ACTUARIALMEMORANDUMandCERTIFICATION

for
JOHNALDENLIFEINSURANCECOMPANY
in
Missouri
on
FormJGM14.POL.MO

Thepurposeofthisannualratefilingistosettheindexrateandanyotherapplicable
adjustmentstotheindexrateforJanuary1st,2015,assetforthintheAffordableCareAct(ACA)
requirements,andtodemonstratethereasonablenessofbenefitsinrelationshiptopremiums.
Thisratefilingisnotintendedforotherpurposes.

AssurantHealthisthemarketingnameofthelegalentitiesTimeInsuranceCompanyandJohn
AldenLifeInsuranceCompany.AssurantHealthwilladminister,issue,andinsurethisblock.
Theselegalentitiesofferidenticalproductswiththesamerates,administrativesystems,and
processes.

1. GeneralInformation:

a. InsuranceCompanyName

JohnAldenLifeInsuranceCompany
b. State

Missouri
c. HIOSIssuerID

49221
d. Market

SmallGroupMajorMedical
e. EffectiveDates

January1,2015December31,2015
f. PrimaryContactName

RobertAnderson
g. PrimaryContactPhone#

4142996866
h. PrimaryContactEmailAddress
robert.anderson1@assurant.com

i. GeneralPolicyDescription:
Thisratefilingisfornongrandfatheredsmallgroupmajormedicalplanswhichcover
theEssentialHealthBenefits(EHB)asrequiredundertheAffordableCareAct(ACA).
TheseplansareguaranteedissueandguaranteedrenewableasdefinedundertheACA
andHIPAA.Plansaremarketedthroughgeneralagencies,brokers,wholesale
arrangements,anddirecttoconsumer.In2015,AssurantHealthwillonlysellplans
outsideoftheSHOPinthisstate.Coveragebeyondage65willbesecondaryto
Medicare.Premiumsareonanattainedagebasisandwillincreasewithage.Premiums
alsovarybyplandesignandgeographicarea.In2015,onlytheoldestthreedependents
underage21willbechargedapremiumrateforagivenpolicy.

Wewilloffercompositeratingonthisformin2015.Wewillensurethatcomposite
ratesareequaltopermemberratesatissueandonrenewalinordertomaintain
stabilityonthegroup'spremiumandemployer'scontributionintheeventofmember
addonandterminations.Allgroupsizeswillbeeligibletoreceivecompositeratingon
thisform.InaccordancetotheFederalrulesandregulationsreleasedonMarch11,
2014,ourcompositeratingstructurewillfollowthefederalproposedtwotiered
structure.

ActuarialMemorandumMissouriFormJGM14.POL.MO

Page2

2. ProposedRateIncrease:

Theproposedaveragerateincreaseforthisstateis6%.Thisincreaseexcludesattainedage
increases.Therateincreasedoesvarybyplan.Theseadjustmentsaredescribedinfurtherdetail
insection14ofthismemorandum.AppendixAshowsthedevelopmentofbaseratesforthis
product.Theremainingsectionsofthememorandumdetailtheassumptionsweusedto
developrates.

ReasonsforRateIncrease:Thefollowinglistisabriefdescriptionofthesignificantfactors
drivingtheproposedratechange.Moredetaileddescriptionsofthesefactorsareincludedlater
inthismemorandum.

1.) MedicalTrend:Ourmedicaltrendaccountsfortheeffectsonfutureclaimsduetoinflation,
advancingmedicaltechnologyandtechniques,andincreasedutilizationandcostshifting.

2.) AdditionalFees:Thehealthinsurerfeeassessmentismovingfrom$8billionto$11.3billion
in2015whichresultsinalowertargetlossratio.

3.) PaidtoAllowedRatio:Thedifferencebetweenourprojectedpaidtoallowedratioinour
experienceversusthatofthe2014actuarialvaluecalculatorresultsinanincreasetoour
price.

Therateincreasesvarybyproductprimarilyduetobenefitleveragingdifferencesbymetallevel
anddifferencesinPPOnetworkfactors.Theseadjustmentsarewarrantedastheyresultin
actuariallyappropriateratesthatreflectthetruecostdifferencesbetweentheplans.

PleasenotethatourratingmethodologydiffersfromthatoutlinedintheUnifiedRateReview
Template.Rather,theUnifiedRateReviewTemplaterepresentsinformationrequiredbyFederal
Regulationtofacilitatereview.ThefollowingsectionsnoteanydifferencesbetweentheUnified
RateReviewTemplateandthepricingmethodologyweusedtodeveloprates.Pleasereferto
AppendixAforourratedevelopmentmethodology.

