office visits, where multiple services are rendered and can
be billed together, visits are used for the measurement units. For single items that can be billed separately, such as Therapy
or MRI, services are used for the measurement units.

Other Medical: Includes non-capitated ambulance, home health care, DME, prosthetics, supplies, vision exams, dental
services and other services. The Other Medical benefit category uses a combination of both visits and services to determine
the utilization per 1,000. For items such as Home Health visits, where multiple services are rendered and can be billed
together, visits are used for the measurement units. For single items that can be billed separately, such as DME, services are
used for the measurement units.

Capitation: Includes all services provided under one or more capitated arrangements.
Prescription Drug: Includes drugs dispensed by a pharmacy. This amount should be net of rebates received from drug
manufacturers.
Other was selected for utilization description under the prescription drugs benefit category. In this case, the Other
represents Days Supply.

Actuarial Memo 3

Claims Projection Factors - from 2013 to 2015

15.54%

Changes in the Morbidity of the Population Insured:

This adjustment is intended to capture the change in underlying morbidity for the risk pool in 2015 compared
to the experience period risk pool. Reasons for this change include groups moving to individual coverage,
groups remaining on their current plan allowable by the Transitional Extension, the risk of projected new sales,
and the impact from groups moving to an early renewal date.

5.82%

Changes in Benefits:

Addition of any benefits that must be covered under the essential health benefit package.
0.92% Pediatric Dental and Pediatric Vision
0.18% Women's Preventive
0.30% FMH Parity
0.26% New State Mandates
0.17%

Embed 24 Hour Coverage Rider - Twenty-four-hour coverage can be defined as the joint issuance of a
workers' compensation policy with a disability insurance policy or other

3.91% Anticipated changes in the average utilization of services due to differences in average cost sharing
requirements during the experience period and average cost sharing requirements in the projection period.
1.00%

Changes in Demographics:
This is intended to capture the change in age and gender from the experience period to the projected period.
This adjustment is based on historical nationwide grandfathered age/gender rating factors to calculate the
average change in claims factor. This impact was 0.5% annually and we are expecting this not to change.

2.78%

Other Adjustments

2.78% Pooling Charge - In 2013 we experienced a lower than expected shock claim amount. A shock claim is
defined as any claims in excess of $60,000 per member per month. For 2015, we're adjusting the claims 2.78%
to account for the expected level of shock claims.

Actuarial Memo 4

12.49%

9.83%

Trend Factors (Cost/Utilization)

Cost Trend
The cost trend captures pure unit cost changes from 2013 to 2015, calculated using the same basket of services
each period, due to price/contract negotiations and provider distribution changes.
Inpatient Hospital, Outpatient Hospital, Professional, Capitation and Other Medical cost trends are developed
based on historical area specific cost trends from Humanas Small Commercial block of business data. Future
cost trends are developed based on expected changes in Humanas Commercial contracts.
Pharmacy cost trends are developed based on historical brand, generic, and specialty drug trends from
Humanas Commercial data. Future cost trends are developed based on expected changes in these pharmacy
contracts.
These contractual impacts will be applicable to all members regardless of risk class.

2.35%

Utilization Trend
A midpoint to midpoint methodology is applied to determine the applicable baseline utilization trend, which
incorporates 2013q3 and 2013q4 actual results at the state and legal entity level with the block of business
baseline utilization trend for 2014 and 2015. This results in baseline utilization trends that vary at the state and
legal entity level.
Other components are added to the baseline utilization trend to develop the total utilization trend provided.
These include the following:
Pertinent days Captures changes in the calendar, recognizing that health care utilization varies by day of the
week and reporting periods contain varying weekday mix and count. This impact is developed through the use
of an external consultants model which is uploaded with Humanas Commercial claims data.
New Health Technologies Captures the impact of new health technologies and procedures. An external
consulting firm researches new technologies and develops per member per month impacts. These impacts are
customized to Humanas Commercial business based on membership and coverage policy.
Management Initiatives Captures savings for Humana initiatives designed to bend trend by managing
utilization, such as case management, disease management, and nurse programs. These initiatives are
evaluated by an internal actuarial organization tasked with evaluating the effectiveness of the initiatives.
Evaluations are done through a collaborative effort involving clinical and other operational areas. Projected
savings are calculated by determining prospective changes to impacted metric values, which are determined by
analyzing historical metric values as well as through discussions with clinical and operational areas. Savings are
reviewed with leadership to ensure appropriateness of assumptions.
This describes the development of the core utilization trend. All impacts from healthcare reform have been
removed and are included in the Population Risk/Morbidity and Other adjustments from Worksheet 1 to
prevent double counting of any impacts.

