Rate Setting Methodology #2 – Use of Managed Care Data. To develop capitation rates on an actuarially sound basis for the HealthChoices program using actual managed care data, the following general steps are performed: Summarize, Analyze, and Adjust the Managed Care Data, Project the Managed Care Base Data Forward, Include the Effect of Program/Policy Changes, and Add an Appropriate Administration/Profit Load. Summarize, Analyze, and Adjust the Managed Care Data — The Commonwealth collects data from each of the managed care organizations (MCOs) participating in the HealthChoices program. This data is summarized, analyzed, and adjustments (positive and negative) are applied as needed to account for underlying differences between each MCO’s management of the HealthChoices program. These adjustments can account for items such as collection of TPL/COB, over- or under- reserving of unpaid claims, management efficiency, and provider contracting relations. After adjusting each MCO’s data, each plan’s specific medical claim costs is aggregated together to arrive at a set of base data for each population group. Project the Managed Care Base Data Forward — The aggregate base of managed care data is projected forward to the time period for which the capitation rates are to be paid. Trend factors are used to estimate the future costs of the services that the covered population would generate in the managed care program. These trend factors normally vary by service and/or population group. Include the Effect of Program/Policy Changes — The Commonwealth occasionally changes the services or populations covered under the HealthChoices program (e.g., expands dental care, restricts enrollment). Any new program/policy changes that were not already reflected in the managed care data are included in the capitation rates by either increasing or decreasing the managed care data by a certain percentage amount. Add an Appropriate Administration/Profit Load - After the base data has been trended to the appropriate time period, and adjusted for program/policy changes, an administration/profit load will be added to the medical claim cost component to determine the overall capitation rates applicable to each population group. The administration/profit load is applied as a percentage of the total capitation rate (e.g., percent of premium) and does not vary by population group and includes all administrative liabilities expected for the average health plan in Pennsylvania operating the program in an efficient manner. Add an amount fo...
