Glossary

The funds intended to assure payment of obligations from insurance contracts, over and above those funds backing the liabilities.

An assessment of capital of an insurer relative to its risk capital targets or risk capital thresholds.

A modeled or actual event that either a) causes capital to be significantly above or below the risk capital target or b) causes capital to be below the risk capital base. (Capital Adequacy Assessment for Insurers)

The amount of money paid to a provider by an exposure-based payment system to provide certain health care services to any Managed Care Health Provider members. The payment does not vary on the basis of the number or type of services actually rendered. The verb “to capitate” is used to indicate the act of entering into such an arrangement. Capitation is also sometimes used to mean the total medical cost or premium per enrollee, though it is not used in this manner in this document.

An arrangement that calls for periodic payments to a provider to cover specified services to certain members of a health benefit plan regardless of the number or types of such services provided. (ASOP No. 42)

A monthly fee paid for each member assigned or each event (for example, maternity delivery) regardless of the number or actual cost of services provided under a system of reimbursement for MCOs. Capitation rates can vary by member based on demographics, location, covered services, or other items. Capitation rates can be structured so that an MCO is fully at risk, or so that an MCO shares the risk with the state or with other MCOs. (Medicaid Managed-Care Capitation – Rate Development and Certification)

Any entity subject to state regulation that offers health benefit plan coverage for sale. Carrier includes an insurance company, a prepaid hospital or medical service plan, a fraternal benefit society, a health maintenance organization, and any other entity offering for sale a plan of health insurance or health benefits. (ASOP No. 26)

Carve-outs are designated services provided by specified 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 No. 42)

Contractually designated services such as prescription drugs or dental, or condition-specific services such as cancer, mental health, or substance abuse treatment, excluded from a capitation, risk-sharing, or other contractual arrangement.

The value of cash, cash equivalents, and marketable securities of a CCRC (historically referred to as cash balance by CCRC practitioners). This excludes the value of the physical property assets of the CCRC.

Any receipt, disbursement, or transfer of cash.

Any evaluation of the risks associated with the timing or amount of cash flows. (ASOP No. 7)

A model designed to simulate asset and liability cash flows. (Principle-Based Reserves for Life Products)

The risk that the amount or timing of cash flows will differ from expectations or assumptions.

A form of cash flow analysis involving the projection and comparison of the timing and amount of cash flows resulting from economic and other assumptions.

A relatively infrequent event or natural phenomenon that produces large aggregate losses.

A representation of relationships among events based on statistical, financial, economic, or mathematical concepts and equations used to explain a system, to study the effects of different components, and to derive estimates based upon the future occurrences of large scale, low-frequency, high-severity events such as hurricanes, earthquakes, tornados, terrorist acts, and pandemics.

Ratemaking procedures that adjust for the impact of catastrophe losses in the experience data and determine a provision for catastrophe losses and loss adjustment expenses.

A residential facility that provides stated housekeeping, social, and health care services in return for some combination of an advance fee, periodic fees, and additional fees.

The entity that is transferring insurance risk in a reinsurance agreement, such as an employer transferring risk under a stop-loss arrangement, an insurance company transferring risk to a reinsurer, or a reinsurer transferring risk to a retrocessionaire.

An actuary who meets the qualifications defined in the PBA Reserve Model, and who has certified that the reserves have been calculated in a manner consistent with the PBA Reserve Model and complies with all applicable actuarial standards of practice. (Independent Review of Principles-Based Valuations)

The costs of administering, determining coverage for, settling, or defending claims even if it is ultimately determined that the claim is invalid. (ASOP No. 43)

An estimate on an undiscounted basis of the obligation for future loss and loss adjustment expenses resulting from claims due to past events or an estimate of loss and loss adjustment expenses associated with prospective property/casualty risk transfer or risk retention. Claim estimates may include elements, such as case reserves, developed by individuals other than actuaries.

A demand for payment under the coverage provided by a plan or contract.

In this standard, the word includes the employing company of an employee actuary, as well as the client of a consulting actuary. (ASOP No. 1)

A mechanism to preserve (over time) the reasonable dividend expectations of policyholders with individual life, health, or annuity policies. A closed block comprises a defined, limited group of policies and a defined set of assets, and is governed by a set of operating rules. All cash flows arising from the closed block are exclusively committed to supporting the policies in the closed block as specified in the operating rules. (ASOP No. 33)

The process of recording and submitting information (for example, diagnoses or services provided) on claims forms. (ASOP No. 45)

A deficiency in a person’s short- or long-term memory; orientation as to person, place, and time; deductive or abstract reasoning; or judgment as it relates to safety awareness. (ASOP No. 18)

A grouping of insurance contracts or policies for the purpose of measuring the liability for future policy benefits, DPAC, and any other related balances.

A hypothetical group of new contractual residents or members assumed to enter a CCRC or At Home Program over a specified period of time and assumed to have certain demographic characteristics.

A hypothetical group of new residents assumed to enter the CCRC over a specified period of time and assumed to have certain demographic characteristics. (ASOP No. 3)

A hypothetical group of new residents or members assumed to enter a CCRC or At Home Program over a specified period of time and assumed to have certain demographic characteristics.

The likelihood of receiving the amount of money owed.

The ability of the counterparty to obtain funds owed to it according to the terms of the reinsurance program.

Compensation associated with the acquisition and service of business paid to agents, brokers, or other parties, including ceding insurance companies.

Affiliated group of individual organizations, primarily consisting of insurers, where the relationships among the organizations is constrained by governance, accounting, tax, foreign exchange, or legal or regulatory restrictions and considerations.

