actuarial memorandum and certification effective january 1 ......molina healthcare of new mexico,...

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Molina Healthcare of New Mexico, Inc.

Marketplace Individual Rate Submission August 15, 2018

Actuarial Memorandum and Certification

Effective January 1, 2019

The purpose of this actuarial memorandum and certification is to provide information related to Molina Healthcare of New Mexico, Inc.’s (Molina) Part I Unified Rate Review Template submission to the Error! Reference source not found. Marketplace Individual Marketplace (New Mexico Marketplace). The actuarial memorandum and certification describe Molina’s rating methodology used to develop rates for Individual products offered on the New Mexico Marketplace effective January 1, 2019. Molina will not market Individual products outside of the New Mexico Marketplace. Molina Healthcare of New Mexico, Inc. is a managed care organization that provides healthcare services for over 250,000 individuals eligible for Medicaid, Medicare, and Marketplace throughout the State of New Mexico. Molina Healthcare of New Mexico, Inc. is a licensed state health plan managed by its parent corporation, Molina Healthcare, Inc. Molina Healthcare, Inc., a FORTUNE 500 company, provides managed health care services under the Medicaid and Medicare programs and through the state insurance marketplaces. Through our locally operated health plans in 12 states across the nation and in the Commonwealth of Puerto Rico, Molina serves more than 4.2 million members. Dr. C. David Molina founded our company in 1980 as

a provider organization serving low‑income families in Southern California. Today, we continue his

mission of providing high quality and cost‑effective health care to those who need it most.

200 Oceangate Suite 100 Long Beach, CA 800.526.8196

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TABLE OF CONTENTS

GENERAL INFORMATION .............................................................................................................................3

COMPANY IDENTIFYING INFORMATION ........................................................................................................................3

COMPANY CONTACT INFORMATION ............................................................................................................................3

PROPOSED RATE INCREASE(S) .....................................................................................................................4

MARKET EXPERIENCE ..................................................................................................................................5

EXPERIENCE PERIOD PREMIUM AND CLAIMS ................................................................................................................5

BENEFIT CATEGORIES ...............................................................................................................................................6

PROJECTION FACTORS ..............................................................................................................................................7

CREDIBILITY OF EXPERIENCE .................................................................................................................................... 12

PAID TO ALLOWED RATIO ....................................................................................................................................... 12

RISK ADJUSTMENT AND REINSURANCE ..................................................................................................................... 13

NON-BENEFIT EXPENSES AND PROFIT & RISK ............................................................................................................ 16

PROJECTED LOSS RATIO ............................................................................................................................ 19

APPLICATION OF MARKET REFORM RATING RULES .................................................................................... 20

SINGLE RISK POOL................................................................................................................................................. 20

INDEX RATE ......................................................................................................................................................... 20

MARKET ADJUSTED INDEX RATE .............................................................................................................................. 21

PLAN ADJUSTED INDEX RATES ................................................................................................................................. 21

CALIBRATION ....................................................................................................................................................... 23

CONSUMER ADJUSTED PREMIUM RATE DEVELOPMENT ............................................................................................... 25

PLAN PRODUCT INFORMATION ................................................................................................................. 26

AV METAL VALUES ............................................................................................................................................... 26

AV PRICING VALUES .............................................................................................................................................. 27

MEMBERSHIP PROJECTIONS ................................................................................................................................... 28

TERMINATED PRODUCTS ........................................................................................................................................ 30

PLAN TYPE ........................................................................................................................................................... 30

WARNING ALERTS................................................................................................................................................. 30

MISCELLANEOUS INSTRUCTIONS ............................................................................................................... 30

EFFECTIVE RATE REVIEW INFORMATION ................................................................................................................... 31

RELIANCE ............................................................................................................................................................ 31

ACTUARIAL CERTIFICATION ..................................................................................................................................... 32

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GENERAL INFORMATION The information below documents the company identifying and contact information entered into the general information section of Worksheet 1 of the Unified Rate Review Template (URRT).

Company Identifying Information

Company Identifying Information

Legal Name: Molina Healthcare of New Mexico, Inc.

State: New Mexico

HIOS Issuer ID: 19722

Market: New Mexico Individual Marketplace

Effective Date: January 1, 2019

Company Contact Information

Company Contact Information

Contact Name: Evan Swalheim

Telephone #: 888.562.5442 x114611

E-mail: [email protected]

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PROPOSED RATE INCREASE(S)

Molina’s rate filing reflects the following rate changes by metal tier for Molina’s 25,045 members

enrolled effective April 1, 2018 reported as of May 2018.

The rate changes vary by metal tier due to changes in the Actuarial Value (AV) Pricing Values assigned

to each metal plan that are applied to the Plan Adjusted Index Rate.

Rate Change by Plan

Plan ID Product Name

Metal Tier

Members Rate Change

Average Minimum Maximum

19722NM0010001

Molina Marketplace

Gold 12,177 3.4% -1.4% 6.0%

19722NM0010002 Silver 5,398 -20.8% -24.6% -18.9%

19722NM0010003 Bronze 7,470 -7.5% -11.9% -5.2%

Total 25,045 -6.0% -24.6% 6.0%

Reason for Rate Decrease(s): Molina identified the following factors contributing to the overall

decrease in Molina’s proposed rates.

- Health Insurer Fee: The Health Insurer Fee will be subject to a one year moratorium with no collection for the 2019 Fee Year.

- Federal Income Tax: The federal tax rate was lowered from 35 percent to 21 percent beginning in 2018.

