ASOP 5
(INCURRED HEALTH AND DISABILITY CLAIMS)
SECTION 2
(DEFINITIONS)

Section 2
Definitions

ASOP 5 | §2.0 | INTRO TO SECTION 2

The terms below are defined for use in this actuarial standard of practice.

ASOP 5 | §2.1 | BLOCK OF BUSINESS

All policies of a common coverage type (for example, major medical, preferred provider organization, or capitated managed care), demographic grouping (for example, size, age, or area), contract type, or other segmentation used in estimating incurred claims or used by a risk-bearing entity for evaluating its business.

ASOP 5 | §2.2 | CAPITATION

The amount of money paid to a provider, usually per covered member, to provide specific health care services under a health benefit plan regardless of the number or types of services actually rendered.

ASOP 5 | §2.3 | CARVE-OUTS

Contractually designated services provided by specific providers, such as prescription drugs or dental, or condition-specific services such as cancer, mental health, or substance abuse treatment. Carve-outs are often provided by a separate entity specializing in that type of designated service.

ASOP 5 | §2.4 | CONTRACT PERIOD

The time period for which a contract is effective.

ASOP 5 | §2.5 | DEVELOPMENT (OR LAG) METHOD

An estimation technique under which historical claim data, such as the number and amount of claims for the subject block of business, are grouped into the time periods in which claims were incurred and the time periods in which they were paid. The development method uses these groupings to create a claims payment pattern, which is used to help estimate the incurred claims.

ASOP 5 | §2.6 | EXPOSURE UNIT

A unit by which the cost for a health benefit plan is measured. For example, an exposure unit may be a contract, an individual covered, $100 of weekly salary, or $100 of monthly benefit.

ASOP 5 | §2.7 | HEALTH BENEFIT PLAN

A contract, such as an insurance policy, or other financial arrangement providing medical, prescription drug, dental, vision, disability income, longterm care, or other health-related benefits, whether on a reimbursement, indemnity, or service benefit basis, regardless of the form of the risk-bearing entity.

ASOP 5 | §2.8 | INCURRAL DATE

The date a claim became a liability of the risk-bearing entity in accordance with the terms of the health benefit plan. For health benefit plans where the claim must exceed a minimum threshold, for example, where there is a deductible or elimination period, the incurral date may be the date claims begin to accumulate toward the threshold.

ASOP 5 | §2.9 | INCURRED CLAIMS

For use in this ASOP, the value of all amounts paid or payable under a health benefit plan, determined to be a liability with an incurral date within the contract period or other appropriate period, as of the valuation date. It includes payments on all claims as of the valuation date plus a reasonable estimate of unpaid claims liabilities and, for certain coverages such as long-term care and long-term disability, projection of future payments on reported claims. This definition is different than an alternate definition of incurred claims used for a risk-bearing entity’s income statements, for which incurred claims include payments on all claims between the prior valuation date and the current valuation date plus the estimate of unpaid claims liabilities as of the current valuation date less the estimate of unpaid claims liabilities as of the prior valuation date.

ASOP 5 | §2.10 | LONG-TERM PRODUCT

A health benefit plan that provides medical or disability benefits for an extended period of time. Some examples are cancer, long-term care, and long-term disability policies. The plan’s benefits may not begin for several years after policy purchase and claims usually extend beyond the valuation date.

ASOP 5 | §2.11 | PROJECTION METHOD

The application of an adjusted historical claim metric to an appropriate exposure base, in order to estimate incurred claims.

ASOP 5 | §2.12 | PROVIDERS

Individuals, groups, or organizations providing health care services or supplies, including but not limited to doctors, hospitals, independent physician associations, accountable care organizations, physical therapists, medical equipment suppliers, and pharmaceutical suppliers.

ASOP 5 | §2.13 | RISK-BEARING ENTITY

The entity with respect to which the actuary is estimating liabilities associated with health benefit plans or risk-sharing arrangements. Examples of risk-bearing entities include but are not limited to managed-care entities, insurance companies, health care providers, self-funded employer plans, government-sponsored plans or risk contracts.

ASOP 5 | §2.14 | TABULAR METHOD

The seriatim application of factors to a volume measure (for example, number of individual claims) based on prior experience, in order to estimate unpaid claims liabilities for reported claims (commonly used for long-term products).

ASOP 5 | §2.15 | TIME VALUE OF MONEY

The principle that an amount of money available at an earlier point in time has different usefulness and value than the same amount of money has at a later point in time.

ASOP 5 | §2.16 | TRENDS

Measures of rates of change, over time, of the elements, such as cost, incidence, and severity, affecting the estimation of incurred claims.

ASOP 5 | §2.17 | UNPAID CLAIMS LIABILITY

The value of the unpaid portion of incurred claims, including unreported claims and reported but unpaid claims. For a risk-bearing entity’s balance sheet, the unpaid claims liability includes provision for all unpaid claims incurred during the current and prior periods.

ASOP 5 | §2.18 | VALUATION DATE

The date as of which the liabilities are estimated.