Adopted as-is — accepted in the original. The Kazakhstan Chamber of Actuaries (KCA) adopts this Actuarial Standard of Practice in its original English form, as published by the Actuarial Standards Board (ASB), United States, without modification. The full original ASB text is reproduced below for reference. The Russian and Kazakh catalogue entries are KCA adaptations; in case of any discrepancy the original ASB text prevails.
Repeal of Actuarial Standard of Practice No. 31
Documentation in Health Benefit Plan Ratemaking
Developed by the Health Committee of the Actuarial Standards Board
Repealed by the Actuarial Standards Board June 2009
(Doc. No. 115)
T A B L E O F C O N T E N T S
Transmittal Memorandum Appendix 1 Appendix 2—Comments on the Exposure Draft and Responses
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June 2009
TO: Members of Actuarial Organizations Governed by the Standards of Practice of the Actuarial Standards Board and Other Persons Interested in Documentation in Health Benefit Plan Ratemaking
FROM: Actuarial Standards Board (ASB)
SUBJ: Repeal of Actuarial Standard of Practice (ASOP) No. 31
ASOP No. 31, Documentation in Health Benefit Plan Ratemaking, has been repealed by the ASB.
Background
ASOP No. 31, Documentation in Health Benefit Plan Ratemaking , was effective in 1998 and relied heavily on Interpretative Opinion No. 3 of the Guides and Interpretative Opinions as to Professional Conduct of the American Academy of Actuaries.
In 2002, the ASB repealed Interpretative Opinion 3: Professional Communications of Actuaries when the Board adopted ASOP No. 41, Actuarial Communications, which supersedes the guidance of Interpretative Opinion No. 3. ASOP No. 41 is applicable to all areas of actuarial practice and provides guidance with respect to written, electronic, or oral communications.
The Health Committee of the ASB has reviewed ASOP No. 31 and compared its guidance to ASOP No. 41 and other ASOPs. The committee concluded that the guidance in ASOP No. 31 is addressed in ASOP No. 41 and other ASOPs.
Exposure Draft
The exposure draft of this repeal document was issued in September 2008 with a comment deadline of December 31, 2008. Four comment letters were received. For a summary of the substantive issues and the reviewers’ responses, please see appendix 2.
The Actuarial Standards Board wishes to thank all who commented on the repeal.
Action
The ASB voted in June 2009 to repeal ASOP No.31.
ASOP No. 31 is repealed for any work performed after June 30, 2009.
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Health Committee of the ASB
Paul R. Fleischacker, Chairperson Mike S. Abroe John C. Lloyd Robert G. Cosway Cynthia S. Miller James M. Gutterman Nancy F. Nelson
Actuarial Standards Board
Stephen G. Kellison, Chairperson Albert J. Beer Robert G. Meilander Alan D. Ford James J. Murphy Patrick J. Grannan Godfrey Perrott Thomas D. Levy James F. Verlautz
The ASB establishes and improves standards of actuarial practice. These ASOPs identify what the actuary should consider, document, and disclose when performing an actuarial assignment. The ASB’s goal is to set standards for appropriate practice for the U.S.
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Appendix 1
Note : This appendix is prepared for informational purposes only.
The Health Committee prepared the following grid, which identifies provisions of section 3 of ASOP No. 31 cross referenced against ASOP No. 41, Actuarial Communications , and other ASOPs to reflect where pertinent actuarial guidance already exists.