Molina identified factors that mitigated the overall rate decrease:

- Trend: Molina trended the experience period claims at a 10.4% annualized trend rate.

- Individual Mandate: The individual mandate will not be enforced for the 2019 plan year, resulting in younger and healthier members dropping coverage.

- Rate changes by metal tier: Rate changes vary by metal tier due to changes in Actuarial Value and Cost Share Design (CSD).

- Risk and Contingency Margin: A risk and contingency margin is added to our premiums to account for the increased risk and volatility associated with the line of business.

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- Acuity Adjustment: The morbidity of Molina's covered population is expected to increase between the experience period and the projection period.

MARKET EXPERIENCE

Molina’s 2017 experience in Part I of the Unified Rate Review Template (URRT) is based on 313,322

member months or 26,110 average members.

Experience Period Premium and Claims

Paid Through Date: The market experience reported in Worksheet 1, Section I of the URRT

represents 2017 incurred claims paid through April 31, 2018. The IBNR factors applied to the 2017

claims experience were updated with data through April 31, 2018.

Premiums (Net of MLR Rebate) in Experience Period: The premiums reported in Worksheet 1,

Section I of the URRT represent the earned premium from 2017, excluding risk adjustment transfer

payments for the 2017 benefit year. Molina has accrued $3,206,969 for MLR rebates for the 2017

benefit year. No amounts were subtracted from the earned premium for any reductions prescribed

by the federal MLR formula, such as taxes and assessments.

Allowed and Incurred Claims in Experience Period: The following table reports the allowed and

incurred claims during the 2017 experience period.

2017 Experience Period Claims (paid through: March 2018)

Item Description Medical Pharmacy Capitation Total

a Allowed $77,648,994 $17,470,236 $1,186,481 $96,305,711

b Member Cost

Share ($13,066,903) ($3,258,224) $0 ($16,325,127)

c = a + b Subtotal $64,582,091 $14,212,012 $1,186,481 $79,980,584

d IBNR 1.023 1.000 1.000 1.019

e = c x d Subtotal $66,092,674 $14,212,012 $1,186,481 $81,491,167

f Cost Share Reduction

($7,591,998)

g = e + f Incurred Claims $73,899,169

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Molina applied completion factors to both the allowed and incurred medical claim amounts. The

completion factors were developed separately for inpatient and non-inpatient medical claims based

on Molina’s New Mexico Marketplace data. The IBNR factors applied to the 2017 claims experience

were updated with data through April 2018. The IBNR factor applied to the allowed and incurred

claims is 1.019. Molina does not apply IBNR factors to capitation and pharmacy claims.

Molina did not consider ACA related risk adjustment, reinsurance, and risk corridor payments/

receivables in the experience data entered in Worksheet 1, Section I and Section II of the URRT.

All medical claims are paid through Molina’s claims system. Pharmacy claims are processed through

Molina’s pharmacy benefit manager.

Benefit Categories

Molina assigned all experience claims to benefit categories utilizing Milliman’s MedInsight Health

Cost Guidelines (HCG) grouper. The following table displays the measurement units related to each

benefit category.

Benefit Categories

Benefit Category Description

Inpatient Hospital Days

Outpatient Hospital Services

Professional Services

Other Medical Services

Capitation Benefit Period

Prescription Drug Prescriptions

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Projection Factors

Population Morbidity: The population morbidity adjustment is comprised of an acuity factor, which

represents anticipated changes in Molina’s single risk pool, and the individual mandate impact, which

represents anticipated changes in the market-wide risk pool.

Changes in acuity: The morbidity of Molina's covered population is expected to increase between

the experience period and the projection period.

Molina used historical acuity membership changes for new and renewal members to derive the

projected acuity membership mix.

Acuity is measured by applying the 2017 HHS model risk score weights for Silver to 2017 experience

period membership net of the demographic component to ensure the changes in HHS model,

demographics, and metal are not included in this adjustment. Molina estimated the average allowed

cost by risk score cohort normalized for age, gender, and metal and calculated the change in average

allowed cost between the experience period and projection period. Molina applied the change in

allowed costs as an adjustment to the experience period.

The total acuity adjustment made to the 2017 experience period data was 1.027. Acuity Adjustments

were not made to capitation costs.

Population Morbidity Adjustment

Member Mix Normalized Allowed Costs by Service Category

Risk Score Experience

Period Projection

Period HIP HOP Prof Other Rx Cap

[00] 76.5% 77.3% 23.68 37.22 25.28 2.89 19.59 3.79

[00-1.0] 10.8% 9.5% 71.25 111.97 76.05 8.70 58.94 3.79

[1.0-10.0] 10.3% 10.6% 173.35 272.44 185.03 21.17 143.42 3.79

[10++++] 2.4% 2.6% 976.06 1533.93 1041.80 119.18 807.49 3.79

Total 100% 100%

a 2017 67.40 105.92 71.94 8.23 55.76 3.79

b 2019 69.24 108.81 73.90 8.45 57.28 3.79

c = b / a Adjustment 1.027 1.027 1.027 1.027 1.027 1.000

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Individual Mandate: In addition to the acuity factor, we applied an adjustment to the experience

period to reflect the anticipated change in morbidity of the market-wide risk pool due to the repeal

of the individual mandate. The New Mexico Marketplace is expected to decrease in size and have a

higher average morbidity compared to the experience period. Molina performed an analysis using its

own experience data to assess the impact of a subset the population dropping coverage. The

impacted membership included a portion of members with low claims in the previous year, members

with higher member premiums, and members who are younger. The market-wide risk pool changes

together with higher average morbidity are expected to increase the fee-for-service portion of the

experience period allowed claims by 5.7%. The results of the study are shown in the table below.