Actuarial Memo 5

Credibility Rate Manual Development

Source and Appropriateness of Experience Data Used:
The source data is not fully credible and there is not other fully credible legal entity in the same state, so the Nationwide
manual was used to blend with the source data.

Adjustments Made to the Data:

The following adjustments were made to the credibility manual. Please see the previous section for the description of
the impact.
Changes in the Morbidity of the Population Insured:
Changes in Benefits:
Changes in Demographics:
Other Adjustments:
Trend Factors:

12.1%
5.8%
1.0%
-4.3%
13.3%

Inclusion of Capitation Payments:

No adjustments were made to the data. The source data already includes capitated payments.

Credibility of Experience
Description of the Credibility Methodology Used:
A value of 120,000 member-months of experience is assumed to be fully credible, this value was derived based on
analyzing historical experience. Our credibility weight methodology utilizes the following equation:

Resulting Credibility Level Assigned to Base Period Experience when applying the proposed credibility
methodology:

96%

Actuarial Memo 6

Paid to Allowed Ratio

The anticipated paid to allowed average factor over the projection period was developed by separately considering the
anticipated paid to allowed factors by each plan.
Once calculated, projected member month weights for each plan tier were applied to these paid to allowed factors to produce
an overall anticipated paid to allowed average factor of 72.8%.
Each plan paid to allowed factor was developed based on an internal pricing model with underlying utilization and costs
reflective of a standard population equal to that of the anticipated membership in the overall projected risk pool. By using a
standard population (rather than the demographics of the projected population), we ensure that selection and health status
do not affect the calculation of this factor. These values were developed in accordance with generally accepted actuarial
principles and methodologies.
The 2014 plan factors were developed using an internal pricing model and were priced relative to our prior product generation
of plan factors. The resulting premium rates were appropriate; however, the plan factors were not relative to cost sharing. As
a result, the plan factors have been modified to more closely resemble a paid to allowed ratio. The impact to the premium
rates of each is rate neutral. This neutrality is yielded by offsetting the increase in the plan factors in the area factors.

Actuarial Memo 7

Risk Adjustment and Reinsurance

Projected Risk Adjustments PMPM:
The adjustment factor to account for Humanas expected transfer amount due to the risk adjustment process was derived
from our participation in a study by Wakely Consulting, an actuarial consulting firm. Wakely generated an analysis of
carrier risk scores in several states based on the carriers small group experience. Wakely generated the analysis in states
where at least 80% of the insured membership in a states small group market was included through carrier participation in
the study. For the carriers that participated in the study, Wakely received a summary of their membership and deidentified claim experience so that Wakely could generate HCC risk scores for all of the carriers small group membership
based on the risk adjuster scoring methodology outlined by HHS. Each carrier was supplied a summary exhibit that showed
the average risk score, expected risk score, average actuarial value, average rate factor, and induced demand factor for
their small group block of business. Wakely generated the expected transfer amount for each carrier based on this study.
Humana then applied an expected transfer amount based on the difference in our average premium per member to the
state average small group premium per member taken from the 2012 MLR rate filing experience supplied by CCIIO.

The projected risk adjustment is $ -0.08 PMPM for this state and legal entity. This includes the Risk Adjuster Fee that will
be charged at $.96 PMPY or $.08 PMPM as stated in the Federal Register - Vol. 79, No. 47 published on Tuesday, March 11,
2014.

Projected ACA Reinsurance Recoveries Net of Reinsurance Premium:

From the Federal Register - Vol. 79, No. 47 published on Tuesday, March 11, 2014, the uniform reinsurance contribution
rate will be charged at $44 PMPY or $03.67 PMPM.

