Line (13) Enter the prior year’s withholds and bonuses that were available for payment in the prior year. Line (14) Divides Line (12) by Line (13) to determine the portion of withholds and bonuses that were actually returned in the prior year. Line (15) Equal to Line (13) and is automatically pulled forward. Line (16) Claims payments that were subject to withholds and bonuses in the prior year. Equal to Line (3) + Line (4) of LR019 Underwriting Risk–Managed Care Credit FOR THE PRIOR YEAR. Line (17) Divides Line (15) by Line (16) to determine the average withhold rate for the prior year. Line (18) Multiplies Line (14) by Line (17) to determine the discount factor for Category 2 claims payments in the current year, based on the performance of the insurer’s withhold/bonus program in the prior year.
LONG-TERM CARE LR020
The Long Term Care Morbidity Risk is calculated in part based on the current year’s earned premium. The premium is separated into the total not to exceed $50,000,000 to which a larger factor is applied and amounts in excess of $50,000,000 to which a lower factor is applied. This is done in lines (1) through (3) of LR020 Long-Term Care. Another portion of the Morbidity Risk is applied to incurred claims. This is done in Lines (4.1) through (6). To reduce the volatility of claims, the current and prior year’s results are averaged using loss ratios. This is done in lines (4.1) through (4.3). The average loss ratio is applied to current year’s earned premium to get Adjusted LTC Claims for RBC in Line (5). To allow for those situations where either there is no positive earned premium or one of the loss ratios is negative, the RBC formula uses the actual incurred claims for the current year. The claims-based RBC is separated into amounts up to $35,000,000 to which a higher factor is applied in line (5.1) and amounts in excess of $35,000,000 in line (5.2). In addition, if Line 1, column 1 is not positive, a larger factor is applied to actual incurred claims (if positive) to reflect the fact that there is no premium-based RBC.
© 2005 National Association of Insurance Commissioners
17
11/8/2005