Statistical Modeling and Analysis of Stop- Loss Insurance for Use in NAIC Model Act

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1 Statistical Modeling and Analysis of Stop- Loss Insurance for Use in NAIC Model Act Prepared for: National Association of Insurance Commissioners Prepared by: Milliman, Inc. James T. O Connor FSA, MAAA Erik C. Huth FSA, MAAA 71 S. Wacker Drive 31 st Floor Chicago, IL Tel Fax milliman.com

2 TABLE OF CONTENTS I. INTRODUCTION... 1 II. BACKGROUND... 2 III. SCOPE OF THE ASSIGNMENT... 3 IV. RESULTS... 4 Analysis of Specific Stop-Loss Arrangements No Aggregate Program... 4 Analysis of Aggregate Stop-Loss Arrangements With and Without a Specific Stop-Loss Program... 5 Alternative Measurements... 7 Probability of Exceeding Aggregte Attachment Point th Percentile of Retained Claims as a Percent of Expected Retained Claims... 9 Expected Policyholder Deficit (EPD)...10 Sensitivity Testing...11 Comparison to Previous Study...11 V. METHODOLOGY AND DATA SOURCES...13 Data Sources...13 Single Life Claim Probability Distributions...13 Simulation Model...14 Variation by Plan Design...15 VI. LIMITATIONS OF RESULTS...18 VII. STATEMENT OF ACTUARIAL OPINION...20 Attachments National Association of Insurance Commissioners

3 I. INTRODUCTION This report presents the results of our work to assist the National Association of Insurance Commissioners ( NAIC ) with the development of specific and aggregate attachment points for stop-loss insurance. The factors presented are related to business to which stop-loss insurance applies, primarily comprehensive and major medical coverage offered to employer groups under age 65. The report presents the aggregate attachment points at which the ceding company s and reinsurer s expected claims amount will be equal, and the aggregate attachment points at which the standard deviation of the ceding company s expected claims will equal that of the reinsurer s. This approach is similar to previous studies that produced the aggregate attachment points currently used in the NAIC Stop-Loss Insurance Model Act. The report also includes other commonly recognized measures of risk by aggregate attachment point, specific stop-loss deductible, and employer size that may provide additional analysis to the NAIC for deciding how to update the Model Act. National Association of Insurance Commissioners Page 1

4 II. BACKGROUND The NAIC developed the Stop-Loss Insurance Model Act (Model Act) in 1995, in order to prevent insurers from avoiding laws regulating the health insurance marketplace by structuring their products as stop loss coverage sold to employers that were purportedly self-insured, but did not actually retain a significant portion of the plan s risk. The Model Act established minimum attachment points for stop-loss insurance. The Health Care Reform Actuarial (B) Working Group has now been charged by the ERISA (B) Subgroup with updating the various attachment points in the Model Act to reflect more recent claims experience. Section 3 of the Model Act defines the specific and aggregate attachment points at which stop-loss insurance can be issued. The last study the NAIC commissioned to help determine attachment limits was performed in 1994 for the initial development of the Model Act in 1995 The Model Act states that an insurer shall not issue a stop-loss insurance policy that has an attachment point (specific stop-loss deductible) for claims incurred per individual lower than $20,000 or that provides direct coverage of an individual s health care expenses. For groups of more than 50, the annual aggregate attachment point must not be lower than 110 percent of expected claims. For groups of 50 or fewer people, the annual aggregate attachment point may not be less than the greater of: (i) (ii) $4,000 times the number of group members, 120 percent of expected claims, or (iii) $20,000. According to the NAIC, three states Minnesota, New Hampshire, and Vermont have adopted the Model Act. Eighteen (18) other states have implemented related legislative or administrative action. National Association of Insurance Commissioners Page 2

5 III. SCOPE OF THE ASSIGNMENT The NAIC requested that our work identify the following attachment points, given various group sizes and specific stop-loss deductibles: > Attachment points at which the ceding company s and reinsurer s expected claims amount will be equal. > Attachment points at which the standard deviation of the ceding company s expected claims will equal that of the reinsurer s. (Note: In many situations, there were no aggregate attachment points that could meet this criterion.) In addition, we have included the following measures of risk: > The employer s total health care costs in excess of expected costs, expressed as a ratio to expected health care costs. > The probability that the ceding company s claims exceed the aggregate attachment point for a variety of aggregate attachment points. > The employer s expected deficit relative to expected health care costs. These parameters and characteristics translate into the tables that are presented on the following pages and in the attachments to this report. Following the instructions and guidance of the NAIC, we have developed a stochastic pricing model in which we run thousands of iterations to calculate the total expected claims, the expected specific stop-loss claims, and the aggregate stop-loss claims. This can be done for any group size, specific stop-loss deductible, and aggregate attachment point. The first step in considering the impact of stop-loss coverage is the calculation of specific stop-loss claims, in which a member s annual claims exceeds the specific stop-loss deductible. We provide the percent of an employer s paid claims above the specific stop-loss deductible to put the value of various specific stop-loss deductibles in perspective. We then examine in the various ways listed above the relative aggregate claims between an employer and its reinsurer. National Association of Insurance Commissioners Page 3

6 IV. RESULTS ANALYSIS OF SPECIFIC STOP-LOSS ARRANGEMENTS NO AGGREGATE PROGRAM The specific stop-loss deductible is the amount above which the reinsurer reimburses the employer for the amount of a member s annual paid claims. Specific stop-loss claims are the portion of a member s annual paid claims exceeding the specific stop-loss deductible or the amount reimbursed by the reinsurer for that member s claims. We calculate the value of the specific stop-loss deductible as the portion of an employer s paid claims that are above the specific stop-loss deductible. These percentages vary somewhat by the size of a specific employer due to varying claim probability distributions (CPDs). We have modeled two different CPDs, one for small groups (fewer than 51 employees) and another for large groups (51 or more employees). However, the differences do not dramatically impact the value of the stop-loss deductible, as can be seen in Table 1. We calculated these values for a typical Bronze, Silver, Gold and Platinum plan. TABLE 1 PERCENT OF AN EMPLOYER S PAID CLAIMS ABOVE THE SPECIFIC STOP-LOSS DEDUCTIBLE Specific Stop-Loss Deductible Small Group Large Group Bronze Silver Gold Platinum Bronze Silver Gold Platinum $20, % 46.0% 41.7% 37.5% 49.6% 45.0% 40.8% 36.4% $30, % 36.6% 33.1% 29.3% 39.7% 35.7% 32.1% 28.4% $40, % 30.3% 27.3% 24.1% 32.9% 29.4% 26.4% 23.2% $50, % 25.7% 23.1% 20.3% 27.9% 24.9% 22.2% 19.5% $60, % 22.1% 19.9% 17.5% 24.1% 21.4% 19.1% 16.6% $75, % 18.2% 16.3% 14.2% 19.8% 17.5% 15.6% 13.6% $200, % 6.0% 5.4% 4.6% 6.5% 5.7% 5.0% 4.3% The results indicate that, if there is only a specific stop-loss program without an aggregate stop-loss arrangement, the employer would be expected to cede 50% or less of claims. This means the employer would pay over 50% of the claims plus the reinsurance premium at a selected attachment point. The employer s share of claims would increase as the specific stop-loss deductible increases, while the reinsurance rates would decrease (although there would not necessarily be an exactly corresponding decrease due to the need for the reinsurer to cover its expenses, risk charge, and surplus needs, which could vary by group size and attachment point). We can compare results from our analysis against those of the original 1994 study to identify a specific stop-loss deductible in the present day health plan cost environment that corresponds to that study s $20,000 deductible. The 1994 Coopers study provided two sample populations. The probability of a member incurring a claim above $20,000 in the 1994 study was 0.85% for Sample 1, and 2.43% for Sample 2. Table 1A presents our estimates of the 2012 probability of a Small Group Silver Plan member incurring high dollar claim amounts: National Association of Insurance Commissioners Page 4