3. ExperiencePeriodPremiumandClaims

WepreparedtheUnifiedRateReviewTemplateusingstateandlegalentityspecificnon
grandfatheredexperienceinordertocomplywithDepartmentofHealthandHumanServices
(HHS)requirements.Forthepurposeofestimatingtheaverageriskofthe2015market,
grandfatheredandnongrandfatheredexperienceofTimeInsuranceCompanyandJohnAlden
LifeInsuranceCompanywasreviewedtogether.Thiscombinedexperiencewasusedinorderto
developanactuariallyappropriatepredictionofthemarketwidepermemberpermonthrisk
andstandardizedclaimcostin2015.Thesameexperiencebasisisusedforboththepricing
methodologyandthedevelopmentoffactorsthatwilladdresstheimpactofourriskrelativeto
themarketandtheimpactthishasonpremiumrates.Thisprocessisdescribedinmoredetail
below.

ActuarialMemorandumMissouriFormJGM14.POL.MO

Page3

ExperiencePeriod:TheexperienceperiodisclaimsincurredandpremiumearnedfromJanuary
1,2013throughDecember31,2013.

PaidThroughDate:Thedatethroughwhichpaymentshavebeenmadeonclaimsincurred
duringtheexperienceperiodisFebruary28,2014.

Premiums(NetofMLRRebate)inExperiencePeriod:IntheUnifiedRateReviewTemplate,the
earnedpremiumpriortoMedicalLossRatio(MLR)rebatesfortheCalendarYear2013
experienceperiodwas$5,886,262.Earnedpremiumwasnotadjustedforanyreductions
prescribedwhencalculatingtheMLR,suchastaxesandassessments.TheMLRrebatesforthe
experienceperiodareestimatedat$0.

ThefinancialactuarialteamatAssurantHealthestimatesaccruedpremiumrefundsrequired
underFederalMinimumLossRatioregulationsfortheIndividualMedicalandGroupMedical
insurancebusiness.Theteamprojectsincurredclaims,earnedpremiums,andotherelements
andappliesadjustmentsasoutlinedinFederallawsandregulations.Theseprojectionsare
performedonastateandmarketlevelbasisandrecentclaimsexperienceisadjustedfor
estimatedclaimsreservesonastatelevelbasis.

AllowedandIncurredClaimsDuringtheExperiencePeriod:IntheUnifiedRateReview
Template,theamountofincurredclaimsprocessedthroughourclaimsystemfortheexperience
period2013is$4,467,100.Thebestestimateofexperienceperiodclaimsincurredbutnot
reportedis$132,615.Theamountofallowedclaimsprocessedthroughourclaimsystemforthe
experienceperiod2013is$6,768,856.Thebestestimateofexperienceperiodallowedclaims
incurredbutnotpaidasofthepaidthroughdateshownaboveis$2,301,756.Allowedclaimsare
developedbysubtractingineligiblechargesanddiscountsfromthetotalproviderbilledamount.
AssurantHealthhasnocapitationagreements.
Thepermemberpermonthexperienceperiodallowedclaimsinourpricingmethodologyis
baseduponallSmallGroupMedicalexperiencewithinthestateforAssurantHealth.The
methodologyisdemonstratedinAppendixA.Experienceforlimitedbenefitplanswasnot
included.Furthermore,anadjustmentwasmadeinordertopoollargeclaimsacrossourblock.
Claimsinexcessof$50,000foraspecificmemberandincurredmonthwereremovedfromthe
experience,andthenanationwideaveragepoolingchargewasappliedpermember.Allpricing
components,includingthebaseexperienceperioddata,areappliedconsistentlyacrossthe
singleriskpoolinthestateandmarketfor2015.
OurfinancialactuarialteamdevelopslagtrianglesfornationwideSmallGroupMedical
experience.ThesetrianglesareseparatelydevelopedforMedicalandPrescriptionDrugCard
coverage.Specificlargeclaimsthatarepartofourcasemanagementprogramareremoved
fromtheMedicaltrianglesandreservedforseparately.Historicalaveragesareusedinorderto
calculatemonthlycompletionfactorsfortheremainingclaims.

