Common use of Experience Adjustment Clause in Contracts

Experience Adjustment. In the event that the actual medical loss ratio (MLR) that the INSURER achieves for this Contract is better than eighty five percent (85%), calculated in the same manner as the premium development and allocation methodology utilized in INSURER’s ITN response. INSURER shall return to FHKC a share of the dollar difference between the INSURER’s actual MLR for said period and the projected minimum MLR of eighty five percent (85%) based on the following tiered Experience Adjustment schedule: A. Tier I: MLR of 84.99 to 82.00 Percent: 50% to FHKC (84.99% to 82.00%) B. Tier II: MLR of 81.99 Percent or Less: 100% to FHKC (81.99% or less) If INSURER’s actual MLR is less than eighty-five percent (85%) during a Contract Year, but not lower than eighty-two percent (82%), INSURER shall return to FHKC fifty percent (50%) of the difference between the actual MLR and the projected minimum MLR of eighty-five percent (85%), pursuant to sub- paragraph 3-20-3A Tier I. If INSURER’S actual MLR is less than eighty-two percent (82%) during any Contract Year, INSURER shall return to FHKC the sum of the Tier I and Tier II experience adjustment pursuant to sub- paragraph 3-20-3A and B, as follows: 1) fifty percent (50%) of the difference between INSURER’s actual MLR of eighty-two percent (82%) and the minimum MLR of eighty-five percent (85%), and 2) one hundred percent (100%) of the difference between INSURER’s actual MLR and the Tier II maximum MLR of eighty-two percent (82%). INSURER shall provide FHKC with a written copy of its findings for each Contract year by April 1st (first). If any payments are due under this provision, INSURER shall forward such payment within thirty (30) days of its written notification. INSURER may be subject to audit or verification by FHKC or its designated agents. FHKC shall determine the adequacy of the information supplied under this section and whether or not the calculation has been accurately performed. The calculation shall be reported in a format approved by FHKC and FHKC may also request supporting documentation. After receipt of INSURER’S submission, FHKC may request that the calculation also be provided on a county by county basis. INSURER’S submission must include the following minimum information: Insurer Name: Contract Year: Counties Included in Calculation: Total Premiums Paid to INSURER during Contract Year: $ Actual Incurred Claims for Contract Year: $ Medical Loss Ratio Achieved: % Apply adjustment percentage in accordance with Section 3-21-3. Amount Due to FHKC: $ 3-22 Premium Rate Modifications INSURER shall provide an actuarial memorandum to FHKC supporting any premium rate adjustment requested under this section prior to any adjustment taking effect. 3-22-1 Annual Adjustment Request Upon request by INSURER, the Board of Directors of FHKC may approve an annual adjustment to the premium rate. Prior to any submission deadline, FHKC will provide INSURER with any trend information or other actuarial standards that may be applied to any rate requests by FHKC’s consulting actuary during the review process. Each adjustment request must meet all of the following conditions: A. Any request to adjust the premium rate for the upcoming Contract Year must be received by FHKC by April 1st (first). B. INSURER’S request for an adjustment must be accompanied by a supporting actuarial memorandum which includes a breakdown of the rate utilizing the following categories: Primary Care Physicians Specialty Care Hospital Inpatient Hospital Outpatient Pharmacy Durable Medical Equipment Behavioral Health Substance Abuse Other Services (Provide details) Administration C. Any proposed premium rate adjustment must include all counties covered by the currently approved premium rate and be presented in the same format as submitted by INSURER under the ITN process. D. The proposed premium rate shall not be excessive or inadequate in accordance with the standards established by the Department of Financial Services or the Office of Insurance Regulation for such determination. E. All approved rate adjustment requests under this Section are effective October 1st (first) through September 30th (thirtieth). F. Non-compliance with any reporting requirements under this Contract may result in the denial of a rate adjustment request submitted by INSURER at FHKC’s sole discretion, and such denial is not subject to the provisions of Section 3-22-2. 3-22-2 Annual Premium Rate Adjustment Denials In the event that INSURER’s annual premium rate adjustment is denied by the Board of Directors of FHKC, and INSURER desires to appeal such decision, INSURER may request that an independent actuary be retained to determine whether or not the proposed rate is excessive or inadequate. A. Any request for a review of a denied premium rate must be submitted by INSURER to FHKC in writing within fourteen (14) calendar days of the date of the board meeting in which the Board of Directors denied the premium rate request. B. Within fourteen (14) calendar days of receipt of such request, FHKC shall provide INSURER with a list of three (3) qualified, independent actuaries and also provide the curriculum vitae for each proposed independent actuary. INSURER shall select an independent actuary from the list provided by FHKC no later than fourteen (14) calendar days following receipt of all information from FHKC. FHKC shall ensure that none of the three (3) qualified independent actuaries offered for selection has a working or personal relationship with FHKC’s contracted actuary. INSURER shall ensure that the actuary selected from the three (3) qualified, independent actuaries received from FHKC does