Individual Mandate Impact

Mandate Enforced Mandate Not Enforced Mandate

Age Category Member Months Allowed PMPM Member Months Allowed PMPM Impact

a b c = b / a d e f = e / d g = f / c

< 21 32,605 3,552,571 108.96 29,822 3,479,613 116.68 1.071

21 to 29 34,315 5,209,356 151.81 31,584 5,138,292 162.69 1.072

30 to 39 42,935 9,645,576 224.66 39,440 9,553,914 242.24 1.078

40 to 49 48,887 13,651,745 279.25 45,726 13,562,855 296.61 1.062

50 to 59 90,653 35,065,799 386.82 86,439 34,928,486 404.08 1.045

60+ 63,927 30,953,666 484.21 61,663 30,871,347 500.65 1.034

Total 313,322 98,078,712 313.03 294,673 97,534,507 330.99 1.057

Other Adjustments:

Changes in Demographics: Molina applied a factor to the experience period claims to reflect the

anticipated change in the demographic mix from the 2017 experience data to the 2019 projection

period. The anticipated demographic mix is based largely on a review of enrollment through April

2018 compared to the experience period. Molina anticipates that its 2019 demographics will be

consistent with its 2018 demographics. The demographic adjustments were developed for the major

categories of service for fee-for-service claims as shown in the table below. Demographic

adjustments were not made to capitation costs. The total demographic adjustment made to the 2017

experience period data was 0.999.

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Population Demographic Adjustment

Member Mix Claim Costs PMPM

Age Gender Experience

Period Projection

Period IP OP Prof Rx

0-14 M 3.1% 3.2% 21.59 12.46 46.65 10.68

0-14 F 3.3% 3.2% 18.74 13.56 45.50 6.62

15-19 M 1.5% 1.7% 10.63 14.93 30.38 13.61

15-19 F 1.5% 1.7% 10.08 27.17 39.08 12.40

20-29 M 5.9% 5.6% 37.74 22.97 27.32 18.06

20-29 F 6.5% 6.1% 32.43 34.77 58.09 14.82

30-39 M 6.9% 7.0% 30.61 32.81 38.18 28.63

30-39 F 7.2% 7.4% 61.50 49.00 74.91 20.90

40-49 M 7.1% 7.3% 56.09 36.45 48.40 36.80

40-49 F 8.5% 8.7% 54.68 64.01 77.46 25.58

50-59 M 12.5% 12.3% 120.77 66.47 74.14 49.49

50-59 F 15.8% 15.0% 74.69 80.76 93.65 40.28

60+ M 8.6% 8.9% 177.86 95.95 109.48 53.38

60+ F 11.7% 11.8% 128.12 103.29 119.43 51.18

Total 100% 100%

a 2017 78.14 60.23 74.77 34.33

b 2019 78.29 60.12 74.71 34.30

c = b / a Adjustment 1.002 0.998 0.999 0.999

The claim costs to determine the estimated impact of demographic mix changes from 2017 to 2019

are calculated based on Molina’s nationwide 2017 claims experience.

Cost Sharing Design: Members will utilize services less frequently when their responsibility of cost-

sharing increases. Molina calculated the cost sharing design utilization factor by estimating the

members by metal tier and cost-sharing subsidy. Molina assigned each metal tier and cost-sharing

subsidy tier the cost sharing design utilization factor used in the Federal Risk Adjustment calculation

and calculated the change in the cost sharing design factor between the experience period and the

projection period. Molina applied the difference in the factors as an adjustment to the experience

period.

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Cost Share Design (CSD) Adjustment

Product Name Metal FPL 2017 2019

MMs CSD MMs CSD

Molina Marketplace Gold Base 35,381 1.080 60,431 1.080

Molina Marketplace Silver CSR 100-150 48,625 1.030 45,637 1.030



Molina Marketplace Silver Base 61,755 1.030 34,659 1.030

Molina Marketplace Bronze Base 63,547 1.000 120,737 1.000

Total 313,322 1.030 351,038 1.028

2017 CSD 1.030

2019 CSD 1.028

CSD Factor Adjustment 0.999

Internal Reinsurance: Molina applied a factor in consideration of premiums related to catastrophic

reinsurance coverage.

Changes in Benefits: No factors were applied to adjust the experience period claims for benefit

changes.

Trend Factors: Trend factors were applied separately for unit cost and utilization and by each major

benefit category shown in Worksheet 1, Section I of the URRT. Molina trended the experience period

claims forward 24 months from the midpoint of the base period, July 2017, to the midpoint of the

projection period, July 2019.

Unit cost trends were developed by comparing anticipated changes in provider contracts between

the 2017 experience period and the 2019 projection period. The contract changes were calculated

for the major service categories in each rating area.

Utilization trends were developed through a review of the allowed claims experience from 9 states

representing over 900,000 members in 2017 and 500,000 members in 2016. The utilization data was

normalized to account for differences in demographics and health status between the two

comparison periods. The chart below shows the annual trends by category of service included in the

rate filing.

