How to Apply a Penalty or Discount on a Premium
OHI Enterprise Policy Administration offers the possibility to apply discounts or penalties on a premium.
A penalty or discount in OHI is called an adjustment. Some adjustment examples are:
-
an adjustment reducing the premium if the policyholder pays premium a year in advance
-
an adjustment increasing the premium if the member is a smoker
-
an adjustment reducing the premium if the policyholder enrolled through a group account.
An adjustment can be:
-
a fixed amount
-
a percentage of the premium
-
the result of a dynamic logic function
Applying a Fixed Amount Discount Based on the Copay
This example shows an adjustment that reduces the base premium based on the office visit co-payment [1], in which the premium itself is made dependent on the chosen office visit co-payment.].
In this example there are only three office visit co-payment choices available, either a 10.00, 20.00 or 30.00 co-payment that lead to a 0.00, 5.00 or 10.00 discount on the premium.
Step 1
The first step is to set up the time period that governs the 'condition' columns on the adjustment rule. In this example there is only the condition, that is, the co-payment amount.
| Time Period | ||
|---|---|---|
Name |
Start |
End |
Calendar year 2015 |
01-01-2015 |
12-31-2015 |
More time periods can be set up later, e.g., when we want to specify that co-payment amounts 10.00, 20.00 and 30.00 in calendar year 2015 have increased to 15.00, 25.00 and 35.00 in calendar year 2016.
Step 2
The second step is to set up a co-payment parameter. This parameter becomes available in the adjustment rule. At the same time it becomes available as a setting on the policy enrollment product, so that a policyholder can choose a co-payment value.
| Parameter Alias | ||
|---|---|---|
Code |
Display name |
Type |
COP_OV |
Office Visit Co-payment |
Amount |
Step 3
The next step is to set up a schedule definition of type Adjustment. This schedule definition controls which columns the adjustment rule shows in addition to the columns for the value and value type. Because we want to add a column for the office visit co-payment, we’ll add the parameter from step 3 as a dimension:
| Schedule Definition | ||||
|---|---|---|---|---|
Code |
Description |
Type |
Premium Scope |
Conditions |
DC_COP |
OV Co-pay Discount |
Adjustment |
Product |
- |
| Schedule Dimensions | ||||||
|---|---|---|---|---|---|---|
Header |
Seq |
Width |
Type |
Parameter |
Dyn Field |
Usage |
OV Co-pay |
1 |
4 |
Parameter |
COP_OV |
- |
Value |
Step 4
Now the schedule definition has been created, a new adjustment type [2] has become available. The next step is to set up adjustment rules for this new adjustment type.
| Adjustment Type | |
|---|---|
Code |
Description |
DC_COP |
OV Co-pay Discount |
| Adjustment Rules | |
|---|---|
OV Co-pay |
Adjustment |
10.00 USD |
0.00 USD |
20.00 USD |
-5.00 USD |
30.00 USD |
-10.00 USD |
In this example there are only three office visit co-payment choices available, either a 10.00, 20.00 or 30.00 co-payment. The adjustment is a discount, therefore the amount has a negative sign.
Step 5
The adjustment rule configuration is now complete, but it won’t be applied in the premium calculation until it is attached to an enrollment product or group account product, group account or group client in case of a group adjustment. To complete the example, we set up an enrollment product and link it to the adjustment type that we’ve created.
| Enrollment Product | |
|---|---|
Code |
Assigned Premium Schedules |
COPAY PLAN |
AGE_BASED_01 |
Step 6
On the adjustment tab, in the enrollment product page, it is possible to assign adjustment types to an enrollment product. When assigning an adjustment type, we can choose the sequence in which the different types are calculated. This is especially relevant for adjustments that are based on a percentage. More information on how adjustment rules are evaluated can be found the implementation guide for premium calculation.
Applying a Deductible Range Discount
This example shows an adjustment rule that reduces the base premium based on the deductible. In this example, the system does not pick the discount out of a list discrete deductible amounts. It is the result of a continuous function instead, for example because it is determined as a percentage of the policyholder’s income. This means that we have to set up the adjustment rules based on ranges, rather than discrete values for the deductible.
Step 1
The first step is to set up the time period that governs the 'condition' columns on the adjustment rule. In this example, the conditions are the 'from' and 'trough' columns for the deductible.
| Time Period | ||
|---|---|---|
Name |
Start |
End |
Calendar year 2015 |
01-01-2015 |
12-31-2015 |
More time periods can be set up later, for example, when we want to specify that the boundaries for the ranges are different in calendar year 2016
Step 2
The second step is to set up the deductible parameter. This parameter becomes available in the adjustment rule. At the same time it becomes available as a setting on the policy enrollment product, so it will be possible to store the deductible.
| Parameter Alias | ||
|---|---|---|
Code |
Display name |
Type |
DEDUCT |
Deductible |
Amount |
Step 3
The next step is to set up a schedule definition. The schedule definition controls which columns the adjustment rule shows in addition to the columns for the value and value type. We want to add a column for the deductible, so we add a single dimension, that uses a range:
| Schedule Definition | ||||
|---|---|---|---|---|
Code |
Description |
Type |
Premium Scope |
Conditions |
DC_DED |
Deductible Discount |
Adjustment |
Product |
- |
| Schedule Dimensions | ||||||
|---|---|---|---|---|---|---|
Header |
Seq |
Width |
Type |
Parameter |
Dyn Field |
Usage |
Deductible |
1 |
10 |
Parameter |
DEDUCT |
- |
Range |
Now that the schedule definition has been created, a new adjustment type has become available in the adjustment page. Because the 'Deductible' dimensionshas been set up as a range, it’s possible to set a 'from' and a 'through' value.