7 Table 1A Probability of a High Dollar Claim For a Small Group Silver Plan Member Claim Amount Probability Greater than $20, % Greater than $30, % Greater than $40, % Greater than $50, % Greater than $60, % The 0.85% sample probability from the 1994 study would correspond to an attachment point greater than $60,000 in today s dollars, but the 2.43% sample result would indicate an attachment point somewhere between $20,000 and $30,000. Unfortunately, the probabilities from the previous study for the two samples are pretty diverse, but should provide some guidance as to a potential range within which the updated attachment point can be chosen. More details are presented in the Comparison to Previous Study section. ANALYSIS OF AGGREGATE STOP-LOSS ARRANGEMENTS WITH AND WITHOUT A SPECIFIC STOP-LOSS PROGRAM The aggregate attachment point is the dollar amount above which the reinsurer reimburses the employer for the sum of all its member s annual claims below the specific stop-loss deductible. Aggregate stop-loss claims, which are the responsibility of the reinsurer, are the portion of an employer s annual paid claims below the specific stop-loss deductible that exceed the aggregate attachment point. The aggregate attachment point is calculated as the aggregate attachment factor, in the form of a percentage, multiplied by the employer s expected annual claims below the specific stop-loss deductible. Aggregate Stop-Loss Attachment Point Where Ceded Claims Equal Retained Claims The NAIC requested that we calculate the aggregate attachment points at which the ceding company s and reinsurer s expected claim amounts are equal for various specific stop-loss deductible amounts and employer sizes. In this report, we assume that there are two covered members per employee. The reinsurer s claims are the sum of the specific stop-loss claims and the aggregate stop-loss claims. Table 2 shows the aggregate attachment factor at which the employer s expected retained claims equal their expected ceded claims: National Association of Insurance Commissioners Page 5

8 TABLE 2 AGGREGATE STOP-LOSS ATTACHMENT POINT SET SO EXPECTED VALUE OF CEDED CLAIMS = EXPECTED VALUE OF RETAINED CLAIMS Group Size (Number of Employees) Members Assumed to be 2x Specific Stop-Loss Deductible 10 Employees 25 Employees 50 Employees 100 Employees 500 Employees $20, % 124% 109% 99% 92% $30, % 93% 84% 80% 78% $40, % 82% 75% 72% 71% $50,000 98% 76% 70% 67% 67% $60,000 93% 73% 67% 64% 64% $75,000 89% 69% 63% 61% 61% None 73% 57% 52% 51% 50% When there is no specific stop-loss deductible, the largest groups have an aggregate attachment factor of 50%. Since there were no stochastic model iterations in which a large employer s claims were less than 50% of the expected value, a 50% aggregate attachment factor will, by definition, cause the large employer to cede exactly 50% of its claims. The calculation criterion utilized in Table 2, namely the point at which a group s expected ceded claims equal expected retained claims, results in aggregate attachment points that significantly understate the levels in the current Model Act. By comparison, the aggregate reinsurance minimum percentages of the current Model Act are 110% for large groups and 120% for small groups. Aggregate Stop-Loss Attachment Point Where Standard Deviation of Ceded Claims Equals that of Retained Claims The NAIC also requested that we calculate the aggregate attachment points at which the standard deviation of the ceding company s expected claim amounts and that of the reinsurer s expected claim amounts are equal for various attachment points and employer sizes. Specific stop-loss deductibles dampen the standard deviation of the ceding company s claims by capping a high-cost individual s claims at the specific stop-loss deductibles. Lower specific stop-loss deductibles reduce the variance experienced by the ceding company. When an individual s annual claims are less than the specific stop-loss deductibles, the reinsurer s claims are $0; thus an increase in the specific stoploss deductible generally increases the variance experienced by the reinsuring company. Therefore at lower specific stop-loss deductibles, there may be no aggregate attachment points that result in the standard deviation of the ceding company s claims equaling the standard deviation of the reinsurer s claims. By either dramatically increasing or completely removing the specific stop-loss deductible, we can calculate an aggregate attachment point such that the standard deviation of the ceding company s claims equals the standard deviation of the reinsurer s claims. National Association of Insurance Commissioners Page 6

9 In order to stabilize the results, we doubled the number of Monte Carlo simulation runs for small groups. The results are shown in Table 3: TABLE 3 AGGREGATE STOP-LOSS ATTACHMENT POINT SET SO STANDARD DEVIATION OF CEDED CLAIMS = STANDARD DEVIATION OF RETAINED CLAIMS Group Size (Number of Employees) Members Assumed to be 2x Specific Stop-Loss Deductible 10 Employees 25 Employees 50 Employees 100 Employees 500 Employees $20,000 N / A N / A N / A N / A N / A $30,000 N / A N / A N / A N / A N / A $40,000 N / A N / A N / A N / A N / A $50,000 N / A N / A N / A N / A N / A $60,000 N / A N / A N / A N / A N / A $75,000 N / A N / A N / A N / A N / A $200, % 198% 161% 136% 113% None 290% 180% 144% 125% 105% We believe the calculation criterion utilized in Table 3, namely setting the attachment point at the level where the standard deviation of the ceded claims distribution equals that of the retained distribution, is not very useful for determining revisions to the Model Act triggers. For lower specific stop-loss deductibles, aggregate attachment points do not even exist that satisfy the criterion, and it appears to generally overstate the level of appropriate aggregate attachment points required for the employer to retain meaningful risk where there are values. ALTERNATIVE MEASUREMENTS There are measurements other than standard deviation that are commonly used to determine the level of risk transfer achieved by insurance coverage. FAS 113 requires that risk transfer be demonstrated by comparing the present value of the cash flows associated with a contract, and in particular by passing certain thresholds of "significance" of risk: > The reinsurer assumes significant insurance risk under the reinsured portions of the underlying insurance contracts. > It is reasonably possible that the reinsurer may realize a significant loss from the transaction. Commonly used measures of the risk used in the reinsurance industry to satisfy FAS 113 include: 1. The probability of a reinsurance claim occurring, 2. A commonly cited standard rule of thumb known as the 10/10 rule, meaning that the reinsurer has a 10% or greater chance of incurring a 10% or greater loss as a percentage of the ceded premium, and National Association of Insurance Commissioners Page 7