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Annual Claims Trends

Benefit Utilization Unit Cost

Total

IP 3.5% 4.5% 8.2%

OP 5.0% 4.5% 9.7%

Prof 4.5% 5.0% 9.7%

Other 4.5% 5.0% 9.7%

Rx 6.5% 8.5% 15.6%

Cap 0.0% 4.0% 4.0%

Total 4.8% 5.4% 10.4%

The following tables summarize all of the adjustments made to the data in the URRT, Worksheet 1.

Benefit Category Acuity Individual

Mandate

Population

Risk

Morbidity

Inpatient Hospital 1.027 1.057 1.086

Outpatient Hospital 1.027 1.057 1.086

Professional 1.027 1.057 1.086

Other Medical 1.027 1.057 1.086

Capitation 1.000 1.000 1.000

Prescription Drug 1.027 1.057 1.086

Adjustments -- Experience to Projection Period (Other)

Benefit Category Demographic

Adjustment

Cost Sharing

Design

Non-EHB

Benefits Reinsurance Total

Inpatient Hospital 1.002 0.999 1.000 1.001 1.002

Outpatient Hospital 0.998 0.999 1.000 1.001 0.998

Professional 0.999 0.999 1.000 1.001 0.999

Other Medical 0.999 0.999 1.000 1.001 0.999

Capitation 1.000 1.000 1.000 1.000 1.000

Prescription Drug 0.999 0.999 1.000 1.001 0.999

Inclusion of Capitation Payments: All capitated payments are included in the experience data and

rate development.

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Credibility of Experience

Molina calculated the credibility percentage to apply to the experience data based on experience

period member months and the credibility formula below:

Molina Credibility Table

Member Months Experience Period Manual Rate

Low High Weight Weight

0 11,999 0.0% 100.0%

12,000 23,999 50.0% 50.0%

24,000 + 100.0% 0.0%

Molina’s 2017 experience in Part I of the Unified Rate Review Template (URRT) is based on 313,322

member months, resulting in a credibility percentage of 100.0%. This method is consistent with the

applicable American Academy of Actuaries’ Actuarial Standards of Practice (ASOP) No. 25 Credibility

Procedures.

Paid to Allowed Ratio

The Paid to Allowed ratio reflects the estimated cost-sharing in the projected period. The actuarial value (AV) for each product was based on Molina’s actual claims experience, and was adjusted based on expected cost-sharing differences between the 2017 and 2019 plans. This rate methodology assumes the Cost Sharing Reduction subsidies are not funded. The Paid to Allowed ratios for the Silver 100 and Silver 150 plans represent the amounts without the Cost Sharing Reduction subsidies.

The Paid to Allowed ratio is the average of the AVs weighted by projected allowed costs. The table

below documents the Paid to Allowed ratio factor entered into the URRT, Worksheet I, Section III.

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Paid to Allowed Ratio

Plan ID Product Name Metal FPL Member

%

Projected Allowed PMPM

Paid to Allowed

Calibrated Paid to Allowed

a b c d e f g k = g*j

19722NM0010001

Molina Marketplace

Gold Base 17.2% $633.55 0.838 0.883

19722NM0010002 Silver

CSR 100-150 13.0% $553.15 0.953 1.004

CSR 150-200 15.1% $490.26 0.880 0.928

CSR 200-250 10.4% $463.78 0.788 0.831

Base 9.9% $367.39 0.733 0.772

19722NM0010003 Bronz

e Base 34.4% $215.38 0.627 0.661

Total 100% $413.68 0.771 0.813

h Member Weighted

Average 0.771

i Dollar Weighted

Average 0.813

j = i/h Calibration Factor 1.054

Risk Adjustment and Reinsurance

Experience Period Risk Adjustment PMPM:

Molina used results from the Wakely National Risk Adjustment Reporting (WNRAR) Project to

supplement internal estimates of risk scores, statewide premiums, and the corresponding risk

adjustment transfer amounts. For the 2017 experience period the estimated risk transfer payable is

$10.17 per member per month (PMPM) or $3,388,535.

Projected Risk Adjustments PMPM:

Molina estimated the risk transfer amount for 2019 using the 2017 experience period risk transfer

amounts. The 2019 risk transfer estimates were developed by projecting 2018 relative risk scores and

transfer payments, then projecting 2019 relative risk scores and transfer payments. The population

was grouped into the following cohorts:

- 2018 Renewal Members – Some of Molina’s current members previously had coverage in 2017 and renewed with Molina in 2018. Molina relied on the renewal member’s 2017 experience and risk scores to project their 2018 relative risk, adjusting for shift in metal mix.

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- 2018 New Members – To estimate the relative risk of the 2018 new members, Molina

referred to the estimated risk scores and transfer amounts from the 2017 experience period. Estimated risk scores were adjusted in consideration of the metal tier mix between the 2017 members and the 2018 new members.

- 2019 Members – Molina assumed the 2019 members would have the same risk scores as the 2018 members, with consideration for the metal tier mix between the two years.

The impact of the national high-risk pool fund was incorporated using our 2017 claims experience

and a white paper report from Wakely on the estimated high-cost risk pooling charges based on

information voluntarily provided by issuers. The net impact of estimated charges and recoveries was

calculated as $1.01 PMPM payable.

The resulting 2019 risk transfer receivable estimate is $5.51 per member per month (PMPM). Molina

added $1.01 PMPM for projected national high-risk pooling funding, $0.15 PMPM in projected risk

adjustment user fees to the $5.51 PMPM risk transfer payable estimate and entered the total of

$4.31 PMPM in the URRT Worksheet I, Section III.