not have a historical or current working relationship with INSURER or any working or personal relationship with an employee of INSURER or a Consultant/Contractor of INSURER involved in the course of this review or the original filing for a rate increase outside the scope of this project. C. The Letter of Engagement will be executed by the selected independent actuary, FHKC and INSURER. D. FHKC and INSURER are financially responsible for the fees incurred by the independent actuary for this dispute process and shall each pay fifty percent (50%) of the total costs. E. All communications after execution of the Letter of Engagement and up through the submission of the final report by the independent actuary shall include both FHKC and INSURER, no communication may take place between the contracted independent actuary and just one (1) of the other parties. If such communication takes place, the independent actuary will be disqualified and the Letter of Engagement terminated, immediately, and the review process begins again with a different independent actuary, pursuant to this section. F. The selected independent actuary will only review the original rate request as filed by INSURER, any reports developed by FHKC or FHKC’s consulting actuary and any supplemental communications regarding the proposed rate in existence prior to denial of the rate by the FHKC board of directors. No new information may be considered during the review process, unless both FHKC and INSURER in writing agree to the provision of such information. G. In conducting the review, the independent actuary may: a. Uphold the rate requested by INSURER; or b. Deny the rate requested by INSURER. If the independent actuary denies the rate requested by the INSURER, the independent actuary may recommend a revised rate. In no event may the independent actuary’s recommended rate be higher than the original rate requested by the INSURER. Acceptance of the revised rate is at the discretion of the FHKC Executive Director after consulting with FHKC’s actuary. If the revised rate is denied by the Executive Director, the premium rate shall continue at the previous, most recently approved rate. INSURER may submit a written request for a review of that determination at the next regularly scheduled meeting of the FHKC Board of Directors following the Executive Director’s decision. ▇. The independent actuary’s findings as described in Paragraph E of this Section must be in writing and communicated to both FHKC and INSURER within thirty (30) calendar days after execution of the Letter of Engagement by all parties. I. The effective date of any premium rate adjustment based upon the actuary’s determination shall be October 1st (first) or the first of the month following receipt of the independent actuary’s findings, whichever occurs first. J. The findings of the independent actuary to either uphold or deny the rate will be binding. However, if the independent actuary finds that the rate should be denied, then at the discretion of the Executive Director: a. if the independent actuary provides a new recommended rate, the recommended revised rate may be implemented; or b. The previous, most recently approved rate may be continued for the upcoming Contract Year. 3-22-3 Change in Benefit Schedule INSURER understands that changes in federal and state law may require amendments to the Enrollee Benefit Schedule during the Contract term. Should such changes be necessary, FHKC shall notify INSURER in writing of the required change and INSURER shall have thirty (30) days to agree to the amended benefit schedule. If the change in the benefit schedule results in a reduction in a benefit level or increases in co-payments, FHKC may require that INSURER reduce its premium rate by an amount actuarially equivalent to the benefit reduction. If benefits or co-payments are modified under this Section, INSURER may submit a request for a rate adjustment to accommodate this modification. Final determination of the INSURER’s compliance under this Section shall be made by FHKC and shall not be subject to the provisions of Section 3-21-2. If INSURER elects not to implement the necessary change, FHKC may terminate this Contract by providing INSURER with a written notice of intent to terminate and include a termination date of not less than ninety (90) days from the date of the written notification or earlier if required by law. 3-22-4 Specialty Fee Arrangements FHKC shall have the right to negotiate specialty fee arrangements with non- INSURER affiliated providers and make such rates available to INSURER. In such cases, if there is a material impact on the premium rate, it will be adjusted by INSURER in a manner consistent with sound actuarial practices. 3-23 Program Integrity 3-23-1 Excluded Providers INSURER may not knowingly have a relationship with the following: An individual who is debarred, suspended, or otherwise excluded from participating in procurement activities under the Federal Acquisition Regulation or from participating in non-procurement activities under regulations issued under Executive Order No. 12549 or under guidelines implementing Executive Order No. 12549. An individual who is an affiliate, as defined in the Federal Acquisition Regulation, of a person described above. The relationship is described as follows: A director, officer, or partner of the INSURER. A person with beneficial ownership of five percent (5%) or more of the INSURER’s equity. A person with employment, consulting or other arrangement with the INSURER under its contract with FHKC or the State. INSURER’s network may not include any providers excluded for participation by Medicare, Medicaid or CHIP, except for emergency services.