10 3. The expected value of a net loss, given that a net loss occurs. This is known as the Expected Policyholder Deficit. We show the results for a group of 50 employees (100 members) with a Silver plan for each of these measurements in Tables 4 through 6 and Table 8. Full results for these tables for all group sizes and plans tested are shown in Attachments 4 through 6. PROBILITY OF EXCEEDING AN AGGREGATE ATTACHMENT POINT We calculated the probability of a group s claims, given various specific stop-loss deductibles, exceeding an aggregate attachment point. As the aggregate attachment factor is increased, the likelihood of groups reaching the aggregate attachment point decreases. TABLE 4 SILVER PLAN PROBABILITY OF A GROUP WITH 50 EMPLOYEES (100 MEMBERS) EXCEEDING THE AGGREGATE ATTACHMENT POINT Specific Stop- Loss Deductible Aggregate Attachment Factor 110% 115% 120% 125% 130% $20, % 28.5% 23.1% 18.4% 14.4% $30, % 30.5% 25.3% 20.9% 16.9% $40, % 30.3% 25.8% 21.6% 17.9% $50, % 30.9% 26.6% 22.7% 19.0% $60, % 31.9% 27.3% 23.4% 19.7% $75, % 32.2% 28.2% 24.4% 21.0% None 31.8% 28.9% 26.2% 23.7% 21.4% The use of this approach may be helpful to the NAIC in setting the updated percentage attachment point since it more clearly shows the likelihood of exceeding the aggregate percentage attachment points. By definition, it also shows the probability that an employer will suffer the most unfavorable outcome possible under the selected stop-loss arrangement. For example, an employer with a $50,000 specific deductible and a 120% attachment point has a 26.6% probability of having claim costs that are 20% higher than their initial expectations. National Association of Insurance Commissioners Page 8

11 90TH PERCENTILE OF EMPLOYER COSTS AS A PERCENT OF EXPECTED EMPLOYER COSTS To determine a measure similar to the aforementioned 10/10 rule, we calculated the ratio of the 90 th percentile of total employer costs to expected employer costs. If we assume that stop-loss insurers will charge stop-loss premiums equal to the expected ceded claims, then total employer cost is equal to total expected claims. (Note: We have made a simplifying assumption that stop-loss insurers will not include expense or profit loads in the stop-loss premium. Of course, this is not likely, but it should have a meaningful effect on conclusions drawn from the results.). The 90 th percentile of a group s costs as a percent of the group s expected costs increase as specific stop-loss deductible increases, increase as aggregate attachment point increases, and decrease as group size increases: TABLE 5 SILVER PLAN 90 TH PERCENTILE OF RETAINED CLAIMS AS A PERCENT OF EXPECTED EMPLOYER COSTS FOR A GROUP WITH 50 EMPLOYEES (20 MEMBERS) Specific Stop- Loss Deductible Aggregate Attachment Factor 110% 115% 120% 125% 130% $20, % 111% 113% 115% 118% $30, % 113% 115% 118% 120% $40, % 116% 118% 121% 124% $50, % 117% 120% 123% 126% $60, % 118% 121% 124% 127% $75, % 120% 123% 126% 129% None 128% 131% 135% 138% 142% This approach shows the claim amount retained by a self-funded employer in the highest 10% of all scenarios compared to the expected claim amount. For example, an employer with a $50,000 specific deductible and a 120% attachment point has a 10% probability of having total health care costs (including stop-loss premium) that are 20% higher than their initial expectations. The use of this approach may be helpful to the NAIC in understanding the risks that a self-funded employer faces under a high-cost scenario. National Association of Insurance Commissioners Page 9

12 EXPECTED POLICYHOLDER DEFICIT (EPD) We performed another analysis highlighting the variance in the ceding company s claims based on the Expected Policyholder Deficit, or EPD. EPD is a measure that is becoming more prevalent in the evaluation of risk transfer, particularly in reinsurance. The advantage of EPD is that it accounts for both the probability of a loss, or bad outcome, and the severity of losses. In this analysis, the EPD was calculated as the average deficit, where deficit is the excess of actual claims over expected claims. When actual claims are less than expected claims, the deficit is set equal to 0. Table 6 shows both the value of the EPD and the EPD as a percentage of expected employer costs (including expected stop-loss premium, as in Table 4). In this case, claims means retained claims. TABLE 6 SILVER PLAN EXPECTED POLICYHOLDER DEFICIT FOR A GROUP WITH 50 EMPLOYEES (100 MEMBERS) (PERCENTAGE OF EXPECTED EMPLOYER COSTS) Specific Stop- Loss Deductible Aggregate Attachment Factor 110% 115% 120% 125% 130% $20,000 $11,985 (4.2%) $13,021 (4.6%) $13,911 (4.9%) $14,655 (5.2%) $15,255 (5.4%) $30,000 14,992 (5.3%) 16,266 (5.8%) 17,382 (6.1%) 18,341 (6.5%) 19,139 (6.8%) $40,000 17,641 (6.2%) 19,042 (6.7%) 20,276 (7.2%) 21,354 (7.6%) 22,274 (7.9%) $50,000 19,495 (6.9%) 20,993 (7.4%) 22,353 (7.9%) 23,556 (8.3%) 24,602 (8.7%) $60,000 21,039 (7.4%) 22,666 (8.0%) 24,122 (8.5%) 25,405 (9.0%) 26,533 (9.4%) $75,000 22,813 (8.1%) 24,533 (8.7%) 26,091 (9.2%) 27,493 (9.7%) 28,730 (10.2%) None 32,804 (11.6%) 34,837 (12.3%) 36,726 (13.0%) 38,474 (13.6%) 40,093 (14.2%) Though this approach to measuring risk is slightly more complex than the other approaches shown in this report, the NAIC may find this approach helpful because it can account for both the probability of bad outcomes and the magnitude of those bad outcomes in one measure. As a comparison to the table above, consider that the 10/10 reinsurance rule of thumb could lead to policies with an EPD of as little as 1% (10% probability x 10% loss). We would not advocate using a 1% EPD as the criteria for any changes to the model law, but that realization does put the EPDs above in context. National Association of Insurance Commissioners Page 10