The risk transfer payment amounts in the projection period reflect expected changes in the relative

risk of the population and changes to the statewide premium. The 14% administrative cost reduction

is factored in for 2018 and 2019 transfer estimates. The following table summarizes the development

of the 2019 risk transfer estimate.

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Risk Transfer Estimate

Item Term Description Molina Statewide

a PLRSi Plan Liability Risk Score 1.545 1.496

b IDFi Induced Demand Factor 1.028 1.037

c GCFi Geographic Cost Factor 1.016 0.996

f = c x d x e PLRS x IDF x GCF 1.72432 1.614

f(Molina) / f(Statewide) Molina Relativity with Risk 1.16842 1.044

g AVi Actuarial Value 0.683 0.704

h ARFi Allowable Rating Factor 1.811 1.718

i IDFi Induced Demand Factor 1.028 1.037

j GCFi Geographic Cost Factor 1.016 0.996

k = g x h x I x j AV x ARF x IDF x GCG 1.28036 1.292

k(Molina) / k(Statewide) Molina Relativity without Risk 1.10325 1.034

l = f - k 0.06517 0.011

m

Statewide Average Premium 599.53

n = m x 86% Statewide Average Premium

Adjusted

o = l x n Ti Molina Risk Transfer Estimate 5.51

p National High Cost Risk Pool -1.01

q Risk Adjustment User Fee -0.15

s = o + p + q Total Risk Transfer 4.35

Experience Period Reinsurance PMPM: Not applicable.

Projected ACA Reinsurance Recoveries Net of Reinsurance Premium: Not applicable.

x 86%

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Non-Benefit Expenses and Profit & Risk

Administrative Expense Load: Molina reviewed administrative expenses for the Marketplace

products from 2017 and 2018 to develop administrative costs required to manage the New Mexico

Marketplace population. Molina used an internal administrative cost budget on a PMPM basis and

converted the costs to an overall percentage of premiums to apply to the New Mexico Marketplace

rates. Amounts for broker commissions were added to the administrative costs. The expected

administrative expense load is 14.5%. The administrative expense is lower than the 15.8%

administrative expense load included in Molina’s previously approved rate filing.

Administrative Expense Load

Description PMPM % of Premium

Corporate and Plan Expense $37.74 8.4%

Bank Service Charges $1.38 0.3%

Quality Expenses $20.91 4.6%

Broker Commissions $5.38 1.2%

Total $65.41 14.5%

The administrative expense load varies by metal tier as shown in the table below.

Administrative Expense Load

Product Name Metal

Corporate

& Plan

Expense

Bank

Service

Charges

Quality

Expenses

Broker

Commissions Total

% of

Premium

a b c d e f g = sum (c:f)

Molina

Marketplace

Gold $42.84 $1.38 $23.74 $5.38 $73.33 14.3%

Silver $41.48 $1.38 $22.99 $5.38 $71.22 14.4%

Bronze $29.93 $1.38 $16.58 $5.38 $53.27 14.9%

Total $37.74 $1.38 $20.91 $5.38 $65.41 14.5%

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- Broker Commissions: Molina expects broker commissions of $5.38 PMPM in 2019, based on Molina’s broker-sold business in 2018 and a projection of new and renewing members sold through the broker channel.

Commission Estimate

Policy Cohort

Broker Commission Commission

Year Sold % $ PMPM

2019

New Members (Open Enrollment) 27% $732,197 $2.09

New Members (Special Enrollment) 1% $0 $0.00

Renewal Members (Open Enrollment) 27% $1,144,499 $3.26

Renewal Members (Special Enrollment) 0% $12,218 $0.03

Total 28% $1,888,914 $5.38

Profit & Risk Margin: Molina’s target after-tax margin is 3.00%. The target margin is unchanged

from Molina’s previously approved rate filing.

Risk and Contingency Margin: A risk and contingency margin is added to our premiums to account

for the increased risk and volatility associated with the line of business. The risk and contingency

margin considers legislative/political risk, enrollment volatility, profitability volatility, provider

contracting structure risk, shifts in metal mix, and whether an opportunity to revise risk adjustment

estimates is made available after the initial rate filing. The risk and contingency margin is 1.0%.

Taxes and Fees: Molina’s 7.8% estimate of taxes and fees is lower than the previously approved rate

filing estimate of 10.8%. The decreased taxes and fees estimate is primarily to the moratorium of the

Health Insurer Fee that was included in the prior year’s rate filing. The taxes and fees estimate is

comprised of the following:

- New Mexico Marketplace Exchange Fee: New Mexico Marketplace will charge a fee of 3.00% of premium for Molina’s members enrolled in New Mexico Marketplace. The Exchange user fee is applied at the Market adjusted Index Rate.

- PCORI Fee: The PCORI fee no longer applies to health insurance policies with policy years ending after Oct. 1, 2019.

- Premium Tax: 4.003% of premiums will be paid toward state premium taxes.

- Federal Income Tax: An estimated 0.8% of premiums will be paid in Federal income taxes based on an anticipated 21% federal tax rate.

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Taxes and Fees

Taxes and Fees PMPM % of

Premium

Health Insurer Fee $0.00 0.0%

PCORI Fee ($0 PMPY) $0.00 0.0%

Premium Tax & Other Fees $18.03 4.0%

Federal Taxes $3.59 0.8%

Exchange Fee $13.51 3.0%

Total Taxes and Fees $35.14 7.8%

Single Risk Pool Premium $450.48

Taxes and Fees vary by metal tier as shown in the table below.

