Glossary

The entity contracting with the state Medicaid agency to provide health care services for selected subsets of the Medicaid population. (Medicaid Managed-Care Capitation – Rate Development and Certification)

An adjustment for uncertainty, such as that caused by a lack of full credibility of the data. (Modeling)

Assets of the marital estate as determined under the laws and regulations of the applicable jurisdiction. (ASOP No. 34)

Interest rates that are available on funds invested at a particular date. (ASOP No. 20)

Uncertainty regarding the future market value of an asset. (ASOP No. 20)

A contract or contract feature in a long-duration contract issued by an insurance entity that both protects the contract holder from other-than-nominal capital market risk and exposes the insurance entity to other-than-nominal capital market risk by providing a benefit in excess of account value.

The price that would be received to sell an asset in an orderly transaction between market participants at the measurement date (sometimes referred to as fair value). (ASOP No. 44)

The market-consistent actuarial present value of accrued benefits that are expected to be paid in the future. For the purpose of this present value measurement, accrued benefits include vested and nonvested benefits, and take into account the following items (if applicable to the plan benefits) as of the measurement date:

a. accrued service;

b. compensation;

c. substantive plan provisions, i.e., the plan as it is commonly understood by the plan sponsor and participants, reflecting current benefit administration practice;

d. ancillary benefits, such as disability benefits or death benefits; and

e. automatic cost-of-living adjustments.

Ancillary benefits and early retirement subsidies are deemed to accrue on a pro rata basis over total service. Any benefit that is not based on service is deemed to accrue on a pro rata basis over total service. Benefits that are disproportionately backloaded relative to service are deemed to accrue on a pro rata basis over total service. (Measuring Pension Obligations and Determining Pension Plan Costs or Contributions)

An actuarial present value that is consistent with the price at which benefits that are expected to be paid in the future would trade in an open market between a knowledgeable seller and a knowledgeable buyer. The existence of a deep and liquid market for pension cash flows or for entire pension plans is not a prerequisite for this present value measurement.

An assumption that represents what a typical market participant would use in assessing the amount the participant would pay to acquire a given asset, or the amount the participant would require to assume a given liability (a so-called “exit market” price). (ASOP No. 10)

Resulting in an impact, significant to the interested parties, on the affected actuarial incurred claim estimate. (ASOP No. 5)

“Materiality” is a consideration in many aspects of the actuary’s work. An item or a combination of related items is material if its omission or misstatement could influence a decision of an intended user. When evaluating materiality, the actuary should consider the purposes of the actuary’s work and how the actuary anticipates it will be used by intended users. The actuary should evaluate materiality of the various aspects of the task using professional judgment and any applicable law (statutes, regulations, and other legally binding authority), standard, or guideline. In some circumstances, materiality will be determined by an external user, such as an auditor, based on information not known to the actuary. The guidance in ASOPs need not be applied to immaterial items. (ASOP No. 1)

The amount that the actuary judges to be material in determining if there is a significant risk of material adverse deviation with respect to the loss and loss adjustment expense reserves.

“May” as used in the ASOPs means that the course of action described is one that would be considered reasonable and appropriate in many circumstances. “May” in ASOPs is often used when providing examples (for example, factors the actuary may consider; methods that may be appropriate). It is not intended to indicate that a course of action is reasonable and appropriate in all circumstances, nor to imply that alternative courses of action are impermissible. (ASOP No. 1)

The entity contracting with the state Medicaid agency to provide health care services for selected subsets of the Medicaid population. (Medicaid Managed-Care Capitation – Rate Development and Certification)

The average life expectancy based on the assumed survival curve. (ASOP No. 48)

The date as of which the values of the retiree group benefits obligation and, if applicable, the assets are determined (sometimes referred to as the “valuation date”).

The period subsequent to the measurement date during which the chosen assumptions or other model components will apply. The period often ends at the time the last participant is expected to receive the final benefit.

The point in time at which, based on the assumed survival curve, there is a 50% probability that the person will still be alive. (ASOP No. 48)

Payments for graduate medical education as part of the rate structure for inpatient hospital payments or as supplemental payments under 42 CFR 447.272. These payments may include direct (GME) or indirect (IME) costs for medical education. These payments may be included as part of Medicaid managed-care capitation rates or may be made directly to providers for managed-care enrollees. (Medicaid Managed-Care Capitation – Rate Development and Certification)

The approach to determining the portion of a Medicare-eligible claim that is paid by the benefit plan after adjustment for Medicare reimbursements for the same claim. Types of Medicare integration include the following:

a. Full Coordination of Benefits (Full COB)-The health plan pays the difference between total eligible charges and the Medicare reimbursement amount, or the amount it would have paid in the absence of Medicare, if less.

b. Exclusion-The health plan applies its normal reimbursement formula to the amount remaining after Medicare reimbursements have been deducted from total eligible charges.

c. Carve-Out-The health plan applies its normal reimbursement formula to the total eligible charges, and then subtracts the amount of Medicare reimbursement. (ASOP No. 6)

A participating individual who is entitled to Medicare benefits. (ASOP No. 6)

A person who has signed a membership agreement with an At Home Program.

A contract between one or more members and an At Home Program that describes the services to be provided and the obligations of the parties. The contract is usually of long duration and may be for the life of each member. The contract describes the health care guarantee and any refund guarantee.

Any rights a member of a mutual company has by virtue of ownership of an insurance policy, other than the contractual insurance rights under the policy. Typical membership rights include voting rights and the rights, if any, the member has upon liquidation of the company. (ASOP No. 37)

The rates of change  in an individual’s compensation attributable to personal performance, promotion, seniority, or other individual factors.