13 This table also shows that employers who choose to purchase only aggregate stop-loss (without specific stop-loss) are taking much more risk than employers who purchase both specific and aggregate. For example, an employer purchasing a 110% aggregate stop-loss policy, with no specific stop-loss, has an EPD that is higher than an employer that purchases a 130% aggregate stop-loss policy and a $75,000 specific, even though it seems that the current model law would allow the $75,000 / 130% policy, but not the 110% aggregate only policy. This suggests that the NAIC may wish to discuss setting a lower aggregate limit in cases where no specific stop-loss is purchased. Attachment 1 provides a visual illustration of this concept. SENSITIVITY TESTING We also tested the sensitivity of these results by adjusting the underlying insurance plan from a Silver plan to Bronze, Gold and Platinum plans. The results for all plans and employer sizes are in the attachments. This analysis is discussed in more detail later in the report. There are other source characteristics of any carrier s blocks of business that could also contribute to statistical variability of results for smaller blocks such as demographic characteristics (age, gender, family composition), geographic area, type of health plan, managed care intensity, provider network parameters, average duration of the business, and likely others. These have not been considered in the development of these CPDs due to project scope constraints, the practicality of being able to identify and apply such results through a model law, and the challenges inherent in being able to appropriately identify the impact of such characteristics, including the sheer volume of the number of CPDs that would result. We expect that including these characteristics in the modeling process would lead to additional variance in stop-loss results experienced by reinsurers and carriers. However, an estimate of the variance contributed by these characteristics is outside the scope of the present assignment. Toward the end of this report we list limitations of our analysis in regard to such characteristics and assumptions that were not included in the study. COMPARISON TO PREVIOUS STUDY The 1994 study by Coopers & Lybrand used two distinct underlying claim distributions, one with a lean set of benefits and one with a rich set of benefits. The analysis used parametric distributions. The functional form of the distribution was an assumption made by the study authors. Given this functional form, the parameters were calculated based on an underlying dataset. Our analysis uses discrete empirical CPDs 1 representing claims that are at least 18 years later than those used in the previous study by Coopers & Lybrand (2012 versus 1994). Because of the inflation in medical costs over the last 18 years, the probabilities of a paid claim exceeding various dollar thresholds are much higher in this study. We also calculated the probability of a paid claim exceeding a variable threshold amount that is a multiple of the mean for both models, so as to better compare the variances of the two models. Table 7 shows a comparison of the two Coopers & Lybrand claim distributions with the claim distributions for the Small Group Bronze, Silver, Gold, and Platinum plans used in this study: 1 The 2012 Milliman Health Cost Guidelines TM Claim Probability Distributions are derived from data representing over 45 million lives National Association of Insurance Commissioners Page 11

14 TABLE 7 PAID CLAIM DISTRIBUTION ASSUMPTIONS COOPERS & LYBRAND MILLIMAN SMALL GROUP LEAN PLAN RICH PLAN BRONZE SILVER GOLD PLATINUM Expected Annual Claim PMPM $671 $1,920 $ 2,319 $ 2,827 $ 3,369 $ 4,136 Standard Deviation $3,922 $7,289 $16,532 $17,232 $17,789 $18,432 Probability of Claim = $ % 37.04% 85.73% 74.66% 54.87% 23.61% Probability of Claim > $20K 0.85% 2.43% 2.71% 3.34% 3.52% 4.38% Probability of Claim > $50K 0.14% 0.58% 1.08% 1.14% 1.20% 1.26% Probability of Claim > $75K 0.03% 0.18% 0.56% 0.59% 0.62% 0.66% Probability of Claim > $100K 0.01% 0.05% 0.37% 0.39% 0.42% 0.44% Probability of Claim > $500K 0.00% 0.00% 0.02% 0.02% 0.02% 0.02% Probability of Claim > 5 x Mean 2.42% 4.00% 3.74% 3.95% 4.16% 4.37% Probability of Claim > 10 x Mean 1.89% 2.52% 2.38% 2.22% 2.09% 1.79% Probability of Claim > 25 x Mean 1.03% 0.64% 0.93% 0.75% 0.62% 0.44% Probability of Claim > 100 x Mean 0.05% 0.00% 0.08% 0.07% 0.04% 0.03% The delivery of medical care has changed significantly since the previous study, resulting in changes to the probability of various claim thresholds being reached, and making it is difficult to compare two CPDs representing claims nearly 20 years apart. However, there does appear to be value in this comparison as the NAIC evaluates the need for changes to specific deductible limits allowed by law if the NAIC s goal is to find an equivalent deductible in today s dollars. In a comparison of absolute claim dollars, the probability of a Bronze member having annual claims greater than $50,000 in 2012 is slightly greater than the probability of a Lean Plan member having annual claims greater than $20,000 in 1994 (i.e., 1.08% versus 0.85%). Similarly, the probability of a Platinum member having annual claims greater than $50,000 in 2012 is lower than the probability of a Rich plan member having reached $20,000 in 1994 (i.e., 1.26% versus 2.43%). The probabilities relative to the mean appear fairly consistent between the two studies, allowing for a similar comparison using the average expected costs. For example, because the original specific deductible limit of $20,000 was between 10x and 25x expected costs for the Rich Plan, setting the specific limit between 10x and 25x of the Platinum Plan mean may be a reasonable approach for an updated model law. National Association of Insurance Commissioners Page 12

15 V. METHODOLOGY AND DATA SOURCES The following describes methodology and data sources that were used in this analysis. DATA SOURCES Milliman collects, parses, categorizes, and analyzes considerable volumes of medical insurance encounter data for the commercial markets every year. Our data sources underlying the information used for this project include the nationwide experience of commercially insured comprehensive medical business for over 45 million lives. Milliman also has proprietary actuarial tools such as our Health Cost Guidelines (HCGs) and related supporting databases. These volumes of health cost factors have been published and updated annually since the mid-1950s, providing an invaluable source for measuring and estimating health care costs under a wide variety of scenarios. One of the key tools included in the HCGs is a set of CPDs, which allows analysis of the distribution of claim levels that a carrier may anticipate for its business. Also included are tools for adjusting any of the CPDs for plan design (scope of covered services and cost-sharing), claims trend, provider reimbursement levels (discounts), geographic variations, and other factors that may need to be reflected in the use of the CPDs and other tools of the HCGs for actuarial analysis of health insurance costs. SINGLE LIFE CLAIM PROBABILITY DISTRIBUTIONS We have used the CPD from our 7/1/2012 edition of the HCGs that includes all benefits for the large group and small group market. We have made adjustments to reflect the following nationwide prevailing health care system differences in each of the two markets: 1. Provider network discounts that vary somewhat by marketplace and between those who have inpatient stays and those who do not. The CPDs are on a billed charge basis. These adjustments move them to average allowed (actual) charge levels. 2. Average age and gender differences between the markets 3. Differences in the prevalence and effectiveness of managed care and disease management protocols used in each market 4. Differences in the average health status of the insureds in each market. These differences are likely to change with the advent of the 2014 reforms. We also reflected differences in utilization of services based upon the deductible / coinsurance combination of the plan being evaluated. These adjustments are based upon proprietary research conducted by Milliman in its efforts to evaluate the impact of the various health care reforms introduced by PPACA. The application of these adjustment factors to the base CPDs results in a single life set of claim probability distributions, one each for the small group and large group insurance markets. Note that the results are not very sensitive to uniform variations in these assumptions throughout the CPD, but might be sensitive to adjustments that alter the curve of the CPD. They represent average expected cost level distributions and are likely to differ somewhat from the actual experience of any specific health insurance company or employer-sponsored health plan. National Association of Insurance Commissioners Page 13