Taxes and Fees

Product

Name Metal

Health

Insurer

Fee

PCORI

Fee

Premium

Tax &

Other Fees

Federal

Taxes

Exchange

Fee Total

% of

Premium

a b c D e e f g = sum (c:f)

Molina

Marketplace

Gold $0.00 $0.00 $20.47 $4.08 $15.37 $39.92 7.8%

Silver $0.00 $0.00 $19.82 $3.95 $14.88 $38.65 7.8%

Bronze $0.00 $0.00 $14.30 $2.85 $10.66 $27.81 7.8%

Total $0.00 $0.00 $18.03 $3.59 $13.51 $35.14 7.8%

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PROJECTED LOSS RATIO

The projected medical loss ratio (MLR) using the federally prescribed MLR methodology is 85.0% for

calendar year 2019 based on the ratio of projected incurred claims divided by projected revenue.

MLR Demonstration

Federal Prescribed MLR Formula

MLR = [(i + q - s + n - r)/{(p + s - n + r) - t - f - (s - n + r)}] + c

s = transitional reinsurance receipts $0.00

n = risk corridors and risk adjustment payments $0.00

r = issuer’s risk corridors and risk adjustment receipts $4.35

= s - n + r $4.35

MLR = [(i + q - 4.35)/{(p + 4.35) - t - f - (4.35)}] + c

i = incurred claims $336.26

q = expenditures on quality improving activities $20.91

= i + q $357.17

MLR = [(357.17 - 4.35)/{(p + 4.35) - t - f - (4.35)}] + c

MLR = [(352.82)/{(p + 4.35) - t - f - (4.35)}] + c

p = earned premiums $450.48

MLR = [(352.82)/{(450.48 + 4.35) - t -f - (4.35)}] + c

MLR = [(352.82)/{(454.82) - t -f - (4.35)}] + c

t = Federal and State taxes and assessments $21.62

f = licensing and regulatory fees, incl. transitional reins $13.51

= -t – f ($35.14)

MLR = [(352.82)/{(454.82) - 35.14 - (4.35)}] + c

MLR = [(352.82)/{415.34}] + c

MLR = [84.9%] + c

c = credibility adjustment, if any 0.0%

MLR = [84.9%] + 0.0%

MLR = 84.9%

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APPLICATION OF MARKET REFORM RATING RULES

Single Risk Pool

Molina’s single risk pool is in accordance with 45 CFR part 156, §156.80. Molina has no transitional

products/plans or grandfathered products that should be included in the development of the single

risk pool.

Index Rate

The index rate is developed following the specifications of 45 CFR part 156.80(d)(1). The index rate

for the projection period is estimated to be $413.68. The index rate represents the estimated total

allowed claims experience for the essential health benefits within the New Mexico Marketplace. The

index rate does not include adjustments for the risk adjustment and reinsurance programs or an

adjustment for the New Mexico Marketplace user fee.

The projected allowed claims in Worksheet 1, Section III of the URRT is $438.54, which is consistent

with the Projected Allowed Claims PMPM in the exhibit below.

Index Rate

Item Description Allowed Claims

a 2017 Allowed Claims $313.03

b Demographic Adjustment 0.999

c Utilization Trend 1.097

d Unit Cost Trend 1.110

e Acuity Adjustment 1.027

f Reinsurance 1.001

g Individual Mandate Adjustment 1.057

h Cost Sharing Design 0.999

i = product(a:h) Index Rate $413.68

j Non-EHB 0.00

k = i + j Projected Allowed Claims $413.68

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Market Adjusted Index Rate

The market adjusted index rate is developed following the specifications of 45 CFR part 156.80(d)(1).

Molina modified the index rate provided in URRT Worksheet I to a market adjusted index rate as

follows:

Market Adjusted Index Rate

Item Description Paid

Basis Adjustment Allowed Basis Comments

a URRT Index Rate $413.68 URRT, Worksheet 1

b Risk Adjustment ($4.35) 0.813 ($5.35)

c Exchange Fee $13.51 0.813 $16.63 See Taxes & Fees

d Market Adjusted Index Rate $424.95 d = a + b + c

Plan Adjusted Index Rates

The plan adjusted index rates are developed following the specifications of 45 CFR part

156.80(d)(2).The plan adjusted index rates are entered in Worksheet 2, Section IV, of the URRT

Template. Molina calculated the plan adjusted index rates by applying plan specific level

adjustments for actuarial value, cost sharing utilization, additional benefits, and administrative costs,

excluding exchange user fees, to the market adjusted index rate.

Product Name Metal

Market

Adjusted

Index

Rate

Actuarial

Value

Cost

Sharing

Adj.

Benefits

in

Addition

to EHBs

Admin

Costs

Plan Adjusted

Index Rate

a b c d E f g h = product (c:g)

Molina Marketplace

Gold 424.95 0.883 1.048 1.000 1.301 511.31

Silver 424.95 0.896 0.999 1.000 1.302 495.10

Bronze 424.95 0.661 0.970 1.000 1.311 357.24

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- AV and Cost Sharing Design: The table below shows the details of Molina’s AVs and Cost Sharing Design Adjustment factors:

Actuarial Value and Cost Sharing Adjustment

Plan ID Product

Name Metal Members

Actuarial

Value

Cost Sharing

Adj.