ActuarialMemorandumMissouriFormJGM14.POL.MO

Page4

4. BenefitCategories

Inpatientservicesarethosereceivedduringapatientshospitalstayandareincludedinthe
InpatientHospitalCategory.Outpatientservices(e.g.labtests,Xrays,andsomesurgical
services)arethoserenderedbyafacilitywithinanoutpatientsetting.Professionalservices
includeprimarycare,specialist,therapyandotherprofessionalchargesthatarenotincludedin
facilityfees.OtherMedicalservicesincludechargesforitemsthatdonotfallintothecategories
above,suchasambulanceanddurablemedicalequipment.TheOthercategoryismeasured
basedupondistinctservicesoritemsprovided.Retailandmailorderpharmacyclaimsare
includedinthePrescriptionDrugcategory.

5. ProjectionFactors

AssurantHealthRiskRelativetotheMarketAverage:Toestablishthisestimate,Assurant
HealthparticipatedintheWakelyNationalRiskAdjustmentSimulationProject(WNRASP).Inthis
projecttheWakelyConsultingGroupquantifiedriskusingtheHCCHHSmodelthatHealthand
HumanServices(HHS)developedforimplementationin2014.Wakelyconductedrisk
simulationsinindividualandsmallgroupmarketsonlywhen75%+ofthestatewide
membershipwasrepresented.Healthplanscoveringthesemembersusedclaimexperienceto
determineplanliabilityriskscoresconsistentwiththeHCCHHSmethodology.Healthplan
specificliabilityriskscoresalongwithallowableratingfactorsarecomparedtothescoresofall
marketparticipantsconsistentwiththemethodologysetforthintheRiskAdjustmentProgram.

TheWNRASPresultsprovidedtoAssurantHealthquantifythedifferenceintheriskofthe
AssurantHealthbookofbusinessrelativetothestateandmarketaveragerisk.Theestimateof
themarketriskwasadjustedtoapproximateariskscorewhenthemarketincludesboth
grandfatheredandnongrandfatheredexperience.Sinceweusebothgrandfatheredandnon
grandfatheredexperiencewefeelitisappropriatethatthemarketisonthissamebasis.In2012
theWakelyNationalRiskAdjustmentSimulationProject(WNRASP)usedbothgrandfathered
andnongrandfathereddatawhilein2013onlynongrandfathereddatawasused.Tocalculate
anadjustmenttoaccountforincludinggrandfatheredexperienceweusedthe2013marketto
2012marketriskscore.

Thefinalstateresultisadjustedtotheextentthatbaseperioddatawaslessthan100%credible,
inordertobeonaconsistentbasiswiththeindexrateforthestate.Thefinalresultforusein
ourpricingmethodologywasa0.91riskscore.ThisindicatesthatAssurantHealthbusiness
practices(e.g.distributionmethodsandunderwriting)andmemberselectionpatternshave
createdabookofexperiencewith9%lowercosts.Ourpricingwasadjustedbyafactorof
1.0/0.91torepresenttheaverageactuarialrisk,asshowninAppendixA.Thismultiplicative
adjustmentisconsistentlyappliedacrossallplanswithinthestate.Pleasenotethatthis
adjustmentisnotaprojectionofa2014riskscore,butratheranadjustmenttogetAssurant
Healthspecificmorbidityinlinewiththemarketaverage.

Afterfurtherreviewingthisassumption,weapplieda5%adjustmentperactuarialjudgmentand
reasonableness.Therefore,inAppendixAtheadjustmentis0.95.

ActuarialMemorandumMissouriFormJGM14.POL.MO

Page5

ChangesinBenefits:Thereisanadjustmentof4.15%withinourpricingandclaimprojectionto
includenewandexpandedbenefitsinaccordancewiththeEHBrequirementsoftheACA.The
tablebelowliststheestimatedadditionalcostassociatedwitheachnewbenefit.ThePediatric
Dentalexpensewasestimatedusingcommercialgroupexperiencefor2011and2012fromour
sistersegment,AssurantEmployeeBenefits.Theremainingestimatesarebaseduponpurchased
dataofexperienceofastandardpopulation.

Benefit
Maternity
MentalHealthandSubstanceAbuse
PediatricVision
Chiropractic
PrivateDutyNursing
PediatricDental
GRANDTOTAL

EstimatedAdditionalCost
1.00%
0.45%
0.40%
0.40%
0.30%
1.60%
4.15%

Wealsomadeanadjustmenttoaccountforthecoverageofadditionalpreventativeitemsthat
willbepaidfirstdollarduetoupdatesbytheUSPSTF.Webelievetheimpactofcoveringthese
additionalfirstdollarbenefitsis1.0%.Thisestimatewasdeterminedbyevaluatingthevolume
oftheseitemsinourhistoricalexperience.Theadditionalfirstdollarpreventativebenefitsare:

1.)
2.)
3.)
4.)
5.)