The rates of change in an individual’s compensation attributable to personal performance, promotion, seniority, or other individual factors. (Proposed Revision of ASOP No. 27)

A systematic procedure for developing, reviewing, or changing rates.

A provision that requires the MCO to use no less than a stated portion of its earned premium for defined medical or care management expenditures. (Medicaid Managed-Care Capitation – Rate Development and Certification)

The formula reserve calculated in accordance with the procedures set forth in section 3 of VM-20.

The minimum reserve standard for all life policies subject to the requirements of the Valuation Manual. (Principle-Based Reserves for Life Products)

The minimum required actuarial value for employer-sponsored group plans, as applied under the ACA. In the large group market, the MV is a component of the determination of whether an employer is subject to a penalty. (Determining Minimum Value and Actuarial Value Under the Affordable Care Act)

A spreadsheet released by Health and Human Services (HHS), used to determine the MV. (Determining Minimum Value and Actuarial Value Under the Affordable Care Act)

The minimum required actuarial value for certain employer-sponsored health insurance plans, as defined by regulations issued pursuant to the ACA. (Determining Minimum Value and Actuarial Value under the Affordable Care Act)

A mathematical or empirical representation of a specified phenomenon.

The configuration of a model and how the model operates. (Pricing of Life Insurance and Annuity Products)

Data or information produced by the model. (ASOP NO. 38 Proposed Revision)

A record used in a model to represent a cohort of policies with similar characteristics. (Pricing of Life Insurance and Annuity Products)

The risk that the methods are not appropriate to the circumstances or the models are not representative of the specified phenomenon. (ASOP No. 43)

The output of a model derived from a given set of input. (Modeling, Second Exposure Draft)

A group of policies and associated assets that are modeled together to determine the path of net asset earned rates. (Principle-Based Reserves for Life Products)

The select mortality factors in the appendix of the Model. (ASOP NO. 40)

Selecting, designing, building, modifying, developing, using, reviewing, or evaluating models.

Policies that are treated in a cash flow model as being completely alike with regard to demographic characteristics, policyholder behavior assumptions, and policy provisions.

Conditions that include one or more unfavorable, but not extreme, events that have a reasonable probability of occurring during the testing period.

A change made to one or more assumptions in order to perform asset adequacy analysis under moderately adverse conditions.

A factor that is used to adjust standard mortality to reflect rating classification. This may include items such as flat extras, mortality multiples, and age ratings. (ASOP No. 48)

Any A/E analysis, other than a historical A/E analysis, in which mortality assumptions differ from those originally used by the LE provider. This may result in life expectancy estimates that differ from those originally provided. (Exposure Draft, Proposed ASOP Life Settlements Mortality)

Mortality assumptions other than the historical A/E mortality basis. Use of this basis may result in life expectancy estimates that differ from those originally provided. (ASOP No. 48)

The incidence of or resource use associated with a medical condition or group of conditions.

The probability of incurring an illness or disability requiring the transfer to a different level of care. The permanent transfer rates and the temporary transfer rates together comprise the morbidity rates. (ASOP No. 3)

The annual probability of death at each age and duration. This may reflect an assumption of future mortality improvement or deterioration or modification factors. This term may apply to either a single insured or group of insureds. (Exposure Draft, Proposed ASOP Life Settlements Mortality)

A modification factor typically determined from a debit/credit underwriting methodology. (ASOP No. 48)

The words “must” and “should” are used to provide guidance in the ASOPs. “Must” as used in the ASOPs means that the ASB does not anticipate that the actuary will have any reasonable alternative but to follow a particular course of action. In contrast, the word “should” indicates what is normally the appropriate practice for an actuary to follow when rendering actuarial services. Situations may arise where the actuary applies professional judgment and concludes that complying with this practice would be inappropriate, given the nature and purpose of the assignment and the principal’s needs, or that under the circumstances it would not be reasonable or practical to follow the practice. Failure to follow a course of action denoted by either the term “must” or “should” constitutes a deviation from the guidance of the ASOP. In either event, the actuary is directed to ASOP No. 41, Actuarial Communications. The terms “must” and “should” are generally followed by a verb or phrase denoting action(s), such as “disclose,” “document,” “consider,” or “take into account.” For example, the phrase “should consider” is often used to suggest potential courses of action. If, after consideration, in the actuary’s professional judgment an action is not appropriate, the action is not required and failure to take this action is not a deviation from the guidance in the standard. (ASOP No. 1)

A mutual life insurance company, or a mutual holding company formed in conjunction with the demutualization of a mutual life insurance company. (ASOP No. 37)

The minimum required actuarial value for employer-sponsored group plans, as applied under the ACA. In the large group market, the MV is a component of the determination of whether an employer is subject to a penalty. (Determining Minimum Value and Actuarial Value Under the Affordable Care Act)

A spreadsheet released by Health and Human Services (HHS), used to determine the MV. (Determining Minimum Value and Actuarial Value Under the Affordable Care Act)

The minimum required actuarial value for certain employer-sponsored health insurance plans, as defined by regulations issued pursuant to the ACA. (Determining Minimum Value and Actuarial Value under the Affordable Care Act)

Data and methodology released by HHS that is used to determine whether the MV requirement is met.

The actuarial value calculated using the MV Calculator, including any adjustments for non-standard plan designs. (Determining Minimum Value and Actuarial Value under the Affordable Care Act)