Section 3. Analysis of Issues and Recommended Practices
| Section 3. Analysis of Issues and Recommended Practices | Section 3. Analysis of Issues and Recommended Practices | Section 3. Analysis of Issues and Recommended Practices |
|---|---|---|
| Current Section | Cross Reference | |
| 3.1 | Introduction | ASOP No. 41 (3.1, 3.3.3) |
| 3.2 | Extent of Documentation | ASOP No. 41 (3.3.3, 3.6) |
| 3.3 | Documentation Issues Related to Risk | ASOP No. 41 (3.3.3, 3.6) |
| 3.3.1 | Reinsurance | ASOP No. 41 (3.3.3, 3.6); ASOP No. 5 (3.3.3); ASOP No. 8 (3.2.2(i)); ASOP No. 26 (3.4.1(b)) |
| 3.3.2 | Operational Changes | ASOP No. 41 (3.3.3, 3.6); ASOP No. 5 (3.2.1, 3.2.3); ASOP No. 8 (3.2.3) |
| 3.3.3 | External Influences | ASOP No. 41 (3.3.3, 3.6); ASOP No. 5 (3.2.2, 3.2.5); ASOP No. 18 (3.3) |
| 3.3.4 | Risk Classification Plan | ASOP No. 41 (3.3.3, 3.6); ASOP No. 5 (3.2.4); ASOP No. 12 (3.4); ASOP No. 26 (3.4.1) |
| 3.3.5 | Ratemaking Process and Exposure Distribution |
ASOP No. 41 (3.3.3, 3.6); ASOP No. 8 (3.2.2-3.2.6, 3.2.9); ASOP No. 26 (3.4.1) |
| 3.3.6 | Experience Rating Process | ASOP No. 41 (3.3.3, 3.6); ASOP No. 8 (3.2.4) |
| 3.3.7 | Investment Income | ASOP No. 41 (3.3.3, 3.6); ASOP No. 5 (3.3.1 (d)); ASOP No. 8 (3.2.2(e)); ASOP No. 18 (3.2.6) |
| 3.3.8 | Risk Provision | ASOP No. 41 (3.3.3, 3.6); ASOP No. 5 (3.3.1(c)); ASOP No. 18 (3.3) |
| 3.3.9 | Cost of Capital | ASOP No. 41 (3.3.3, 3.6) |
| 3.4 | Documentation Issues Related to Data | ASOP No. 41 (3.3.3, 3.6) |
| 3.4.1 | Experience Period | ASOP No. 41 (3.3.3, 3.6); ASOP No. 8 (3.2.4) |
| 3.4.2 | Experience Data | ASOP No. 41 (3.3.3, 3.6); ASOP No. 5 (3.3.1(b), 3.4); ASOP No. 8 (3.2.4); ASOP No. 18 (3.2.1) |
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| 3.4.3 | Credibility | ASOP No. 41 (3.3.3, 3.6); ASOP No. 8 (3.2.4); ASOP No. 18 (3.2.1); ASOP No. 25 (Section 3) |
|---|---|---|
| 3.4.4 | External Data | ASOP No. 41 (3.3.3, 3.6); ASOP No. 5 (3.4); ASOP No. 18 (3.2.1) |
| 3.5 | Documentation Issues Related to Determination of Experience Period Costs |
ASOP No. 41 (3.3.3, 3.6) |
| 3.5.1 | Exposure Units | ASOP No. 41 (3.3.3, 3.6); ASOP No. 8 (3.2.2-3.2.4) |
| 3.5.2 | Claim Administration Expense | ASOP No. 41 (3.3.3, 3.6) |
| 3.5.3 | Large Claims (Shock Loss Claims) | ASOP No. 41 (3.3.3, 3.6); ASOP No. 5 (3.3.4) |
| 3.5.4 | Policy and Provider Contract Provisions | ASOP No. 41 (3.3.3, 3.6); ASOP No. 5 (3.2.1, 3.2.2, 3.3.1(a), 3.3.6); ASOP No. 8 (3.2.2, 3.2.4, 3.2.5); ASOP No. 18 (3.1, 3.2.1); ASOP No. 26 (3.4.1) |
| 3.5.5 | Mix of Business | ASOP No. 41 (3.3.3, 3.6) |
| 3.6 | Documentation Issues Related to Expenses |
ASOP No. 41 (3.3.3, 3.6) |
| 3.6.1 | Categorization of Expenses | ASOP No. 41 (3.3.3, 3.6); ASOP No. 8 (3.2.2(d)); ASOP No.18 (3.2.4) |
| 3.6.2 | Start-Up Costs | ASOP No. 41 (3.3.3, 3.6); ASOP No. 8 (3.2.2d); ASOP No. 18 (3.2.4) |
| 3.7 | Documentation Issues Related to Trending Procedures |
ASOP No. 41 (3.3.3, 3.6) |
| 3.7.1 | Trend Measurement | ASOP No. 41 (3.3.3, 3.6); ASOP No. 8 (3.2.2, 3.2.4) |
| 3.7.2 | Claim Cost Trend Factors | ASOP No. 41 (3.3.3, 3.6); ASOP No. 8 (3.2.2, 3.2.4) |
| 3.7.3 | Other Trend Factors | ASOP No. 41 (3.3.3, 3.6); ASOP No. 8 (3.2.2, 3.2.4) |
| 3.7.4 | Trend Selection | ASOP No. 41 (3.3.3, 3.6); ASOP No. 8 (3.2.2, 3.2.4) |
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Appendix 2
Comments on the Exposure Draft and Responses
The exposure draft of the repeal of ASOP No. 31, Documentation in Health Benefit Plan Ratemaking , was issued to the membership in September 2008 with a comment deadline of December 31, 2008. Four comment letters were received. The ASB and Health Committee carefully considered all comments received. Summarized below are the significant issues and questions contained in the comments and responses to each. The term “reviewers” in appendix 2 includes the Health Committee and the ASB.