Actuarial Memo 8

Non-Benefit Expenses and Profit & Risk

Expenses are based on our internal forecast for 2015. Expenses are estimated based off of current costs, projected
volume changes and estimated changes in department workload. These expenses are simply loaded as a flat
percentage of premium at this point in time and do not vary by product or plan.

13.82% Administrative Expense Load

5.44% Broker & Sales Commissions: Compensation expenses associated with business issued through an agent or
agency
-2.23% Quality Expenses: Expenses associated with quality that are allowed adjustments under the Medical Loss
Ratio standards
2.35% Clinical & Network Operations: non-quality clinical costs, provider contracting, and network maintenance &
development
1.78% IT Expenses: costs associated with maintenance and development of systems
0.89% Customer Service & Account Installation: call center, customer service, and account management
3.80% Corporate Administration: shared functions that are not exclusive to small group medical segment,
including corporate finance, legal, human resources, etc.
1.79% Small Group Administration: functional areas & personnel that solely work on small group medical segment

5.10% Profit (or Contribution to Surplus) & Risk Margin

Since taxes (including any federal income tax) are captured separately in the Taxes & Fees input, the profit
and risk load reflects after-tax amounts. The margin shown does not vary by product or plan.

2.78% Taxes and Fees

1.05% State Premium Tax: state premium tax; charged on a percentage of premium
1.73%

Federal Insurer Annual Fee: assessment created in 2014 by PPACA. Not income tax deductible.

Actuarial Memo 9

Projected Loss Ratio

Claims
+ Payment for Risk Adjuster
+ Payment for Reinsurance
+ Payment for Risk Corridor
- Receipt for Risk Adjuster
- Receipt for Reinsurance
- Receipt for Risk Corridor

$331.86
$0.08
$3.67
$0.00
$0.00
$0.00
$0.00
$335.61

Premiums
- Taxes and Fees

$428.65
$11.93
$416.72

The projected loss ratio using the Federally prescribed MLR methodology is:
$335.61
=
80.5%
$416.72
If the realized loss ratio is less than 80%, then the company will comply with the Federal MLR requirements outlined in
PHSA 2718.

Single Risk Pool

The Single Risk Pool is established according to the requirements in 45 CFR part 156.80(d) which includes all enrollees in
all health plans (other than grandfathered health plans) subject to section 2701 of the Public Health Service Act. The
Single Risk Pool is specific to the legal entity and the state of this filing.

Actuarial Memo 10

Index Rate
The Experience Period is for coverage months between January 2013 and December 2013, over which time the covered
benefits offered by the company were leaner than The Essential Health benefits required by the Affordable Care Act.
Therefore, the index rate for the Experience Period is set equal to the total Allowed Claims PMPM in the Experience Period,
with EHB pricing assumptions used to approximate the portion of the rate which covers EHB requirements in the projected
period.

There are no state mandated covered benefits that are included in allowed claims but excluded from the index rate.

Projected Allowed claims

non-EHB covered in projection period
1Q15 Index Rate

456.03
1.000
456.03
1Q15
2,454

Members by Quarter

2Q15
1,042

3Q15
1,239

4Q15
1,559

1.75%

1.75%

1.75%

$456.03

$463.99

$472.08

$480.32

$319.81

2.33%
1.0233
$327.26

2.33%
1.04714289
$334.89

Quarterly Allowed Core Trend

Index Rate
Quarterly Core Trend
1
Base Rate

= Wkst1 V32

2.33%
1.071541319
$342.69

Weighted Average
6,294

$466.52

1.030854208
$329.68

Market Adjusted Index Rate

Projected Index Rate
+ Risk Adjuster
+ Reinsurance
+ Exchange Fees
Market Adjusted Index Rate

$466.52
$
$
$

0.08
3.67
$470.27

Adjustments for the net impacts of both risk adjustment and reinsurance. See "Risk Adjustment and Reinsurance" earlier
section for more details of this market-wide adjustment.

