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Health Care Cost Trends – 2021 Managed Medicaid Underwriting Margin Model RFP

Background and Purpose  

In 2019, the SOA formed its Health Care Cost Trends Strategic Research Program to conduct Health Care research.  The Health Care Cost Trends Program Steering Committee (HCCT PSC) is seeking a research group to create a research report on the topic of Underwriting Margin (also called underwriting gain). This is an important topic to the Health Insurance Industry as a whole and more specifically within the context of Medicaid Managed Care rate setting. However, there are rate setting areas without detailed guidance in this rule – particularly as they relate to appropriate target assumptions for underwriting margins to be included within the methodology of setting these rates. In the absence of this guidance, there may be less consistency in the approaches Medicaid rate setting actuaries use in estimating the Underwriting Margin, possibly leading to inconsistent practices and/or stakeholder confusion.

Both the Society of Actuaries (SOA) and Centers for Medicare & Medicaid Services (CMS) have published resources related to Medicaid Managed Care rate development standards including providing guidance on underwriting margin considerations. Available resources include:

  • CMS’ Medicaid and CHIP Managed Care Final Rule (CMS-2390-F)
  • Actuarial Standard of Practice 49 – Medicaid Managed Care Capitation Rate Development
  • SOA study released in March 2017 titled: Medicaid Managed Care Organizations: Considerations in Calculating Margin in Rate Setting[1]

The goal of this RFP is to build on available resources and guidance to develop an actuarially sound method/model for developing the underwriting margin assumption in managed Medicaid Managed Care capitation rates.

Research Objective

The Health Care Cost Trends Program Steering Committee (HCCT PSC) is seeking a researcher or team of researchers to perform a study focusing on Medicaid Managed Care Capitation Rate Underwriting Margin and develop an actuarially and economically sound method/model for developing the underwriting margin assumption in managed Medicaid capitation rates. Researchers should consider the various components that are needed in underwriting margin for health insurance rates, such as risk and cost of capital, and characteristics of Medicaid programs that can impact the components, such as differences in Medicaid populations, programs, and benefits. The model should be developed in such a way that actuaries can leverage the model in their work when developing underwriting margin for managed Medicaid capitation rates. The steps necessary to accomplish this are:

  • The researchers will update the data set used in the March 2017 SOA study or develop other data sets needed for the model, if deemed necessary.
  • The researchers will use sound economic and actuarial principles to develop a repeatable methodology to determine the underwriting margin assumption for use in managed Medicaid Managed Care capitation rate development. As part of the process the researchers should:
    • Provide background of what other researchers have done in the area including research of existing financial literature
    • Use relevant data to produce a statistical analysis of various models
    • Specifically describe the method(s) used in the development
    • Summarize the methodology for determining underwriting margin assumptions in a manner in which other actuaries can follow and repeat the process
  • The researchers will incorporate the findings of the study and documentation of the method/model into a report to be made available on the Society of Actuaries website that discusses the importance of these findings. 
  • The researchers will be expected to help promote the work. This includes:
    • Writing articles for section newsletters
    • Hosting webinars
    • Presenting at Society of Actuaries Meeting Sessions
    • Media Outreach
    • Supporting the use of this Research in Society of Actuaries Exam Materials

Letter of Intent

Parties that wish to participate must submit a brief Letter of Intent (LOI) providing the following information:

  • Description of how the research will be conducted
  • A description of the expected deliverables, tools or other resources
  • A description of the ability of the applicant(s) to access any data needed  
  • The qualifications (including any actuarial designations, relevant experience in industry or with the topic, and/or experience with the economic principles of health plan solvency) of the applicant(s)
  • A timeframe for completion of the research
  • An estimate of the funding requirements
  • LOIs will be no more than 2 pages, with no less than 1-inch margins, no less than 11-point font, and no less than a space and a half. Quality of writing in the LOI will be a decision factor

Letters should be submitted to Erika Schulty, eschulty@soa.org, by the end of the day on January 29, 2021. Decisions on whether an applicant will be invited to submit a full proposal based on the LOI are anticipated to be communicated by February 26, 2021, but are dependent upon the quality of the LOIs received.