Step 4
The next step is to set up adjustment rules for this new adjustment type.
| Adjustment Type | |
|---|---|
Code |
Description |
DC_DED |
Deductible Discount |
| Adjustment Rules | |||
|---|---|---|---|
Deductible (range) |
Deductible Curr. |
Adjustment |
|
500.01 |
1,000.00 |
USD |
-5 % |
1,000.01 |
1,500.00 |
USD |
-10 % |
1,500.01 |
2,000.00 |
USD |
-13 % |
2,000.01 |
- |
USD |
-15 % |
This configuration means that there is no discount for deductibles of 500.00 or less and that a deductible higher than 2,000.00 results in a 15% discount, no matter how high it actually is. The adjustment is a discount, therefore the percentage has a negative sign.
The adjustment rule configuration is now complete, but it won’t be applied in the premium calculation until it is attached to an enrollment product or group account product, group account or group client in case of a group adjustment. To complete the example, we set up an enrollment product and link it to the adjustment type that we’ve created.
| Enrollment Product | |
|---|---|
Code |
Assigned Premium Schedules |
COPAY PLAN |
Any |
On the adjustment tab, in the enrollment product page, it is possible to assign adjustment types to an enrollment product. When assigning an adjustment type, we can choose the sequence in which the system calculates the different types. This is especially relevant for adjustments that are based on a percentage. More information on how the system evaluates adjustment rules can be found in the implementation guide for premium calculation.
Applying a Payment Frequency Discount
This example shows an adjustment rule that reduces the base premium based depending on how far ahead in time the policyholder pays his or her premium. The policyholder has a discrete number of choices (pay 1 month, 3 months, 6 months or 12 months ahead). The further ahead the policyholder pays, the higher the discount becomes.
In this example, we set up a schedule definition that includes additional logic to evaluate the chosen payment frequency. The logic in this example is rather simple, but this feature can also be used for more complex, custom evaluations for adjustment rules.
Step 1
The first step is to set up the time period that governs the 'condition' columns on the adjustment rule. In this example there is only the condition on the payment frequency.
| Time Period | ||
|---|---|---|
Name |
Start |
End |
Calendar year 2015 |
01-01-2015 |
12-31-2015 |
More time periods can be set up later, for example when we want to specify that from calendar year 2016 going forward a new frequency choice - pay 2 months ahead - becomes available.
Step 2
The second step is to set up the logic that compares the policyholder’s payment frequency to the values in the adjustment rule
| Dynamic Logic Condition | |
|---|---|
Code |
Logic |
FREQ |
return policy.collectionSettingList.asOf(lookUpDate).frequency = adjustmentRule.frequency |
Step 3
The next step is to set up a schedule definition.The schedule definition controls which columns the adjustment rule shows addition to the columns for the value and value type. We add a single column (dimension) for the payment frequency. The dimension name has to be the same as the name we use in the dynamic logic condition, that is adjustmentRule.frequency.
| Schedule Definition | ||||
|---|---|---|---|---|
Code |
Description |
Type |
Premium Scope |
Line/Rule Evaluation Condition |
DC_FQY |
Payment Frequency |
Adjustment |
Total |
FREQ |
| Schedule Dimensions | |||||
|---|---|---|---|---|---|
Header |
Name |
Type |
Parameter |
Dyn Field |
Usage |
Frequency (months) |
frequency |
Generic |
- |
- |
Value |
Step 4
Now the schedule definition has been created, a new adjustment type has become available in the adjustment page. The next step is to set up adjustment rules for this new adjustment type. Because the adjustment is a discount the percentage has a negative sign.
| Adjustment Type | |
|---|---|
Code |
Description |
DC_FQY |
Payment Frequency |
| Adjustment Rules | |
|---|---|
Frequency (months) |
Adjustment |
1 |
0.0 % |
3 |
-0.5 % |
6 |
-1.0 % |
12 |
-1.5 % |
Step 5
The adjustment rule configuration is now complete, but it won’t be applied in the premium calculation until it is attached to an enrollment product or group account product, group account or group client in case of a group adjustment. To complete the example, we set up an enrollment product and link it to the adjustment type that we’ve created.
| Enrollment Product | |
|---|---|
Code |
Assigned Premium Schedules |
BASIC PLAN |
Any |
On the adjustment tab, in the enrollment product page, it is possible to assign adjustment types to an enrollment product. When assigning an adjustment type, we can choose the sequence in which the system calculates the different types. This is especially relevant for adjustments that are based on a percentage. More information on how the system evaluates adjustment rules can be found the implementation guide for premium calculation.