Scenario A
This scenario explains premium calculation for a policy without a group account or contract period. The policy has one policy enrollment product. The premium calculation in this scenario uses system calculation periods.
See Overview for the configuration details.
Policy 2340
Policy Code |
POL2340 |
Group Account |
- |
Contract Period |
- |
Advance Collection |
1 Month [1] |
Member |
W. Wright |
Enrollment Product |
BASIC PLAN with enrollment start date January 1, 2019 |
The premium calculation process for the policy starts by identifying the calculation periods. The look back date for this calculation is January 1, 2018, therefore, all the calculation periods from the calculation period to which January 1, 2018 belongs up to the input calculation period, are considered for premium calculation. The Advance Collection setting is 1 Month, therefore no calculation period after the calculation period Jan 2019 is considered.
The next step is to verify the calculation periods. Since the policy enrollment started on January 1, 2019 (so Jan 2019 is in fact the first calculation period for this policy), there are no past periods that require recalculation.
The calculations are performed for the person W. Wright for the enrollment product BASIC PLAN.
Calculations for Jan 2019
The system considers the reference date setting on the calculation period as the reference date for the calculations, that is January 1, 2019. Once the reference date for the calculation period is selected the next step is to select the time periods. As W. Wright is enrolled on the enrollment product BASIC PLAN, and the reference date is January 1, 2019, the system selects the enrollment product time period BASIC PLAN 19-20. The start date of the enrollment product time period drives the selection of the default time period. The start date of the enrollment product time period January 1, 2019 belongs to the default time period Calendar Year 2019, therefore the Calendar Year 2019 is selected as the applicable default time period.
The image below provides a snapshot of the configurations that is applicable for the calculations.
Enrollment Product Premium
As the premium schedule has the amount interpretation 'Calculation Period', the system applies the calculation method 'Calculation Period Based'. W. Wright is enrolled for the full calculation period, therefore the full configured value on the evaluated schedule line is charged as premium.
Premium Schedule Line Evaluation
The system considers the premium schedule lines applicable within the selected default time period (Calendar Year 2019). The dynamic dimension Age specifies the premium amount premium schedule lines. W. Wright’s date of birth is May 4, 1969. At the reference date of the calculation period January 2019 (january 1, 2019) his age is 49 years (referenced as of January 1, 2019). The system selects the premium schedule line with the age range 0-49, and charges the premium amount of 105.00 for this calculation period.
- Base Premium
-
The base premium for the subsequent calculations (surcharges and adjustments) is 105.00 as no add-ons are configured for the person.
Surcharges
Once the premium is calculated, the system applies the surcharges. In the sample configuration, a tax based on the member’s 'region' - a dynamic field on relation - is configured.
In order to evaluate a dynamic field based dimension, the value on the surcharge rule must be compared to the value of the dynamic field. Because the dynamic field is on the entity 'Relations', the value is evaluated for the person that is enrolled as the person for the enrollment product, that is, W. Wright. Suppose that the person’s region code is MH, then for the selected default time period a surcharge of 2.5% is applicable.
Surcharge amount = 2.5% of 105.00 = 2.63
Adjustments
Two adjustment types are configured in the system: Payment Frequency Discount and Office Visit Co-payment Discount. As per the enrollment product configurations, the Payment Frequency Discount is the only applicable adjustment for the enrollment product BASIC PLAN on the reference date.
The Payment Frequency Discount is based on a dimension of the type 'Generic': the advance collection setting on the policy. Therefore, the system uses a dynamic logic condition to evaluate the adjustment rules. In this scenario no adjustment rule applies, as there is no rule defined with a schedule dimension value of 1 which would match the advance collection setting on the policy. The system does not apply a payment frequency amount.
Surcharges - After Adjustment
Post adjustment surcharge is computed after adding the adjustment to the base premium (or subtracting it if it is negative). A post adjustment 'Administrative Surcharge' of 1% is applicable.