Experience Adjustment. In the event that the actual medical loss ratio (MLR) that the INSURER achieves for this Contract CONTRACT is better than eighty five percent (85%), calculated in the same manner as the premium development and allocation methodology utilized in INSURER’s ITN response. INSURER shall return to FHKC a share of the dollar difference between the INSURER’s actual MLR for said period and the projected minimum MLR of eighty five percent (85%) based on the following tiered Experience Adjustment schedule: A. Tier I: MLR of 84.99 to 82.00 Percent: 50% to FHKC (84.99% to 82.00%) B. Tier II: MLR of 81.99 Percent or of Less: 100% to FHKC (81.99% or less) If INSURER’s actual MLR is less than eighty-five percent (85%) during a Contract Year, but not lower than eighty-eighty two percent (82%), INSURER shall return to FHKC fifty percent (50%) of the difference between the actual MLR and the projected minimum MLR of eighty-eighty five percent (85%), pursuant to sub- sub-paragraph 3-20-3A Tier I. If INSURER’S actual MLR is less than eighty-two percent (82%) during any Contract Year, INSURER shall return to FHKC the sum of the Tier I and Tier II experience adjustment pursuant to sub- paragraph 3-20-3A and B, as follows: 1) fifty percent (50%) of the difference between INSURER’s actual MLR of eighty-two percent (82%) and the minimum MLR of eighty-five percent (85%), and 2) one hundred percent (100%) of the difference between INSURER’s actual MLR and the Tier II maximum MLR of eighty-two percent (82%). INSURER shall provide FHKC with a written copy of its findings for each Contract year by April 1st (first)1st. If any payments are due under this provision, INSURER shall forward such payment within thirty (30) days of its written notification. INSURER may be subject to audit or verification by FHKC or its designated agents. FHKC shall determine the adequacy of the information supplied under this section and whether or not the calculation has been accurately performed. Florida Healthy Kids Corporation October 1, 2008 The calculation shall be reported in a format approved by FHKC and FHKC may also request supporting documentation. After receipt of INSURER’S submission, FHKC may request that the calculation also be provided on a county by county basis. INSURER’S submission must include the following minimum information: Insurer Name: Contract Year: Counties Included in Calculation: Total Premiums Paid to INSURER during Contract Year: $ Actual Incurred Claims for Contract Year: $ Medical Loss Ratio Achieved: % $ Apply adjustment percentage in accordance with Section 3-2120-3. Amount Due to FHKC: $ 3-22 Premium Rate Modifications INSURER shall provide an actuarial memorandum to FHKC supporting any premium rate adjustment requested under this section prior to any adjustment taking effect. 3-22-1 Annual Adjustment Request Upon request by INSURER, the Board of Directors of FHKC may approve an annual adjustment to the premium rate. Prior to any submission deadline, FHKC will provide INSURER with any trend information or other actuarial standards that may be applied to any rate requests by FHKC’s consulting actuary during the review process. Each adjustment request must meet all of the following conditions: A. Any request to adjust the premium rate for the upcoming Contract Year must be received by FHKC by April 1st (first). B. INSURER’S request for an adjustment must be accompanied by a supporting actuarial memorandum which includes a breakdown of the rate utilizing the following categories: Primary Care Physicians Specialty Care Hospital Inpatient Hospital Outpatient Pharmacy Durable Medical Equipment Behavioral Health Substance Abuse Other Services (Provide details) Administration C. Any proposed premium rate adjustment must include all counties covered by the currently approved premium rate and be presented in the same format as submitted by INSURER under the ITN process. D. The proposed premium rate shall not be excessive or inadequate in accordance with the standards established by the Department of Financial Services or the Office of Insurance Regulation for such determination. E. All approved rate adjustment requests under this Section are effective October 1st (first) through September 30th (thirtieth). F. Non-compliance with any reporting requirements under this Contract may result in the denial of a rate adjustment request submitted by INSURER at FHKC’s sole discretion, and such denial is not subject to the provisions of Section 3-22-2. 3-22-2 Annual Premium Rate Adjustment Denials In the event that INSURER’s annual premium rate adjustment is denied by the Board of Directors of FHKC, and INSURER desires to appeal such decision, INSURER may request that an independent actuary be retained to determine whether or not the proposed rate is excessive or inadequate. A. Any request for a review of a denied premium rate must be submitted by INSURER to FHKC in writing within fourteen (14) calendar days of the date of the board meeting in which the Board of Directors denied the premium rate request. B. Within fourteen (14) calendar days of receipt of such request, FHKC shall provide INSURER with a list of three (3) qualified, independent actuaries and also provide the curriculum vitae for each proposed independent actuary. INSURER shall select an independent actuary from the list provided by FHKC no later than fourteen (14) calendar days following receipt of all information from FHKC. FHKC shall ensure that none of the three (3) qualified independent actuaries offered for selection has a working or personal relationship with FHKC’s contracted actuary. INSURER shall ensure that the actuary selected from the three (3) qualified, independent actuaries received