16 We applied benefits of a typical Silver plan to each simulated member claim to produce the paid claim. We assumed a Silver plan with an annual deductible of $2,500 and a 20% coinsurance on the next $5,000. The CPDs used in our analysis for small and large groups are shown in Attachment 7. SIMULATION MODEL We used a Monte Carlo convolution model to simulate the results that a carrier may experience for its entire block of business in each market. This convolution model was run based upon average exposed lives in force throughout the plan year. We ran 10,000 to 50,000 iterations, running more iterations for smaller group sizes. For each group size we ran at least one million independent estimates of the underlying claims distribution curve (e.g., 50,000 iterations for a 20 member group). These sample sizes consistently resulted in modeled distributions having means within 0.5% of the population mean (i.e., the expected claim cost for the plan) and was deemed to provide sufficient credibility for the analysis. TABLE 8 SILVER PLAN ACTUAL TO EXPECTED CLAIM VALUE BY GROUP Employees Expected Value per Member $2,827 $2,827 $2,827 $2,644 $2,644 Expected Value per Group $56,548 $141,371 $282,742 $528,707 $2,643,534 Iterations 50,000 20,000 10,000 10,000 10,000 Sample Expected Value $56,659 $141,114 $281,500 $530,735 $2,640,957 Difference 0.19% -0.18% -0.44% 0.38% -0.10% We separate each insured claim into the portion capped by the specific stop-loss deductible, and the specific stop-loss reinsured claim amount, which is the portion of the insured claim cost that exceeds the specific stop-loss deductible. We ran 10,000 to 50,000 iterations and calculated the average group claim amount in which individual claims are capped at the specific stop-loss deductible per iteration. The aggregate percentage attachment factor was applied to the average group claim amount capped at the specific stop-loss deductible to calculate the aggregate dollar attachment point for the group. Any Iteration in which a group s claim amount with each individual claim capped at the specific stop-loss deductible exceeded the aggregate attachment point resulted in an aggregate stoploss claim. The aggregate stop-loss claim amount is the amount in excess of the aggregate attachment point, and the portion of the group claim capped at the aggregate attachment point is the retained claim amount. The aggregate stop-loss claim amount and the specific stop-loss claim amount summed together is the ceded claim amount. The NAIC instructed us to determine aggregate factors by Specific Stop-loss limit and group size, so that: 1) The expected value of the retained claim amounts would equal the expected value of the ceded claim amounts; National Association of Insurance Commissioners Page 14

17 2) The standard deviation of the retained claim amounts would equal the standard deviation of the ceded claim amounts; Results are shown in Tables 2 and 3 of the Results section and in Attachments 2 and 3. VARIATION BY PLAN DESIGN We tested the sensitivity of the results against other plan designs; a typical Platinum plan (annual deductible of $250 and 10% coinsurance on the next $5,000), a Gold plan (annual deductible of $1,000 and 20% coinsurance on the next $7,500) and a Bronze plan (annual deductible of $5,000 and 10% coinsurance on the next $5,000). These plan design cost-sharing combinations were chosen as being representative of what is offered in the market and also representative of what may equate to the metal plans described in PPACA. The analysis assumed coverage for physician office visits and outpatient prescription drugs to be subject to deductible and coinsurance, although we recognize that these services are frequently covered only subject to a copayment. We also recognize that combinations of deductible, coinsurance, and out-of-pocket limits are very numerous in the plan designs offered by health plans and health insurance issuers. Coinsurance levels vary from 0% to 50% and out-of-pocket limits also differ considerably from one plan design option to another. Copayments are required for some services in lieu of or in addition to deductible and coinsurance. It would not be practical to develop results for each possible combination. Each of these plans had their own large group and small group CPDs, shown in Attachment 7. We reran the entire model with these two plans and the results are in Attachments 2 through 6. The following tables compare a few of the results from previously displayed tables for each of the four plans: TABLE 9 TABLE 2 VALUES FOR SELECTED SIZES AND SPECIFIC DEDUCTIBLES BY PLAN AGGREGATE STOP-LOSS ATTACHMENT POINT SET SO EXPECTED VALUE OF CEDED CLAIMS = EXPECTED VALUE OF RETAINED CLAIMS Specific Stop-Loss Deductible Group Size (Number of Employees) Members Assumed to be 2x 10 Employees 500 Employees Bronze Silver Gold Platinum Bronze Silver Gold Platinum $20,000 N/A 165% 118% 93% 109% 92% 84% 79% None 86% 73% 64% 56% 50% 50% 50% 50% In table 9, a group with a bronze plan, a $20,000 specific stop-loss deductible, and 10 employees has plan benefits so low that no aggregate attachment point exists that makes expected retained claims equal to expected ceded claims. National Association of Insurance Commissioners Page 15

18 TABLE 10 TABLE 3 VALUES FOR SELECTED SIZES AND SPECIFIC DEDUCTIBLES BY PLAN AGGREGATE STOP-LOSS ATTACHMENT POINT SET SO STANDARD DEVIATION OF CEDED CLAIMS = STANDARD DEVIATION OF RETAINED CLAIMS Specific Stop-Loss Deductible Group Size (Number of Employees) Members Assumed to be 2x 10 Employees 500 Employees Bronze Silver Gold Platinum Bronze Silver Gold Platinum $200, % 326% 297% 248% 116% 113% 111% 108% None 372% 290% 258% 226% 107% 105% 104% 103% TABLE 11 TABLE 4 VALUES FOR SELECTED SPECIFIC DEDUCTIBLES BY PLAN PROBABILITY OF A GROUP WITH 50 EMPLOYEES (100 MEMBERS) EXCEEDING THE AGGREGATE ATTACHMENT POINT Specific Stop-Loss Deductible 110% Aggregate Attachment Point 130% Aggregate Attachment Point Bronze Silver Gold Platinum Bronze Silver Gold Platinum $20, % 34.3% 32.4% 27.9% 17.9% 14.4% 10.1% 5.6% None 31.8% 31.8% 30.3% 30.3% 22.8% 21.4% 19.5% 17.6% TABLE 12 TABLE 5 VALUES FOR SELECTED SPECIFIC DEDUCTIBLES BY PLAN 90 TH PERCENTILE OF RETAINED CLAIMS AS A PERCENT OF EXPECTED EMPLOYER COSTS FOR A GROUP WITH 50 EMPLOYEES (100 MEMBERS) Specific Stop-Loss Deductible 110% Aggregate Attachment Point 130% Aggregate Attachment Point Bronze Silver Gold Platinum Bronze Silver Gold Platinum $20, % 109% 109% 108% 117% 118% 118% 115% None 131% 128% 126% 122% 146% 142% 141% 138% National Association of Insurance Commissioners Page 16

19 The change across the plans in table 12 at the 130% aggregate attachment point seems inconsistent (increasing then decreasing with benefit level). This is because the 90 th percentile of retained claims for each of the bronze, silver, and gold plans are at the maximum level (i.e., the retained claims have hit the aggregate attachment point), while the platinum plan s 90 th percentile of retained claims is not at the maximum level. Specific Stop-Loss Deductible TABLE 13 TABLE 6 VALUES FOR SELECTED SPECIFIC DEDUCTIBLES BY PLAN EXPECTED POLICYHOLDER DEFICIT FOR A GROUP WITH 50 EMPLOYEES (100 MEMBERS) 110% Aggregate Attachment Point 130% Aggregate Attachment Point Bronze Silver Gold Platinum Bronze Silver Gold Platinum $20,000 $10,563 $11,985 $13,156 $14,452 $13,259 $15,255 $16,760 $18,006 None 30,163 32,804 35,179 37,611 36,341 40,093 43,481 47,275 National Association of Insurance Commissioners Page 17