Administrative Surcharge = 1% on (total charged premium + adjustments) = 1% (105.00 + 0.00) = 1.05
Calculation Results for January 2019
- Calculation Result Lines
-
The calculation result lines for W. Wright for BASIC PLAN calculation period Jan'19 are:
| Start Date | End Date | Input Amount | % | Prorate Factor | Result Amount | Schedule Definition | Premium Schedule |
|---|---|---|---|---|---|---|---|
Jan 1, 2019 |
Jan 31, 2019 |
- |
- |
- |
105.00 |
Age Gender Premium |
Basic Plan |
Jan 1, 2019 |
Jan 31, 2019 |
105.00 |
2.5% |
- |
2.63 |
Regional Tax |
|
Jan 1, 2019 |
Jan 31, 2019 |
105.00 |
1% |
- |
1.05 |
Admin. Surcharge |
Calculation Result:
| Policy | Calculation Period | Total Base Premium | Total Adjustment | Total Surcharge | Total Result |
|---|---|---|---|---|---|
POL2340 |
Jan 1, 2019 |
105.00 |
0.00 |
3.68 |
108.68 |
Calculations from February 2019 up to December 2019
The reference date changes with each calculation period, therefore there is a possibility that the applicable configurations may also change.
Consider the premium calculations for the calculation period of Jun'19. In Jun'19 the reference date is June 1, 2019, and the person’s age will be 50 years when computed as of June 1, 2019. This will result in the change of the applicable premium. The new value will get applied starting Jun'19 and it will be 125.00.
The base premium calculations for the calculation periods from Feb'19 to Dec'19 will be as under:
| Calculation Period | Premium | Calculations |
|---|---|---|
Feb'19 |
105.00 |
Configured amount as per evaluated premium schedule line (Age 49) |
Mar'19 |
105.00 |
|
Apr'19 |
105.00 |
|
May'19 |
105.00 |
|
Jun'19 |
125.00 |
Configured amount as per evaluated premium schedule line (Age 50) |
Jul'19 |
125.00 |
|
Aug'19 |
125.00 |
|
Sep'19 |
125.00 |
|
Oct'19 |
125.00 |
|
Nov'19 |
125.00 |
|
Dec'19 |
125.00 |
Regional Tax
Suppose that the person’s residence region does not change within the year 2019 the applicable Regional Tax surcharge for all the calculation period will be 2.5% however since the base premium changes from June'19 onward, the charged amount also changes.
| Calculation Period | Regional Tax | Calculations |
|---|---|---|
Feb'19 |
2.63 |
2.5% of 105.00 |
Mar'19 |
2.63 |
|
Apr'19 |
2.63 |
|
May'19 |
2.63 |
|
Jun'19 |
3.13 |
2.5% of 125.00 |
Jul'19 |
3.13 |
|
Aug'19 |
3.13 |
|
Sep'19 |
3.13 |
|
Oct'19 |
3.13 |
|
Nov'19 |
3.13 |
|
Dec'19 |
3.13 |
Payment Frequency Discount
For all the calculation periods, the selected enrollment product time period is BASIC PLAN 19-20 and, therefore, the Payment Frequency Discount adjustment is applicable for all the calculation periods. The adjustment rules that are considered for the evaluation are the ones that belong to the selected default time period and are mentioned below:
| Year | Advance Collection | Discount | Type |
|---|---|---|---|
Calendar Year 2019 |
6 |
-1.75 |
Amount |
Calendar Year 2019 |
12 |
-2.50 |
Amount |
As the advance collection setting is 1 Month, no frequency discount gets applied for any of the calculation periods.
Administrative Surcharge
1% of administrative surcharge is applicable for all the calculation periods and will be changed as mentioned below
| Calculation Period | Administrative Surcharge | Calculations |
|---|---|---|
Feb'19 |
1.05 |
1% of 105.00 |
Mar'19 |
1.05 |
|
Apr'19 |
1.05 |
|
May'19 |
1.05 |
|
Jun'19 |
1.25 |
1% of 125.00 |
Jul'19 |
1.25 |
|
Aug'19 |
1.25 |
|
Sep'19 |
1.25 |
|
Oct'19 |
1.25 |
|
Nov'19 |
1.25 |
|
Dec'19 |
1.25 |