Full Proposal

Parties who are invited to submit a full proposal would then provide the following information:

  1. Resumes of the researcher(s), including any graduate student(s), undergraduate(s), actuarial analyst(s) expected to participate, indicating how their background, education and experience bear on their qualifications to undertake the research. If more than one researcher is involved, a single individual should be designated as the lead researcher and primary contact. The person submitting the proposal must be authorized to speak on behalf of all the researchers as well as for the firm or institution on whose behalf the proposal is submitted.
  2. A more detailed description of the approach to be used (literature search, data, method), emphasizing issues that require special consideration. Details should be given regarding the techniques to be used, collateral material to be consulted, and possible limitations of the analysis.
  3. A description of the expected deliverables and any supporting data, tools or other resources.
  4. Cost estimates for the project, including computer time, salaries, report preparation, and material costs. Such estimates can be in the form of hourly rates, but in these cases, time estimates would also be included. While cost will be a factor in the evaluation of the proposal, it will not necessarily be the decisive factor. Any amount funded will not be impacted by additional costs. Indirect costs will be limited to 10% of funding and total cost estimates typically do not exceed $100,000 for SOA sponsored projects.
  5. A schedule for completion of the project, identifying key dates or time frames for project completion and report submissions.  The HCCT PSC is interested in completing this project in a timely manner. 
  6. Suggestions in the proposal for ensuring timely delivery, such as fee adjustments, are encouraged.
  7. Other related factors that give evidence of a proposer's capabilities to perform in a superior fashion should be detailed.  

Those that are requested to provide a proposal should submit it to Erika Schulty, eschulty@soa.org, within one month following the request (dates will be provided to chosen respondents). It is anticipated that all proposers will be informed of the status of their proposal within one month of the proposal due date.

Note: Proposals are considered confidential and proprietary.

Selection Process

The HCCT PSC will appoint a Project Oversight Group (POG) to oversee the project.  The HCCT PSC and POG are responsible for recommending which proposal to fund.  Input from other knowledgeable individuals also may be sought, but the HCCT PSC and POG will make the final recommendation, subject to SOA leadership approval. Actuarial participation is preferred in these proposals. The SOA's Health Research Actuary will provide staff actuarial support. Proposals will be principally funded through the HCCT Research budget.

Questions

Any questions regarding this RFP should be directed to Achilles Natsis, SOA Health Research Actuary (phone: 847-273-8846; email:  anatsis@soa.org).    

Conditions

The selection of a proposal is conditioned upon and not considered final until a Letter of Agreement is executed by both the Society of Actuaries and the researcher.

The Health Care Cost Trends Program Steering Committee reserves the right to not award a contract for this research. Reasons for not awarding a contract could include, but are not limited to, a lack of acceptable proposals or a finding that insufficient funds are available. The Health Care Cost Trends Program Steering Committee also reserves the right to redirect the project as is deemed advisable.

The Society of Actuaries plans to hold the copyright to the research and to publish the results with appropriate credit given to the researcher(s).

The Health Care Cost Trends Program Steering Committee may choose to seek public exposure or media attention for the research.  By submitting a proposal, the researchers agree to cooperate with the Health Care Cost Trends Program Steering Committee in publicizing or promoting the research and responding to media requests.

The Health Care Cost Trends Program Steering Committee may also choose to market and promote the research to members, candidates and other interested parties.  The researchers agree to perform promotional communication requested by the Health Care Cost Trends Program Steering Committee, which may include, but are not limited to, leading a webcast on the research, presenting the research at an SOA meeting, and/or writing an article on the research for an SOA newsletter.

Summary of Key RFP Dates

Key Item

Due Date

RFP Published

12/18/2020

Letter of Intent (LOI) Due

1/29/2021

Committee Begins Reviewing LOIs

2/1/2021

Committee Completes Review of LOIs

Dependent upon quality of initial LOIs received – anticipated to be 2/26/2021

Requests for Full Proposals sent to LOI Responders

1 week following Committee’s completion of review of LOIs – anticipated to be 3/5/2021

Full Proposals Due

1 month following request for full proposals – anticipated to be 4/9/2021

Proposal Award Made

1 month following receipt of full proposals – anticipated to be 5/14/2021

 

 

[1] https://www.soa.org/resources/research-reports/2017/medicaid-margins/