20 VI. LIMITATIONS OF RESULTS The results provided in this report are designed to assist the NAIC in updating the Model Act stop-loss insurance definition. The CPDs developed and used in this analysis have the following limitations: 1. Results are based upon CPDs developed from insurance claims experience before the impact of PPACA health care reforms. Some of these reforms have been implemented during 2010 and 2011, while most of them will not be implemented before The effect of these reforms on the distribution of claims is currently unknown and has not been considered in the development of these results. 2. The CPD data represents nationwide experience. If it were based on specific state, county, or ZIP code data, the results could vary. 3. The data represents an average 7/1/2012 experience period. Over time, leveraging effects due to claims trend may affect the appropriateness of plan design and other factors when applied to future periods. 4. Each market is subject to certain forces of adverse selection, particularly the small group market, and corresponding underwriting to limit the adverse selection. While the level of claims used in their respective CPDs reflect the claim costs generated by this adverse selection, the distribution of claims for any given carrier is likely to vary somewhat from that assumed in our development work due to differences in underwriting and marketing. Since the frequencies and types of these claims may differ in a post-reform marketplace, the impact may vary from company to company depending on the proportion of pre-reform versus post-reform business in force at the time. 5. The underlying CPDs are representative of today s insurance market. They should be reevaluated in or after 2014 since distributions and claim variability are likely to change, particularly with the introduction of risk adjustment as required by PPACA 1341 through 1343, which may help to reduce net statistical variability in claims. 6. Some health plans have capitation arrangements with providers. These have the potential to reduce the variability of its experience compared to carriers who do not have such arrangements. 7. Stop-loss arrangements do not always include outpatient prescription drugs, especially when administered separately by a prescription benefit manager (PBM). Our analysis has included drugs the same as other benefits. 8. The underlying CPDs that were used are likely to differ somewhat from the claim probability distributions experienced by any specific health insurer or employer-sponsored health plan. There are numerous characteristics of any one carrier s blocks of business not considered in the development of the factors shown in this report, which could also contribute to statistical variability of results for smaller blocks. These include differences in demographic characteristics (age, gender, family composition), geographic area, type of health plan, average group sizes, managed care and disease management protocols and requirements, provider network parameters (e.g., discounts, in-network penetration, outlier provisions), average duration of the business, and likely others. National Association of Insurance Commissioners Page 18

21 9. The analysis has assumed that the expected claim amount agreed to by an employer and its reinsurer is correct, where in fact there exists a likelihood of uncertainty regarding these estimations. This uncertainty distribution of the expected mean claims has not been included in the results of our analysis. It is quite likely that there are other limitations related to the use of these recommended factors. National Association of Insurance Commissioners Page 19

22 VII. Statement of Actuarial Opinion Jim O'Connor and Erik Huth are consulting actuaries with Milliman, Inc. We are members of the American Academy of Actuaries and meet the Qualification Standards of the American Academy of Actuaries to render the actuarial analyses contained herein. National Association of Insurance Commissioners Page 20

23 LIST OF ATTACHMENTS 1. Charts of Current Criteria vesus Recommended Criteria Chart 1A - Silver Plan, 50 Employee Group, 120% Aggregate Attachemnt Point, $20,000 Sspecific Stop-Loss Deductible Chart 1B - Silver Plan, 50 Employee Group, 120% Aggregate Attachemnt Point, $50,000 Specific Stop-Loss Deductible Chart 2 - Silver Plan, 50 Employee Group, No Specific Stop-Loss Deductible, 110% Aggregate Attachemnt Point versus 120% Aggregate Attachment Point 2. Table 2 - Aggregate Stop-Loss Attachment Points where the Expected Value of Ceded Claims Equals the Expected Value of Retained Claims A. Bronze Plan B. Silver Plan C. Gold Plan D. Platinum Plan 3. Table 3 - Aggregate Stop-Loss Attachment Points where the Expected Value of Ceded Claims Equals the Expected Value of Retained Claims A. Bronze Plan B. Silver Plan C. Gold Plan D. Platinum Plan 4. Table 4 - Probability of Employer Group Reaching Aggregate Attachment Point by Group Size A. Bronze Plan B. Silver Plan C. Gold Plan D. Platinum Plan 5. Table 5-90th Percentile of Actual Claims as a Percent of Expected Claims A. Bronze Plan B. Silver Plan C. Gold Plan D. Platinum Plan Milliman

24 LIST OF ATTACHMENTS 6. Table 6 - Expected Policyholder Deficit A. Bronze Plan B. Silver Plan C. Gold Plan D. Platinum Plan E. Bronze Plan (as a Percent of Expected Employer Costs) F. Silver Plan (as a Percent of Expected Employer Costs) G. Gold Plan (as a Percent of Expected Employer Costs) H. Platinum Plan (as a Percent of Expected Employer Costs) 7. Table 7 - Small Group and Large Group Cumulative Probability Distributions A. Bronze Plan B. Silver Plan C. Gold Plan D. Platinum Plan National Association of Insurance Commissioners Page 2

25 Attachment 1 The difference between the current aggregate level and an alternative aggregate level might best be shown in the following charts. The 10,000 stochastic model iterations are sorted by the employer paid claim cost amount and then grouped into the deciles (e.g. the lowest 10%, the next lowest 10%, etc.). We calculated the average total claims, retained claims and ceded claims (both aggregate and specific) for each decile. Charts 1A and 1B show the impact of changing the specific stop-loss deductible from $20,000 in Chart 1A to $50,000 in Chart 1B. The charts are for a 50 employee group (100 members) Silver plan with a 120% aggregate attachment point. $700,000 Chart 1A Silver Plan / 100 EE / 120% Agg / $20K Spec Annual Claim Cost $600,000 $500,000 $400,000 $300,000 $200,000 Total Claim Cost Retained Claim Cost Aggregate Claim Cost Specific Claim Cost Ceded Claim Cost $100,000 $ Decile Annual Claim Cost $800,000 $700,000 $600,000 $500,000 $400,000 $300,000 $200,000 Chart 1B Silver Plan / 100 EE / 120% Agg / $50K Spec Total Claim Cost Retained Claim Cost Aggregate Claim Cost Specific Claim Cost Ceded Claim Cost $100,000 $ Decile 5/24/2012 Milliman Attachment 1 - Page 1 of 2

26 Attachment 1 (continued) Chart 2 shows the impact of changing the aggregate attachment point from 120% to 110% when there is no specific stop-loss insurance included in the reinsurance. The chart is for a 50 employee group (100 members) Silver plan with no specific stop-loss deductible. $800,000 $700,000 Chart 2 Silver Plan / 100 EE / 110% versus 120% Agg / No Spec Annual Claim Cost $600,000 $500,000 $400,000 $300,000 $200,000 Total Claim Cost Retained Claim Cost 120% Agg Retained Claim Cost 110% Agg Ceded Claim Cost 120% Agg Ceded Claim Cost 110% Agg $100,000 $ Decile 5/24/2012 Milliman Attachment 1 - Page 2 of 2