A rating method that simplifies the calculation for large, complex entities. Instead of using multiple exposure bases to estimate the expected value of future costs, a single composite exposure base is used. (Property/Casualty Ratemaking)

Individual events that interact to yield outcomes that differ from what would be expected if they occurred with full independence.

For purposes of data quality, data obtained from inventory or sampling methods are comprehensive if they contain each data element or record needed for the analysis. (ASOP No. 23)

For purposes of data quality, data obtained from inventory or sampling methods are comprehensive if they contain sufficient data elements or records needed for the analysis. (ASOP No. 23)

A grouping of medical conditions that have similar expected healthcare resource use or clinical characteristics. (ASOP No. 45)

The  consideration  a  policyholder  receives  in  a  demutualization  in  exchange  for relinquishing membership rights (sometimes referred to as policyholder consideration.) (ASOP No. 37)

A lack of independence between the occurrence of losses among different entities.

A provision for the expected differences, if any, between the estimated costs and the average actual costs, that cannot be eliminated by changes in other components of the ratemaking process. (ASOP No. 30)

An individual who is not currently a participant but who may reasonably be expected to become a participant through his or her future action. (ASOP No. 6)

An organization that provides contractual residential housing and stated housekeeping, social, and health care services in return for some combination of an advance fee, periodic fees, and additional fees. CCRCs are also known as Life Plan Communities (LPCs).

The fulfillment of an entity’s obligations required by a contract, for example, compliance under the provisions of a reinsurance contract or under a contract that includes a retrospective rate adjustment or experience refund.

The time period for which a contract is effective. (ASOP No. 5 Revision – Incurred Health and Disability Claims)

A liability established when a portion of the premium due prior to the valuation date is designed to pay all or a part of the claims expected to be incurred after the valuation date (sometimes referred to as an active life reserve or policy reserve).  A contract reserve may or may not include a provision for the reserve for unearned premiums.

The method of dividing the period from issue to mandatory expiration of a policy into successive segments, with the length of each segment being defined as set forth in section 4 of the Model and using the assumptions as set forth in section 4 of the Model. (ASOP No. 40)

A person who has signed a residency agreement.

A procedure that uses an actuarial cost method to determine the periodic prefunding contribution for prefunding a retiree group benefits program. It may produce a single value, such as normal cost plus an amortization payment of the unfunded actuarial accrued liability, or a range of values. This term does not relate to the process of determining the participant contribution.

The concept that aggregate divisible surplus is allocated to policies to reflect the proportion that the policies, as part of their dividend factor classes, are considered to have contributed to divisible surplus. (ASOP No. 15)

The potential of actual future contributions deviating from expected future contributions, for example, that actual contributions are not made in accordance with the plan’s funding policy, that withdrawal liability assessments or other anticipated payments to the plan are not made, or that material changes occur in the anticipated number of covered employees, covered payroll, or other relevant contribution base.

A potential payment to the plan determined by the actuary. It may or may not be the amount actually paid by the plan sponsor or other contributing entity. (ASOP No. 4)

The amount assigned to a period using a cost allocation procedure for purposes other than funding. This may be a function of plan obligations, normal cost, expenses, and assets. In many situations, cost is determined for accounting purposes.

An actuarial cost method combined with defined procedures to account for plan assets (if any) and amortization of changes in plan obligations (such as those arising from plan changes, experience gains and losses, assumption changes, or changes in actuarial cost methods). (ASOP No. 6)

A procedure that uses an actuarial cost method, and may include an asset valuation method and an amortization method, to determine the periodic cost for a plan (for example, the procedure to determine the net periodic pension cost under accounting standards).

The rate of return that capital could earn in an alternative investment of equivalent risk. The source of the capital may be internal or external. (ASOP No. 26)

All benefit payments and expenses associated with issuing and maintaining a company’s insurance policies and contracts, with no provision for profit.

The rate of return that capital could earn in an alternative investment of equivalent risk. The source of the capital may be internal or external. (ASOP No. 26)

Another entity involved in the reinsurance program including, but not limited to, ceding entity, assuming entity, or a service provider.

The risk that the party providing a risk offset or accepting a risk transfer does not fulfill its obligations.

The terms and conditions of a plan or contract, or the requirements of applicable law, that create an obligation to pay benefits, expenses, or claims associated with contingent events.

An active participant, retiree, dependent, or surviving dependent. (Proposed Revision of ASOP No. 6)

The party in a domestic relations action who is covered by the retirement plan. (ASOP No. 34)

Active and retired participants, participating dependents, and surviving dependents of participants who are eligible for benefit coverage under a retiree group benefits program. The covered population may also include contingent participants. (ASOP No. 6)

A measure of the predictive value in a given application that the actuary attaches to a particular set of data (predictive is used here in the statistical sense and not in the sense of predicting the future). (ASOP No. 12)

A process that involves the following: a. the evaluation of subject experience for potential use in setting assumptions without reference to other data; or b. the identification of relevant experience and the selection and implementation of a method for blending the relevant experience with the subject experience. (ASOP No. 25)

Risk associated with the possibility of a loss on an investment arising from a borrower who does not make payments as promised. (Draft Proposed Revision of ASOP No. 20)

A scale of nonguaranteed elements in effect for a policy form as of the preparation date of the illustration or declared to become effective within the next 95 days.

Care to help a person perform ADLs and other routine activities; also known as personal care. It is usually provided by people without professional medical skills. It is less intensive or complicated than skilled or intermediate nursing care, and can be provided in many settings, including nursing homes, assisted living facilities, adult day care centers, or at home. (ASOP No. 18)