Pricing Methodologies and Pricing Variation Based on Parameters (Health Insurance Business)

Fully-Insured Pricing

Age Banded Premium Pricing

Age banded premium pricing is one of the methodologies for premium calculation. In this methodology, Premium calculation is done by determining the premium of each member separately mainly based on the age band in which the member falls, and then aggregating these to derive the overall premium amount for a membership.

Apart from member's age, premium of age banded plans can vary based upon different parameters; be it member's attribute or plan level attribute or LOB specific attributes. For example, pricing can vary by different population segment characteristics such as Employee Type (Retiree, COBRA and Active) and/or by different regions, Employee Status (Permanent/contractual) etc. Age-banded pricing may also vary by different modifiers such as Tobacco usage, Gender etc.

ORMB provides Out of Box Pricing Rule Type ‘Age Banded’. Using the same you can define pricing rule to define age-banded plan pricing. Pricing variation can be defined based on the pricing eligibility parameters where the source can be defined as Membership characteristics or Member characteristics or Plan characteristics. User can set base fee for set of parameters and can also set the percentage or flat amount to be added over the base fee for each modifiers.

Age-banded premium calculation algorithm which is configured in Age-banded pricing rule type process the premium pricing for each membership, derive the premium amount for each member and then aggregates the amount to derive the overall premium amount for a membership. Maximum number of eligible dependents and the order of selection of the dependents like oldest first or youngest first is also configurable at Plan or State level.

Age Banded Example:

Demo Corporation has a fully-insured group policy for the employees and its monthly premium is calculated through an age based pricing rule.

On Top of the base premium, additional 2% premium will be charged if the member is smoker

State of California is configured with the following pricing rules :

Max. No of Eligible Dependents = 2

Order of Dependent Selection = Oldest first

New Born Gift Days = 30

Proration Rule Defined for the account : Mid Month i.e. Member joining before 15^th will be charged the premium for the entire month

Example 1:

North California Based Employee John Doe, a 45 years old smoker who enrolled himself with his spouse Mary Doe (Age 40) and daughter Elsa Doe aged 13, son Bob Doe aged 10 and daughter Laura Doe aged 8.

Example 2 :

North California Based Employee John Doe a California based Employee is enrolled in to the plan along with his spouse Mary Doe, John enrolls his new born daughter Laura born on 3^rd of July on 20^th of July.

With the new enrollment in the month of July, The premium for July and the following months will be recalculated, As the state of California has New Born Gift days = 30 days, the premium will be calculated as follows:

For the Month of July:

For Month of August:

Tiered Premium Pricing

Tiered based premium pricing is another methodology for premium calculation. In this methodology, Premium calculation is done by determining the subscription tier level for the membership directly to derive the premium amount for that membership.

Standard tier based pricing structure contains different tiers such as Employee only (E), Employee+ Spouse (ES), Family (F), Employee + Children (EC). A member can subscribe his/her dependents to a plan and fall into one of the tier. Tier-based premium varies based upon membership tier level and different parameters; parameters can be member's attribute or Plan level attribute or LOB specific attributes. For example, for a particular tier, pricing can vary by different population segment characteristics such as Employee Type (Retiree, COBRA and Active) and/or by different regions, Employee Status (Permanent/contractual) etc.

Like age-based pricing, tier-based pricing can be defined using pricing rule with tier-based pricing rule type You can set premium fee for set of parameters and tier level. Tier-based premium calculation algorithm which is configured in tier-based pricing rule type process the premium pricing for each membership based on the applicable rate for the parameters and tier value for that membership which is defined as membership characteristic.

Tier Based Pricing Example

Example : North California Based Employee John Doe, a 45 years old smoker who enrolled himself with his spouse Mary Doe (Age 40) and daughter Elsa Doe aged 13 the premium charged will be $450 per month.

State Level Configurations

Various state specific rules are defined in ORMB using state specific characteristics e.g. Gift Days to provide no additional premium when New Born is enrolled into the plan or various rules such as maximum dependents to be covered etc. The state and state characteristics can be defined state specific parameters. These parameters which define business rules may have overridden values at Plan or Membership levels.ORMB pricing calculation always checks for the parameters at membership and plan level first, if not found then the state level parameters are considered for the price calculations.

Premium Holiday and Proration

ORMB provides several options for correctly handling of proration; when a rate changes in middle of a billing period or when new Membership is added or terminated during the bill period. Configurable Proration Rule allows to define various options such as; mid-month proration where full premium is applicable if the membership starts before mid-coverage or proration based on covered days etc.