19722NM0010001 Standard Gold 5,036 0.883 1.048

19722NM0010002 Standard Silver 14,156 0.896 0.999

19722NM0010003 Standard Bronze 10,061 0.661 0.970

Total 29,253 0.813 1.000

- Provider Network, Delivery System Characteristics, and Utilization Management Practices: Molina did not vary plan rates for variation of provider network, delivery system characteristics, and utilization management.

- Catastrophic plans: Not Applicable.

- Administrative costs, excluding Exchange User Fees: Molina converted all administrative costs, excluding the New Mexico Marketplace Fee, to a multiplicative factor, which varies for each plan according to differences in premium. The overall multiplicative factor is shown in the table below.

Administrative Costs Excluding Exchange Fee

Item Description % of Premium

a Administrative Expense Load 14.5%

b Profit Margin 3.0%

c Risk & Contingency 1.0%

d Taxes & Fees excl. Exchange Fee 4.8%

e = a + b + c + d Total 23.3%

f= 1 / (1 – e) Administrative Factor 1.304

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The administrative factors vary by metal tier as shown in the table below.

Administrative Costs Excluding Exchange Fee

Product

Name Metal

Admin.

Expense

Load

Profit

Margin

Risk &

Contingency

Taxes & Fees

(excl.

Exchange Fee)

Total Admin.

Factor

a b c d e f g = sum (c:f) h = 1 / (1-g)

Molina

Marketplace

Gold 14.3% 3.0% 1.0% 4.8% 23.1% 1.301

Silver 14.4% 3.0% 1.0% 4.8% 23.2% 1.302

Bronze 14.9% 3.0% 1.0% 4.8% 23.7% 1.311

Total 14.5% 3.0% 1.0% 4.8% 23.3% 1.304

Calibration

Age Curve Calibration: Molina calibrated the Plan Adjusted Index Rates to an age 21 rate. Molina

estimates the average composite age factor by multiplying the expected age distribution by the age

factors. The calibration factor of 0.548 equals the age factor at age 21 divided by the average age

factor (1.000 / 1.825). Please note an additional adjustment was implemented in the age calibration

process to account for the dependent cap where only the 3 eldest children’s premiums contribute to

the family premium.

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Age Curve Calibration

Age Member % Age Factor Age Member % Age Factor Age Member % Age Factor

0 -20* 0.2% 0.000 31 1.4% 1.159 49 2.1% 1.706

0 – 14 5.8% 0.765 32 1.4% 1.183 50 1.9% 1.786

15 0.6% 0.833 33 1.5% 1.198 51 2.2% 1.865

16 0.6% 0.859 34 1.4% 1.214 52 2.3% 1.952

17 0.7% 0.885 35 1.4% 1.222 53 2.6% 2.040

18 0.6% 0.913 36 1.4% 1.230 54 2.7% 2.135

19 0.7% 0.941 37 1.4% 1.238 55 2.7% 2.230

20 0.9% 0.970 38 1.5% 1.246 56 3.3% 2.333

21 0.8% 1.000 39 1.4% 1.262 57 2.8% 2.437

22 0.9% 1.000 40 1.3% 1.278 58 3.3% 2.548

23 0.9% 1.000 41 1.3% 1.302 59 3.3% 2.603

24 1.0% 1.000 42 1.4% 1.325 60 3.4% 2.714

25 0.9% 1.004 43 1.5% 1.357 61 3.9% 2.810

26 1.5% 1.024 44 1.5% 1.397 62 4.2% 2.873

27 1.9% 1.048 45 1.6% 1.444 63 4.6% 2.952

28 1.7% 1.087 46 1.9% 1.500 64+ 5.1% 3.000

29 1.4% 1.119 47 1.9% 1.563 Total 100.0% 1.825

30 1.7% 1.135 48 1.8% 1.635 Adj Fx 1 / Total 0.548

*% of membership impacted by the 3 children under age 21 dependent cap.

Molina estimated the average age of the single risk pool to be 44 years of age by multiplying the

expected age distribution percentages by the age. Molina assumed an average age of 8 for the Age

0-14 cohort in the average age estimate. Premium rates are based on the attained age as of the

coverage effective date and will not be re-rated/adjusted when a birthdate occurs during the year

after the coverage starts.

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Geographic Factor Calibration: Molina applied geographic factors to the index rate in the calculation

of region specific rates. The geographic factors are based solely on the provider reimbursement

expectations in each region. The calibration factor of 0.962 equals 1.000 divided by the weighted

average geographic factor (1.000 / 1.039).

Geographic Factor Calculation

Geographic Members

Allowed

Claims

Geographic

Region Factor

Region 1 12,815 $413.68 1.000

Region 2 780 $426.09 1.030

Region 3 4,184 $426.09 1.030

Region 4 3,001 $434.36 1.050

Region 5 8,473 $455.04 1.100

Total 29,253 $413.68 1.039

Calibration 1 / Total 0.962

A table summarizing Molina’s 2018 and 2019 geographic factors is provided below.

Geographic Factors

Geographic

Region 2018 Factor 2019 Factor

Region 1 1.010 1.000

Region 2 1.023 1.030

Region 3 1.100 1.030

Region 4 1.100 1.050

Region 5 1.100 1.100

Consumer Adjusted Premium Rate Development

The Consumer Adjusted Premium Rates are calibrated to an age 21 premium with an area factor of

1.00. Only the allowable rating factors will be applied to the Consumer Adjusted Premium Rates.

Molina has included a document identified as [“Molina Ind Rate Exhibits – New Mexico”] that

demonstrates how each allowable consumer level adjustment is applied to the Consumer Adjusted

Premium Rates to determine the premiums.