GENERAL COMMENTS
Comment The four commentators generally shared the same concerns in that they believed ASOP No. 31 should not be repealed but updated instead as to not create a void in actuarial guidance relative to ratemaking. The following is a summary of each comment letter received:
• Although ASOP No. 31 contains parts of other ASOPs that provide similar guidance, it is unique in that seven other ASOPs had to be referenced in comparison and, therefore, it should not be repealed. The commentator also noted that certain assumptions, such as credibility and trend, are referenced in ASOP No. 31, but not ASOP No. 41. • The repeal of ASOP No. 31 “proves” that the ASOP is unnecessary as five of the eight Health ASOPs and two of the six General ASOPs were referenced. However, given the importance of ratemaking, ASOP No. 31 should not be eliminated but rather updated, and perhaps the title should be changed to Considerations in Health Benefit Plan Ratemaking . • The current ASOP No. 31 is an excellent guide to the specific task of documenting the ratemaking process for health benefit plans and should not be repealed. The commentator believes it would be distracting and confusing to have to reference so many ASOPs whereas now all the requirements are contained in ASOP No. 31.
• Although general guidance with regard to documentation of the health actuary’s work for ratemaking is likely addressed in other ASOPs, ASOP No. 31 is used by many health actuaries not only as documentation guidance but also as a valuable checklist of elements and aspects that should be considered and addressed in ratemaking for health benefit plans. Therefore, having such reference is especially important for actuaries working on heavily regulated products, and a repeal of ASOP No. 31 would thus create a void in the actuarial guidance for health benefit plan ratemaking.
Response The reviewers note that the cover memorandum to ASOP No. 31specifically states that, “It is not a standard on ratemaking itself, but rather on the documentation of the ratemaking process.” Also, in section 1 of the ASOP, the purpose and scope, as described, are limited to documentation of the ratemaking process. The same is true for ASOP No. 41 and, as such, does not include references to specific assumptions. Appendix 1 could have been limited to providing guidance to actuaries regarding documentation requirements on ratemaking as contained in other ASOPs. This would have reduced the references in appendix 1 primarily to ASOP No. 41.
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However, the reviewers believe that it would be helpful to practicing actuaries to have a more comprehensive list of cross references than those pertaining to just documentation. Thus, appendix 1 was developed to provide guidance to practicing actuaries regarding all ASOPs that can be referenced on specific issues as it relates to ratemaking, including documentation. In addition, the reviewers note there are several ratemaking and pricing sources that a practicing actuary can reference, including study notes, practice notes, and textbooks in addition to the referenced ASOPs noted in appendix 1. The reviewers further note that much of the material contained in ASOP No. 31 is also contained in ASOP No. 8. Therefore, the reviewers believe the repeal of this ASOP is appropriate.
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