A configuration option can be set to handle special cases where proration is not to be applied even during a long or short bill period (e.g. when a flat charge is to be applied in full; even though the billing period is half of the standard period).

ORMB allows configuring or uploading the period for which premium holiday or waive off of premium needs to be given to the membership, based on which the premium is waived off, the rate configurations allow you to provide these details on the bill lines providing the required transparency to the customer.

Self-funded Pricing

ORMB provides you with a complete solution in terms of pricing, billing and revenue management to support ASO plans and also to provide risk coverage of offering self-funded plans through the stop loss or re-insurance services.

Claim Amount Processing

ORMB provides capability to calculate the final claim amount to be charged to the customer by summing up all the claim line items configured as billable for the customer. It also provides a facility to mark up or markdown these line items amounts as per customer specific pricing.You can also define the capping amounts per claim.

In order to support new ‘Payments Integrity model’ ORMB enables you to define the additional fees i.e. recovery fees / savings amounts to be calculated as flat or percentage based on the claim charges and charge the same to the customers along with Max / Min capping amounts

ORMB allows you to define pricing rules, having different pricing strategy based on policy status e.g. during the active policy period various chargeable items like consumer driven health insurance charges, traditional health insurance charges, are charged to the customer whereas during post runout period the entire claim amount will be written off.

To enable easy configurations ORMB provides you a capability to define claim templates and with definition of multiple add-on fees and its usage with default pricing. Using a file upload utility or other custom process the claim transactions can be uploaded to ORMB.

Claim transactions contain information about the membership and details of various claim line items such as ASO service provider charges, fee for network access, fee for non-network access, fee for collection services provided by external vendor, fee for hospital audit performed by external vendor, and so on.

ORMB allows the ASO service provider to bill employers for claim amount and various additional fees based on the pricing defined. Claim pricing rules can be defined at the parent customer and bill group levels. Claim pricing rule enables you to define whether a particular claim line item should be billable to the customer or should be written off. Eligibility for billing can be defined based on rules using the transaction attributes.

Retention fee - Claim based

Retention fee is based upon claim amount either the percentage of claim or flat amount per claim transaction can also be calculated. ORMB provides you an ability to select the Claim line items eligible for claim based fees calculations. Claim based fees pricing can vary based on either membership attributes or based on the claim transaction attributes e.g. different claim based fees can be charged for claim with health coverage class as ‘Medical’ than that of the ‘Dental’

Retention fee - Enrollment based

In order to calculate fees / premium amount / various limits (e.g. ASL Limit based on the enrollments), ORMB provides out of box pricing rule type - retention fee - enrollment based. Enrollment based pricing rules can be defined at both customer or bill group level where, enrollment fees are defined as per member or per subscriber charges where pricing variation can be provided based on parameters e.g. coverage tier or health coverage class(HCC) etc. It also calculates the retention fee based upon enrollment count.

Flat and Recurring Fees

Ad-hoc one time fees (e.g. one time admin fees), recurring premium fees / charges e.g. charge the stop loss premium can be defined in ORMB using the flat and recurring fees pricing rule type. These types of charges are independent of no. of enrollments or claims and are charged as a flat fee per month over a period of time. ORMB provides flexibility to set up pricing rules for charging flat / one time fees or flat recurring fees with configurable recurring frequencies e.g. claim funds.

Ancillary fees

Ancillary service charges are basically an adjustments charge which are either pre-calculated charges which need to be included into the bill or to be calculated based on the utilization of the ancillary services Ancillary pricing rule can be defined at the parent customer and bill group levels. The ancillary in ORMB enables you to create an ancillary charge in either of the following ways:

• As pass through charge without markup or markdown (i.e. flat charge)

• As pass through charge where ORMB adds a flat or percentage based markup or markdown to charge the customer

• Or by creating a rate based charge using the rate defined in the ancillary pricing and the service quantity specified in the ancillary transaction. You can also apply markup or markdown to a rate based charge

Specific Stop Loss (SSL)