27 Attachment 2 Specific Stop-Loss Table 2A BRONZE PLAN Aggregate Stop Loss Attachment Point Set so Expected Value of Ceded Claims = Expected Value of Retained Claims Employee Size Deductible $20,000 N / A N / A N / A 134% 109% $30, % 111% 97% 89% 83% $40, % 95% 83% 78% 75% $50, % 86% 76% 72% 69% $60, % 81% 72% 68% 66% $75, % 77% 68% 64% 62% None 86% 61% 54% 51% 50% Specific Stop-Loss Table 2B SILVER PLAN Aggregate Stop Loss Attachment Point Set so Expected Value of Ceded Claims = Expected Value of Retained Claims Employee Size Deductible $20, % 124% 109% 99% 92% $30, % 93% 84% 80% 78% $40, % 82% 75% 72% 71% $50,000 98% 76% 70% 67% 67% $60,000 93% 73% 67% 64% 64% $75,000 89% 69% 63% 61% 61% None 73% 57% 52% 51% 50% Specific Stop-Loss Table 2C GOLD PLAN Aggregate Stop Loss Attachment Point Set so Expected Value of Ceded Claims = Expected Value of Retained Claims Employee Size Deductible $20, % 98% 91% 87% 84% $30,000 96% 81% 77% 75% 74% $40,000 88% 74% 70% 69% 68% $50,000 83% 70% 66% 65% 64% $60,000 80% 67% 64% 62% 62% $75,000 76% 64% 61% 60% 59% None 64% 53% 51% 50% 50% Specific Stop-Loss Table 2D PLATINUM PLAN Aggregate Stop Loss Attachment Point Set so Expected Value of Ceded Claims = Expected Value of Retained Claims Aggregate Attachment Factor Deductible $20,000 93% 84% 82% 79% 79% $30,000 80% 73% 72% 70% 70% $40,000 74% 68% 67% 65% 65% $50,000 71% 65% 64% 62% 62% $60,000 68% 63% 61% 60% 60% $75,000 66% 60% 59% 58% 58% None 56% 52% 51% 50% 50% 5/24/2012 Milliman Attachment 2 - Page 1

28 Attachment 3 Specific Stop-Loss Deductible Table 3A BRONZE PLAN Aggregate Stop Loss Attachment Point Set so Standard Deviation of Ceded Claims = Standard Deviation of Retained Claims Employee Size $20,000 N / A N / A N / A N / A N / A $30,000 N / A N / A N / A N / A N / A $40,000 N / A N / A N / A N / A N / A $50,000 N / A N / A N / A N / A N / A $60,000 N / A N / A N / A N / A N / A $75,000 N / A N / A N / A N / A N / A $200, % 211% 163% 144% 116% None 372% 196% 149% 130% 107% Specific Stop-Loss Deductible Table 3B SILVER PLAN Aggregate Stop Loss Attachment Point Set so Standard Deviation of Ceded Claims = Standard Deviation of Retained Claims Employee Size $20,000 N / A N / A N / A N / A N / A $30,000 N / A N / A N / A N / A N / A $40,000 N / A N / A N / A N / A N / A $50,000 N / A N / A N / A N / A N / A $60,000 N / A N / A N / A N / A N / A $75,000 N / A N / A N / A N / A N / A $200, % 198% 161% 136% 113% None 290% 180% 144% 125% 105% Specific Stop-Loss Deductible Table 3C GOLD PLAN Aggregate Stop Loss Attachment Point Set so Standard Deviation of Ceded Claims = Standard Deviation of Retained Claims Employee Size $20,000 N / A N / A N / A N / A N / A $30,000 N / A N / A N / A N / A N / A $40,000 N / A N / A N / A N / A N / A $50,000 N / A N / A N / A N / A N / A $60,000 N / A N / A N / A N / A N / A $75,000 N / A N / A N / A N / A N / A $200, % 179% 149% 132% 111% None 258% 172% 134% 121% 104% Table 3D PLATINUM PLAN Aggregate Stop Loss Attachment Point Set so Standard Deviation of Specific Ceded Claims = Standard Deviation of Retained Claims Stop-Loss Employee Size Deductible $20,000 N / A N / A N / A N / A N / A $30,000 N / A N / A N / A N / A N / A $40,000 N / A N / A N / A N / A N / A $50,000 N / A N / A N / A N / A N / A $60,000 N / A N / A N / A N / A N / A $75,000 N / A N / A N / A N / A N / A $200, % 166% 141% 123% 108% None 226% 154% 129% 115% 103% 5/24/2012 Milliman Attachment 3 - Page 1