Actuarial Memo 11

Plan Adjusted Index Rates

Market Adjusted Index Rate
$470.27
Cost Sharing
Plan
Adjustment
30613MO0500001
0.9672
30613MO0500002
0.9063
30613MO0500003
0.8135
30613MO0500004
0.7865
30613MO0500005
0.7656
30613MO0500006
0.7388
30613MO0500007
0.7249
30613MO0500008
0.8697
30613MO0500009
0.8226
30613MO0500010
0.7253
30613MO0500011
0.7038
30613MO0500012
0.6862
30613MO0500013
0.7138
30613MO0500014
0.7913
30613MO0500015
0.6618
30613MO0500016
0.6546
30613MO0500017
0.6376
30613MO0500018
0.6524
30613MO0500019
0.6199
30613MO0500020
0.6095
30613MO0500021
0.5976
30613MO0500022
0.5845
30613MO0500023
0.5703
30613MO0500024
0.8833
30613MO0500025
0.6711
30613MO0500026
0.6003
30613MO0500027
0.8740
30613MO0500029
0.5594
30613MO0500030
0.5634
30613MO0500031
0.6780
30613MO0500032
0.7040
30613MO0500034
0.4965
30613MO0500035
0.5186
30613MO0500036
0.4844
30613MO0500037
0.6993
30613MO0500039
0.5098
30613MO0500040
0.5462
30613MO0510001
1.0581

Admin and Fees

Addition to
= 1 / (1 - Admin)
EHB
1.000
1.2772
1.000
1.2772
1.000
1.2772
1.000
1.2772
1.000
1.2772
1.000
1.2772
1.000
1.2772
1.000
1.2772
1.000
1.2772
1.000
1.2772
1.000
1.2772
1.000
1.2772
1.000
1.2772
1.000
1.2772
1.000
1.2772
1.000
1.2772
1.000
1.2772
1.000
1.2772
1.000
1.2772
1.000
1.2772
1.000
1.2772
1.000
1.2772
1.000
1.2772
1.000
1.2772
1.000
1.2772
1.000
1.2772
1.000
1.2772
1.000
1.2772
1.000
1.2772
1.000
1.2772
1.000
1.2772
1.000
1.2772
1.000
1.2772
1.000
1.2772
1.000
1.2772
1.000
1.2772
1.000
1.2772
1.000
1.2772
Weighted Plan Adjusted Index Rates

Actuarial Memo 12

Plan Adjusted
Index Rate
$580.92
$544.40
$488.65
$472.40
$459.83
$443.77
$435.39
$522.41
$494.11
$435.65
$422.72
$412.19
$428.75
$475.31
$397.50
$393.16
$382.96
$391.89
$372.35
$366.10
$358.97
$351.07
$342.54
$530.57
$403.12
$360.59
$524.94
$335.97
$338.43
$407.24
$422.86
$298.21
$311.47
$290.94
$420.01
$306.21
$328.09
$635.54
$437.51

Member
Distribution
2.92%
1.33%
3.10%
9.77%
8.52%
7.35%
5.78%
4.65%
5.18%
4.36%
3.87%
12.74%
0.08%
0.85%
5.98%
5.56%
3.54%
0.32%
1.29%
1.22%
0.77%
0.42%
0.16%
0.08%
1.08%
0.60%
1.39%
0.85%
3.54%
0.89%
0.00%
0.23%
0.74%
0.00%
0.00%
0.18%
0.67%
0.00%
100.00%

Cost Sharing Adjustment:

Each of the cost sharing adjustment components were developed based on an internal pricing model with underlying
utilization and costs reflective of a standard population equal to that of the anticipated membership in the overall 2015 risk
pool. The data used to produce the small group pricing AVs was based on a standard population of commercially insured
membership purchased from a third party vendor. Then, the 2015 plan design parameters were applied to those allowed
claims to produce paid claims and cost sharing factors. The company did not use the experience of the terminating products
when determining the pricing adjustment due to the low membership on any particular plan which makes the experience not
credible. These values were developed in accordance with generally accepted actuarial principles and methodologies.

Network:
The development of the index rate includes the anticipated average unit costs derived from the provider networks that will
be available on this legal entity in this state. These average unit costs are the result of charge levels, network discounts,
delivery system characteristics and utilization management practices across the entire state, for this legal entity.