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Consumer Adjusted Premium Rates

Product Name Metal Plan Adjusted

Index Rate

Age

Calibration

Area

Calibration

Consumer

Adjusted

Premium Rate

a b C d e f = product (c:e)

Molina Marketplace

Gold 511.31 0.548 0.962 269.67

Silver 495.10 0.548 0.962 261.13

Bronze 357.24 0.548 0.962 188.41

PLAN PRODUCT INFORMATION

AV Metal Values

All benefit plans Molina proposes to offer meet ACA essential health benefit (EHB) requirements. The

actuarial value (AV) for each product was based on output from the CMS 2019 AV Calculator.

Actuarial Metal Values

Plan ID Product Name Metal FPL Actuarial

Value

19722NM0010001

Molina

Marketplace

Gold Base 0.789

19722NM0010002 Silver

CSR 100-150 0.948

CSR 150-200 0.876

CSR 200-250 0.738

Base 0.684

19722NM0010003 Bronze Base 0.630

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AV Pricing Values

AV pricing value of each plan only includes the allowable modifiers to the index rate, as described in

45 CFR Part 156, §156.80(d)(2). Cost-sharing adjustments ensure that differences due to health

status were not included in the adjustment.

The modifiers are applied to the index rate as shown in the following table.

Actuarial Value Pricing

Product Name Metal Actuarial

Value

Cost

Sharing

Adj.

Benefits in

Addition to

EHBs

Administration

Costs

AV Pricing

Value

a b c D e f g = product

(c:f)

Molina Marketplace

Gold 0.883 1.048 1.000 1.301 1.203

Silver 0.896 0.999 1.000 1.302 1.165

Bronze 0.661 0.970 1.000 1.311 0.841

28 | P a g e



Membership Projections

Molina is filing New Mexico Marketplace rates in 33 counties representing 5 rating regions. The

membership projection is based on anticipated renewals of existing members and new members in

2019. Molina assumed 66% of its existing members would renew coverage in 2019. New

membership is based on an estimated proportion of the total number of members enrolled in New

Mexico Marketplace by county. The source of the new members is mostly from other carriers.

Molina’s enrollment projections by plan, including cost-sharing reduction eligible plans, were based

on the proportion of enrollment enrolled in those plans as of April 2018.

Membership Projections by Region

Region Current

Members

Projected

Members

Region 1 9,960 12,815

Region 2 654 780

Region 3 4,041 4,184

Region 4 1,925 3,001

Region 5 8,474 8,473

Total 25,054 29,253

Membership Projections by Plan

Plan ID Product Name Metal FPL Members

19722NM0010001

Molina

Marketplace

Gold Base 5,036

19722NM0010002 Silver CSR 100-150 3,803

19722NM0010002 Silver CSR 150-200 4,422

19722NM0010002 Silver CSR 200-250 3,042

19722NM0010002 Silver Base 2,888

19722NM0010003 Bronze Base 10,061

Total 29,253

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Molina plans to offer its products in the counties listed by region below.

County List

Geographic Region

County County County County County County County

Region 1 Bernalillo Sandoval Torrance Valencia

Region 2 San Juan

Region 3 Dona Ana

Region 4 Santa Fe

Region 5

Catron Chaves Cibola Colfax Curry De Baca Eddy

Grant Guadalupe Harding Hidalgo Lea Lincoln Los Alamos

Luna McKinley Mora Otero Quay Rio Arriba Roosevelt

San Miguel Sierra Socorro Taos Union

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Terminated Products

A summary of Molina’s terminated, renewing, and new products is provided in the following table:

Terminated Plans and Mapping

Plan ID Plan Effective

Period

Plan

Name

Metal

Tier

Mapping

------>

New Plan

ID

NA NA NA NA -----> NA

Renewing Plans


Period

Plan

Name

Metal

Tier

Actuarial

Value (AV)

AV

(% Chg)

19722NM0010001 Jan 2014 -- Molina Marketplace Gold 0.789 2.5%

19722NM0010002 Jan 2014 -- Molina Marketplace Silver 0.684 0.8%

19722NM0010003 Jan 2014 -- Molina Marketplace Bronze 0.630 0.8%

New Plans and Mapping


Period

Plan

Name

Metal

Tier

Mapping

------>

New Plan

ID

NA NA NA NA -----> NA

Plan Type

All benefit plans are comprehensive HMO individual products.

Warning Alerts

Warning Alert: No warning alerts seen in any section of Worksheet II.

MISCELLANEOUS INSTRUCTIONS

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Effective Rate Review Information

Not applicable.

Reliance

Not applicable.

32 | P a g e



Actuarial Certification

I, Evan Swalheim, as a member in good standing with the American Academy of Actuaries, hereby certify, to the best of my knowledge and judgment, the following:

The projected index rate is:

a. In compliance with all applicable State and Federal Statutes and Regulations (45 CFR 156.80 and 147.102),

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 was calculated in accordance with actuarial standards of practice. The geographic rating factors reflect only differences in the costs of delivery and do not include differences for population morbidity by geographic area. The 2018 AV Calculator was used to determine the AV Metal Values shown in Worksheet 2 of the Part I Unified Rate Review Template.

Evan Swalheim, ASA, MAAA Director, Actuarial Services Molina Healthcare Inc.

August 15, 2018

Date

actuarial memorandum and certification effective january 1 ......molina healthcare of new mexico,...

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