SSL is the form of excess risk coverage that provides protection for the employer against a high claim on any one individual. ORMB provides a pricing rule type - specific stop loss to support SSL calculations. SSL pricing rules are defined at two levels - parent level defines all the accumulation specific details which are common for all the bill groups and bill group - policy level pricing to define the limits and also information about which charges are to be re-insured against SSL. ORMB provides complete flexibility to define the accumulation criteria e.g. you can choose to calculate SSL only on the medical claims, out of network claim, etc. based on configurations. Ability to calculate and invoice the specific stop loss based on per subscriber or per member basis with a facility to laser or excludes the subscribers / members. ORMB's flexible accumulation criteria definitions allow you to define SSL pricing for various types of policies -12/12 or 15/12 or 12/15 with ease. With ORMB you can choose the settlement frequency for the SSL

ORMB enables you to setup SSL retrospectively or allow pricing updates by reprocessing

Aggregated Stop Loss (ASL)

ORMB enables you to provide a ceiling on the dollar amount of eligible expenses that an employer would pay, in total for all members or subscribers, during a contract period. ASL limit can be configured as either flat limit or based on the PSPM (Per subscriber per month) basis or enrollment based. Similar to SSL, ASL pricing rules enables to define eligibility rules for the transactions and claim line items for the calculations of ASL. With ORMB you can choose the settlement frequency for the ASL. ORMB enables you to setup ASL retrospectively or allow pricing updates by reprocessing

Discount Arrangements Fees

ORMB discount arrangement pricing rule type enables to calculate and bill the discounts using two different methods - i:e: discount share Fees where discount amount to be charged to customer is calculated as percentage of the total discount savings amount per claim and discount guarantee Fees where discount amount calculated based on discount savings amount and guaranteed percentage of the covered amount.

Pricing Rule type allows you to define maximum discount amount that can be charged per claim transaction and/or allow to configure the minimum and maximum discount limit on the contract level. It also allows defining the rule based eligibility criteria to apply discount and exclude few transactions based upon the parameters.

Level Funding Arrangements

ORMB level funding pricing rule type allows defining the required setup for monthly contribution mechanism which can be a fixed monthly amount or amount based upon enrollment count. ORMB enables you to collect the funds during active policy period to settle not only the claims and other fees during active period but also to take care of the terminal liability or the claims and other fees during runout period. ORMB also provides configurable setup to define the charges to be considered for settlement with specific criteria. ORMB enables to setup pricing rules for level funding products where the claims, ancillary, retention based fees, discounts can be settled against the level funded amounts.

ORMB has two variations of level funding based on the method to calculate premium fund. The portal enables you to define whether the price items included in the claim, retention type claim based, retention type enrollment based, ancillary, and discount pricing rule types are eligible for level funding. If the price items are eligible for level funding, you can then include them in the level funding pricing rule type indicating that the charges for these price items will not be included in the respective billable charge (for example, claim billable charge), but it would be settled against the funds billable charge. While adjusting such charges against the funds billable charge, there might be some surplus or deficit in funds at the time of settlement which is ideally at the end of year. In such case, the system enables to configure whether a flat amount or percentage of surplus should be retained by the ASO provider or whether a flat amount or percentage of deficit is offered as a discount to the self-funded employer. It allows you for different settlement options - Close out - where the final settlement is done, In case the customer is continuing for the next cycle with the payer you can provide an option to Roll Forward the surplus funds to the next years funds.

Level Funding Arrangements

ORMB level funding pricing rule type allows defining the required setup for monthly contribution mechanism which can be a fixed monthly amount or amount based upon enrollment count. ORMB enables you to collect the funds during active policy period to settle not only the claims and other fees during active period but also to take care of the terminal liability or the claims and other fees during runout period. ORMB also provides configurable setup to define the charges to be considered for settlement with specific criteria. ORMB enables to setup pricing rules for level funding products where the claims, ancillary, retention based fees, discounts can be settled against the level funded amounts.

ORMB has two variations of level funding based on the method to calculate premium fund. The portal enables you to define whether the price items included in the claim, retention type claim based, retention type enrollment based, ancillary, and discount pricing rule types are eligible for level funding. If the price items are eligible for level funding, you can then include them in the level funding pricing rule type indicating that the charges for these price items will not be included in the respective billable charge (for example, claim billable charge), but it would be settled against the funds billable charge. While adjusting such charges against the funds billable charge, there might be some surplus or deficit in funds at the time of settlement which is ideally at the end of year. In such case, the system enables to configure whether a flat amount or percentage of surplus should be retained by the ASO provider or whether a flat amount or percentage of deficit is offered as a discount to the self-funded employer. It allows you for different settlement options - Close out - where the final settlement is done, In case the customer is continuing for the next cycle with the payer you can provide an option to Roll Forward the surplus funds to the next years funds.