| TO: | Members of Actuarial Organizations Governed by the Standards of Practice of the Actuarial Standards Board and Other Persons Interested in Incurred Health and Disability Claims |
| FROM: | Actuarial Standards Board (ASB) |
| SUBJECT: | Actuarial Standard of Practice (ASOP) No. 5 |
Background
ASOP No. 5, then titled Incurred Health Claim Liabilities, was adopted in 1991. Under direction from the ASB and its Health Committee, a task force revised ASOP No. 5, retitled Incurred Health and Disability Claims, which was adopted in 2000 and updated for deviation language in 2011.This revision of ASOP No. 5 reflects a number of changes to other standards that have been made since the 2000 revision, including updating the ASOP, where appropriate, to incorporate reference to new standards that have been issued since the 2000 revision, eliminate guidance that does not conform to current ASOP practices regarding references to other standards of practice, and make consistent the definitions used in the standard with those of other standards of practice.
In addition, this revision of ASOP No. 5 has been updated to reflect relevant legal, regulatory, and practice developments that have occurred since the 2000 revision.
Exposure Draft
The exposure draft was released in December 2015 with a comment deadline of April 30, 2016.Eleven letters were received. The task force considered all comments received and made appropriate changes where needed. For a summary of the substantive issues contained in the comment letters on the exposure draft and the responses, please see appendix 2.
Key Changes
The most significant changes from the existing ASOP No. 5 are as follows:2. explicitly addressing certain considerations in estimating and analyzing incurred claims, including behavior of claimants, claim seasonality, credibility, payments and recoveries under government programs, and the purpose and intended use of the unpaid claim estimate;
3. expanding the guidance regarding provider contractual arrangements;
4. including, in section 3.4 regarding methods for estimating incurred claims, explicit discussion of projection methods as well as an updated discussion of other methods commonly in use;
5. making the standard consistent with the revised guidance in ASOP No.1, Introductory Actuarial Standard of Practice, regarding use of the language “should consider”; and
6. adding a requirement to disclose any explicit provision for adverse deviation.