Actuarial Memo 13

Addition to EHB:
An adjustment for the addition of non-EHB benefits (additional benefits we provide at our own discretion, as well as any state
mandated benefits not reflected in the benchmark plan). It is assumed that the addition of such benefits increases costs to
all plans uniformly, hence it is essentially handled as a market-wide adjustment. See "Changes in Benefits" earlier section for
more details.

Admin and Fees:

Administrative and Fees estimates were based on our internal forecast for 2015. They were estimated based on current
costs, modified to accommodate projected volume changes and changes in department workload. These are presented as a
flat percentage of premium at this point in time and do not vary by product or plan, and thus are essentially another marketwide adjustment applied to the projected index rate. See "Non-Benefit Expenses and Profit & Risk" earlier section for more
details.

Actuarial Memo 14

Calibration
Age Curve Calibration
Age Range
0-20
21-24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
41
42
43
44
45
46
47
48
49
50
51
52
53
54
55
56
57
58
59
60
61
62
63
64+

Age Factor
0.635
1.000
1.004
1.024
1.048
1.087
1.119
1.135
1.159
1.183
1.198
1.214
1.222
1.230
1.238
1.246
1.262
1.278
1.302
1.325
1.357
1.397
1.444
1.500
1.563
1.635
1.706
1.786
1.865
1.952
2.040
2.135
2.230
2.333
2.437
2.548
2.603
2.714
2.810
2.873
2.952
3.000

Distribution
25.3%
5.9%
1.8%
1.4%
1.6%
1.6%
1.7%
1.8%
1.8%
1.8%
1.7%
1.9%
1.6%
1.7%
1.6%
1.7%
1.5%
1.7%
1.8%
1.8%
1.8%
1.7%
1.6%
1.6%
1.8%
1.6%
2.0%
2.1%
2.2%
1.9%
2.2%
1.8%
1.9%
2.0%
1.7%
1.6%
1.6%
1.5%
1.4%
1.1%
1.1%
2.2%

The average age factor is calculated as the member

weighted age rating factor, using the projected age
distribution assumptions in the pricing model. The
average age factor is then compared to the standard
age rating curve; the age factor closest to the
calculated weighted age rating factor is used to select
the whole number calibration age.

Weighted Average Age Factor

1.385
Closest Age Factor on Standard Curve
1.397
Whole Number Calibration Age
44

Actuarial Memo 15

Calibration Continued
Geographic Factor Calibration
The average geographic factor is calculated as the member weighted geographic rating factor, using the
projected geographic distribution assumptions in the pricing model. Only regions with projected membership
Rating Area
Geo Factor
Distribution
MO - Rating Area 1
1.5%
MO - Rating Area 2
0.0%
MO - Rating Area 3
81.3%
MO - Rating Area 4
2.7%
MO - Rating Area 6
0.0%
MO - Rating Area 7
0.5%
MO - Rating Area 8
13.9%

Weighted Average Geographic Factor:

Tobacco Calibration
Humana will not rate for tobacco use during the effective period.

Actuarial Memo 16

Consumer Adjusted Premium Rate Development

The Consumer Adjusted Premium Rate is developed by multiplying the Plan Adjusted Index Rate by the appropriate age
and area factors for the member and dividing by the allowable calibration factors shown in the "Calibration" section. For
Example
Member 1
Member 2
Member 3
Member 4
Plan
30613MO0500001
30613MO050000130613MO050000130613MO0500001
Rating Area
MO - Rating Area MO
1 - Rating Area 1MO - Rating Area 1MO - Rating Area 1
Age
21
35
48
61
Plan Adjusted Index Rate
Calibrated Area factor
Calibrated Age factor
x Actual Area factor
x Actual Age factor
Consumer Adjusted Premium Rate

Small Group Plan Premium Rates

Please see "Index Rate" section to view the pricing trend taken throughout 2015.

AV Metal Values
The AV Metal Values entered in Worksheet 2 of the Part I Unified Rate Review Template were entirely based on the AV
calculator.