29 ATTACHMENT 4 Table 4A Table 4B Table 4C Table 4D BRONZE PLAN SILVER PLAN GOLD PLAN PLATINUM PLAN Specific Probability of a Group Exceeding the Aggregate Attachment Point Probability of a Group Exceeding the Aggregate Attachment Point Probability of a Group Exceeding the Aggregate Attachment Point Probability of a Group Exceeding the Aggregate Attachment Point Stop-Loss Aggregate Attachment Factor Aggregate Attachment Factor Aggregate Attachment Factor Aggregate Attachment Factor Employees Deductible 110% 115% 120% 125% 130% 110% 115% 120% 125% 130% 110% 115% 120% 125% 130% 110% 115% 120% 125% 130% 10 $20, % 36.3% 33.9% 31.7% 29.8% 38.7% 35.9% 33.4% 31.2% 29.1% 38.3% 35.1% 31.8% 28.8% 25.9% 37.0% 32.9% 28.9% 25.3% 22.0% 10 $30, % 37.9% 35.7% 32.9% 30.9% 38.8% 36.1% 33.6% 31.2% 28.9% 38.2% 35.1% 32.2% 29.5% 27.1% 37.2% 33.6% 30.3% 27.2% 24.2% 10 $40, % 38.4% 37.0% 35.7% 34.5% 40.1% 37.5% 35.0% 32.5% 30.2% 38.1% 35.1% 32.4% 29.7% 27.3% 37.3% 33.9% 30.6% 27.6% 24.8% 10 $50, % 36.1% 34.9% 33.6% 32.5% 38.7% 37.0% 35.3% 33.1% 31.1% 38.6% 36.1% 33.6% 31.0% 28.7% 37.5% 34.3% 31.3% 28.4% 25.7% 10 $60, % 34.5% 33.4% 32.2% 30.9% 37.3% 35.8% 34.1% 32.7% 31.3% 37.6% 35.6% 33.8% 31.7% 29.6% 37.2% 34.4% 31.8% 29.2% 26.5% 10 $75, % 32.8% 31.7% 30.2% 29.0% 35.4% 33.7% 32.2% 30.7% 29.4% 35.1% 33.3% 31.5% 30.0% 28.5% 35.5% 33.3% 31.1% 29.1% 27.1% 10 None 27.3% 26.1% 25.1% 24.1% 22.8% 28.2% 26.7% 25.4% 24.1% 23.0% 28.3% 26.6% 25.1% 23.6% 22.2% 28.4% 26.4% 24.7% 22.9% 21.3% 25 $20, % 34.8% 31.3% 27.9% 24.9% 37.3% 32.8% 29.0% 25.2% 21.6% 36.0% 30.7% 25.9% 21.4% 17.4% 32.9% 26.6% 21.3% 16.6% 12.6% 25 $30, % 35.2% 31.9% 28.9% 26.0% 38.0% 34.0% 30.2% 26.6% 23.3% 35.9% 31.1% 26.8% 23.0% 19.7% 34.1% 28.5% 23.5% 19.3% 15.3% 25 $40, % 36.0% 32.9% 30.1% 27.4% 37.2% 33.7% 30.3% 27.1% 24.0% 36.3% 32.2% 28.0% 24.5% 21.2% 35.4% 30.1% 25.6% 21.3% 17.5% 25 $50, % 35.2% 32.5% 29.7% 27.4% 38.3% 34.6% 31.2% 28.1% 25.3% 36.3% 32.1% 28.2% 24.8% 21.7% 35.0% 30.5% 26.1% 22.1% 18.5% 25 $60, % 35.3% 32.6% 29.9% 27.6% 37.3% 34.2% 31.2% 28.2% 25.5% 36.7% 32.8% 29.4% 25.9% 22.9% 35.2% 30.6% 26.5% 22.8% 19.1% 25 $75, % 35.1% 32.4% 30.0% 27.6% 38.1% 34.9% 31.8% 28.9% 26.4% 37.1% 33.6% 30.1% 26.8% 23.9% 34.9% 30.7% 26.8% 23.5% 20.1% 25 None 30.9% 29.0% 27.2% 25.6% 24.0% 30.8% 28.8% 26.6% 24.7% 23.1% 30.4% 27.8% 25.5% 23.4% 21.5% 30.3% 27.5% 25.0% 22.7% 20.6% 50 $20, % 30.8% 26.0% 21.4% 17.9% 34.3% 28.5% 23.1% 18.4% 14.4% 32.4% 25.3% 19.3% 14.1% 10.1% 27.9% 19.6% 13.4% 9.0% 5.6% 50 $30, % 32.0% 27.6% 23.9% 20.5% 36.0% 30.5% 25.3% 20.9% 16.9% 32.6% 26.6% 20.9% 16.0% 12.3% 30.7% 23.3% 16.9% 11.9% 8.1% 50 $40, % 33.0% 28.5% 24.7% 21.0% 35.8% 30.3% 25.8% 21.6% 17.9% 34.2% 28.3% 22.7% 18.0% 14.0% 31.5% 24.6% 18.9% 13.8% 10.1% 50 $50, % 32.7% 28.8% 25.3% 22.0% 35.4% 30.9% 26.6% 22.7% 19.0% 33.8% 28.5% 23.4% 19.4% 15.6% 32.2% 25.3% 19.7% 15.2% 11.7% 50 $60, % 33.3% 29.4% 26.1% 23.2% 36.6% 31.9% 27.3% 23.4% 19.7% 34.4% 29.4% 24.7% 20.2% 16.3% 32.8% 26.6% 20.9% 16.2% 12.4% 50 $75, % 33.1% 29.7% 26.5% 23.3% 36.6% 32.2% 28.2% 24.4% 21.0% 35.2% 29.9% 25.6% 21.5% 18.0% 32.6% 26.8% 21.8% 17.1% 13.6% 50 None 31.8% 29.2% 26.9% 24.7% 22.8% 31.8% 28.9% 26.2% 23.7% 21.4% 30.3% 27.1% 24.3% 21.6% 19.5% 30.3% 26.4% 23.1% 20.2% 17.6% 100 $20, % 25.9% 20.6% 15.5% 10.8% 30.6% 22.7% 16.2% 11.3% 7.8% 27.0% 18.5% 11.7% 7.0% 3.9% 22.1% 13.0% 7.1% 3.6% 1.6% 100 $30, % 27.4% 22.1% 17.1% 12.6% 31.1% 24.4% 18.1% 13.0% 9.2% 28.6% 20.3% 14.2% 9.6% 6.0% 24.8% 15.9% 9.2% 5.3% 3.0% 100 $40, % 28.4% 23.0% 18.5% 14.1% 32.3% 25.6% 19.5% 14.9% 10.9% 29.9% 22.0% 15.7% 10.9% 7.2% 25.9% 17.2% 11.0% 6.9% 4.1% 100 $50, % 28.7% 23.8% 19.2% 14.8% 33.1% 26.5% 21.0% 16.1% 12.0% 30.4% 23.1% 17.2% 12.2% 8.3% 26.6% 18.5% 12.2% 8.1% 5.2% 100 $60, % 30.0% 25.2% 20.7% 16.0% 34.1% 28.2% 22.7% 17.8% 13.7% 32.0% 24.4% 18.6% 13.8% 9.9% 28.8% 20.2% 13.9% 9.8% 6.4% 100 $75, % 31.6% 26.6% 22.3% 17.9% 34.2% 28.2% 22.9% 18.5% 14.8% 31.5% 24.9% 19.2% 14.2% 10.7% 30.0% 22.4% 16.4% 11.3% 7.5% 100 None 32.5% 29.2% 25.9% 23.2% 20.5% 31.1% 27.3% 23.7% 20.3% 17.7% 30.4% 26.1% 22.3% 19.2% 16.5% 29.5% 24.5% 20.2% 16.9% 13.8% 500 $20, % 9.4% 4.3% 1.8% 0.4% 13.6% 5.2% 1.8% 0.4% 0.1% 8.9% 2.5% 0.5% 0.1% 0.0% 5.3% 0.8% 0.1% 0.0% 0.0% 500 $30, % 11.6% 5.5% 2.4% 0.7% 15.7% 7.1% 2.7% 0.9% 0.3% 12.3% 4.0% 1.0% 0.2% 0.0% 7.3% 1.5% 0.2% 0.0% 0.0% 500 $40, % 12.1% 6.1% 3.0% 1.1% 17.3% 8.4% 3.3% 1.1% 0.4% 13.0% 5.1% 1.5% 0.4% 0.1% 8.5% 2.2% 0.5% 0.1% 0.0% 500 $50, % 13.9% 7.6% 3.7% 1.6% 19.5% 10.1% 4.5% 1.7% 0.5% 14.5% 6.0% 2.2% 0.7% 0.1% 10.5% 3.1% 0.8% 0.2% 0.0% 500 $60, % 13.9% 7.8% 4.1% 1.7% 20.5% 11.0% 5.2% 2.2% 0.8% 15.7% 7.2% 2.7% 0.8% 0.2% 11.1% 3.6% 0.9% 0.2% 0.0% 500 $75, % 15.3% 9.0% 5.2% 2.3% 20.5% 11.5% 6.0% 2.5% 0.9% 17.8% 8.6% 3.6% 1.2% 0.4% 12.5% 5.0% 1.3% 0.3% 0.1% 500 None 28.7% 22.3% 16.8% 12.5% 9.5% 26.5% 19.8% 14.0% 9.9% 7.2% 24.9% 17.0% 11.5% 7.7% 5.1% 21.2% 13.7% 8.2% 5.1% 3.1% 5/24/2012 Milliman Attachment 4 - Page 1

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