from FHKC does not have a historical or current working relationship with INSURER or any working or personal relationship with an employee of INSURER or a Consultant/Contractor of INSURER involved in the course of this review or the original filing for a rate increase outside the scope of this project. C. The Letter of Engagement will be executed by the selected independent actuary, FHKC and INSURER. D. FHKC and INSURER are financially responsible for the fees incurred by the independent actuary for this dispute process and shall each pay fifty percent (50%) of the total costs. E. All communications after execution of the Letter of Engagement and up through the submission of the final report by the independent actuary shall include both FHKC and INSURER, no communication may take place between the contracted independent actuary and just one (1) of the other parties. If such communication takes place, the independent actuary will be disqualified and the Letter of Engagement terminated, immediately, and the review process begins again with a different independent actuary, pursuant to this section. F. The selected independent actuary will only review the original rate request as filed by INSURER, any reports developed by FHKC or FHKC’s consulting actuary and any supplemental communications regarding the proposed rate in existence prior to denial of the rate by the FHKC board of directors. No new information may be considered during the review process, unless both FHKC and INSURER in writing agree to the provision of such information. G. In conducting the review, the independent actuary may: a. Uphold the rate requested by INSURER; or b. Deny the rate requested by INSURER. If the independent actuary denies the rate requested by the INSURER, the independent actuary may recommend a revised rate. In no event may the independent actuary’s recommended rate be higher than the original rate requested by the INSURER. Acceptance of the revised rate is at the discretion of the FHKC Executive Director after consulting with FHKC’s actuary. If the revised rate is denied by the Executive Director, the premium rate shall continue at the previous, most recently approved rate. INSURER may submit a written request for a review of that determination at the next regularly scheduled meeting of the FHKC Board of Directors following the Executive Director’s decision. ▇. The independent actuary’s findings as described in Paragraph E of this Section must be in writing and communicated to both FHKC and INSURER within thirty (30) calendar days after execution of the Letter of Engagement by all parties. I. The effective date of any premium rate adjustment based upon the actuary’s determination shall be October 1st (first) or the first of the month following receipt of the independent actuary’s findings, whichever occurs first. J. The findings of the independent actuary to either uphold or deny the rate will be binding. However, if the independent actuary finds that the rate should be denied, then at the discretion of the Executive Director: a. if the independent actuary provides a new recommended rate, the recommended revised rate may be implemented; or b. The previous, most recently approved rate may be continued for the upcoming Contract Year. 3-22-3 Change in Benefit Schedule INSURER understands that changes in federal and state law may require amendments to the Enrollee Benefit Schedule during the Contract term. Should such changes be necessary, FHKC shall notify INSURER in writing of the required change and INSURER shall have thirty (30) days to agree to the amended benefit schedule. If the change in the benefit schedule results in a reduction in a benefit level or increases in co-payments, FHKC may require that INSURER reduce its premium rate by an amount actuarially equivalent to the benefit reduction. If benefits or co-payments are modified under this Section, INSURER may submit a request for a rate adjustment to accommodate this modification. Final determination of the INSURER’s compliance under this Section shall be made by FHKC and shall not be subject to the provisions of Section 3-21-2. If INSURER elects not to implement the necessary change, FHKC may terminate this Contract by providing INSURER with a written notice of intent to terminate and include a termination date of not less than ninety (90) days from the date of the written notification or earlier if required by law. 3-22-4 Specialty Fee Arrangements FHKC shall have the right to negotiate specialty fee arrangements with non- INSURER affiliated providers and make such rates available to INSURER. In such cases, if there is a material impact on the premium rate, it will be adjusted by INSURER in a manner consistent with sound actuarial practices. 3-23 Program Integrity 3-23-1 Excluded Providers INSURER may not knowingly have a relationship with the following: An individual who is debarred, suspended, or otherwise excluded from participating in procurement activities under the Federal Acquisition Regulation or from participating in non-procurement activities under regulations issued under Executive Order No. 12549 or under guidelines implementing Executive Order No. 12549. An individual who is an affiliate, as defined in the Federal Acquisition Regulation, of a person described above. The relationship is described as follows: A director, officer, or partner of the INSURER. A person with beneficial ownership of five percent (5%) or more of the INSURER’s equity. A person with employment, consulting or other arrangement with the INSURER under its contract with FHKC or the State. INSURER’s network may not include any providers excluded for participation by Medicare, Medicaid or CHIP, except for emergency services.