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10 Cards in this Set
- Front
- Back
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(Required Rate Per Member Per Month)
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The HMOCR is the required premium amount PMPM that is needed to cover the HMO’s total operational costs.
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AN HMO'S OPERATING STATEMENT (INCOME STATEMENT)
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Income
+ Premiums + Adjustments (copays, COB, reinsurance) + Interest Income Outgo – Medical Costs (Claim Costs) – Contributions to Required Surplus – Contributions to Reserves – Taxes – Expenses (Admin, commissions, overhead, etc.) – Reinsurance premiums – Interest income paid out (credited to ph’s) – Retrospective Experience Refunds |
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AN HMO’S BALANCE SHEET
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Assets
+ Cash and Investments + Premium Receivable + Fixed assets Liabilities – Unearned premiums – Claims payable (IBNR claims reserve) – Risk Pool liabilities |
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TYPES OF COMMUNITY RATING
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Pure Community Rating —The HMO must charge each Er group the same rate PEPM or PMPM.
Community Rating by Class (Modified Community Rating) — The PMPM rate can vary by Age/Sex/Industry/Family-status. |
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Misc. Considerations in Setting Premium Rates in Order to Achieve the HMOCR
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12-month guarantee of premiums
Inflation Gradation of premiums 1st, 2nd quarter premiums exceed costs, 3rd and 4th fall short of costs Enrollment Projections New enrollments at beginning (end) of a quarter make premiums overadequate (inadequate). Initial vs. Break-Even Year operational costs there is deficit each year until breakeven s/base premiums on the breakeven year costs unless financing specific initial objectives. Utilization Projections New HMOs’ utilization will decrease over time (as UM improves) should base premiums on ultimate levels (for competitivity) |
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CALCULATING TIERED PREMIUM RATES
Assumptions needed |
The HMOCR (Required premium rate per member per month)
Distribution of contracts by contract type the Number of ees in an average family (F) The desired ratios of contract rates large er groups may want ratios to match Indemnity ratios. |
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How To Calculate the Single Rate (S)
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S = HMOCR * (Members per Contract) / (Prem. Units per Contract)
S = HMOCR * (M/C) / (U/C) The (M/C) / (U/C) part is called the Conversion Factor. |
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Considerations in Developing Tiered Rates
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Each tier’s rates s/b competitive
with other HMO’s with the indemnity plan offered by the Er Each tier should be self-supporting note: children cost less total premium must equal the HMOCR. |
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COMPOSITING
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See example in chapter notes
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RE-ALIGNING RATES to MATCH an EMPLOYER’S DESIRED RATIOS.
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See example in chapter notes
Done. |