AV Pricing Values
The AV Pricing Values are calculated as the ratio of each Plan Adjusted Index Rate and the Market Adjusted Index Rate.
Please see "Plan Adjusted Index Rates" section for the breakouts of the allowable modifiers. Our product pricing is
developed based on a nationwide 3rd party model calibrated to Small Business that incorporates expected utilization
based on different cost sharing components. The methodology does not include differences due to health status in these
adjustments.

Actuarial Memo 17

Membership Projections
The company is terminating all non-grandfathered plans issued before 1/1/2014 and is projecting that groups will renew on
similar plans throughout 2014 and 2015. The membership projections found in Worksheet 2 of the Part I Unified Rate Review
Template are based on mapping membership from non-ACA compliant plans to 2014 ACA compliant plans. The overall
membership volume is adjusted for anticipated market growth, in-force persistency, and relative competitiveness via our
internal market level projection models. There is also an adjustment on plans with zero mapped members due to Part I
Unified Rate Review Template Instructions not allowing projected membership on any plan to be zero. If a plan originally had
zero mapped member months, the projected member months on Worksheet II will show 2, thus increasing the total member
months by 8.

Terminated Products
The product names being terminated prior to the effective date have been listed below. The list encompasses both products
that have experience included in the single risk pool during the experience period and any products that were not in effect
during the experience but were made available thereafter.
List of Terminated Products:
30613MO041
30613MO042
30613MO046
30613MO015
30613MO019
30613MO023
30613MO030
30613MO037
30613MO016
30613MO020
30613MO024
30613MO032
30613MO038
30613MO017
30613MO021
30613MO028
30613MO033
30613MO039
30613MO018
30613MO022
30613MO029
30613MO034
30613MO040

Plan Type
The plan types selected in the drop-down boxes in Worksheet 2, Section I of the Part I Unified Rate Review Template for each
of the company's plans do not require further explanation. The company's plan types align with the definitions found on the
Healthcare.gov website.
Align Paid to Allowed ratios more closely with plan factors
0.10%
There may be warnings due to the member months not allowed to equal zero.
This impact is:
0.01%
There may be warnings due to the Plan Adjusted Index Rate on Worksheet 2 are using the 2015 weighted PMPM while
Worksheet 1 uses a non-weighted PMPM.

Warning Alerts

This impact is:

2.30%
There may be warnings due to the Plan Adjusted Index Rate on Worksheet 2 are using the index rate which has non-EHB
excluded from the calculation while Worksheet 1 has non-EHB included.
This impact is:
0.00%
There may be warnings due to the Plan Adjusted Index Rate on Worksheet 2 are using a different order of operations than on
Worksheet 1.
This impact is:
-0.31%
There may be warnings due to the Plan Adjusted Index Rate and Allowed Claims on Worksheet 2 have the average network
adjustment embedded while Worksheet 1 does not.
This impact is:

0.0%

Actuarial Memo 18

Reliance
I, Brian Kist, relied on information and underlying assumptions provided by internally developed pricing and modeling as
well as third party consultant data in the establishment of these rates.

Actuarial Certification
I, Brian Kist, am a Managing Actuary employed by Humana Insurance Company. I am a member of the American Academy of
Actuaries and I meet the Qualification Standards of the American Academy of Actuaries to render the Statement of Actuarial
Opinion contained herein.
I hereby certify that to the best of my knowledge and judgment and based upon the information presented to me:
1. 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.
2. That 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.
3. That 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.
4. That the 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 except those specified in the certification. For plans where an alternate methodology was
used to calculate the AV Metal Value, a copy of the actuarial certification required by 45 CFR Part 156, 156.135 has been
included. That certification was signed by a member of the American Academy of Actuaries, where he or she indicated that
the values were developed in accordance with generally accepted actuarial principles and methodologies. That certification
also includes a reason and a description of the alternate methodology that was used for each applicable plan.
This opinion is qualified, in that the Part I Unified Rate Review Template does not demonstrate the process used by the
issuer to develop the rates. Rather, it represents information required by Federal regulation to be provided in support of the
review of premium impacts, for certification of qualified health plans for Federally facilitated exchanges 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: 07/29/2014

Brian Kist, FSA, MAAA

Managing Actuary

Actuarial Memo 19