AlcoholMisuse
BreastCancerRisk
HepatitisCScreening
HIVScreening
TobaccoUsePreventioninChildrenandAdolescents

Inaddition,weexpectthatricherbenefitsin2015willinducedemandforhealthcareservices
thatishigherthantheaverageutilizationwithinourbaseexperience.Weassumethatfuture
Silverplanswillhaveutilizationthatis3%higherthanouraveragecurrentexperience,Goldwill
be8%higher,andPlatinumwillbe15%higher.Baseduponourexpected2015splitofplansby
metallevel,wehaveadjustedourexperienceperiodclaimsby0.9%inordertoaccountforthis
benefitleveldrivenincreaseinutilization.Theprojected2015membershipwasusedto
determinethesplitofplansbymetallevelandtheweightedaverageutilizationimpactThe
membershipmethodologyisdescribedinmoredetailbelow.

OtherAdjustments:Wemadeanadjustmentof4.1%withinourpricingandclaimprojectionin
ordertoaccountforexpectedimprovementsinPreferredProviderOrganization(PPO)discounts
in2015relativetothe2013experienceperiod.OurexpectedPPOdiscountsaredevelopedby
usingacombinationofexperienceandreporteddatafromthenetworksthatwelease.The
futureimprovementisdrivenbyalargershareofbusinessexpectedintheAetnaSignature
Administrators(ASA)networkin2015relativeto2013.Thisnetworkarrangementismore
favorableforAssurantHealththanotherleasednetworks.Furthermore,ourrentalnetworks
worktorenegotiateandimprovetheircontractswithprovidersovertime,whichalso
contributestowardstheimprovementindiscounts.TheASAnetworkwasfirstlaunchedin
MissouriinApril2012.

ActuarialMemorandumMissouriFormJGM14.POL.MO

Page6

TrendFactors(cost/utilization):Theeffectsonfutureclaimsofinflation,advancingmedical
technologyandtechniques,andincreasedutilizationandcostshiftingareaccountedforbyan
annualseculartrendassumptionof9.0%.Thisisanallowedclaimstrendfactor.Thistrendwas
developedfromhistoricalexperienceofournationwideblock.Ourhistoricalexperienceshows
slightlyhighertrendbutweareloweringitto9.0%asweanticipatetrendwillbelowerthanour
historicalexperienceduetoamorestandardriskpopulationgoingforward.PleaseseeAppendix
Bforfurtherdetail.Experiencewastrendedfor24months,fromthemidpointof2013tothe
midpointof2015.

AgeShift:Theexpectedageshiftbetween2013and2015isincludedintheindexrate
development.PleaseseeAppendixAfordetails.

GeographicShift:Theexpectedgeographicshiftbetween2013and2015isincludedinthe
indexratedevelopment.PleaseseeSection15b.andAppendixAfordetails.

6. CredibilityManualRateDevelopment

ThemanualratereflectstheAssurantHealthSmallGroupMedical2013nationwideallowed
claimspermemberpermonth(pmpm).Thisallowedpmpmvaluehasbeenadjustedtoaddress
thefollowingneeds:

1. AdjustthenationwideclaimstoreflecttheAssurantHealthdistributionbyageinMissouri.
2. RemovetheimpactofclaimsexperiencefromMissouri(toavoiddoublecountingthis
experienceintheratedevelopment).
3. AdjusttoreflectthespecificutilizationandchargelevelpatternsofMissouri.

Externaldata,inconjunctionwithclaimsexperiencefrom2012,isusedtodeterminethe
Missouritonationwideexpectedcostrelativity.Inordertodeterminethisrelativityfor2012,
regressionanalysisisusedholdingageandgenderconstant.If2012experienceinMissouriis
notfullycredible,thestaterelativecostfactorisblendedwithastaterelativecostfactor
developedusingTruvenAnalyticsMarketScan2011database.Controllingforageandgender,
regressionanalysisontheTruvendatabaseproducedthestatetonationwideallowedcost
relativity.The2011andTruvenblendedrelativityfactorisreferredtoasthemanualstate
factor.

Aregressionbasedonnationwide2013allowedclaimsexperiencewasusedtosmoothallowed
claimlevelsbyage,gender,andsmokingstatus.Fromthisregression,predictedallowedclaims
werecalculatedateachageandsmokingstatuscombination.Theseallowedpmpmclaimlevels
areappliedtotheMissouridistributionofmembershipbyageandgender,andsummed.In
addition,anadjustmentisappliedtoremovetheinfluenceMissouriclaimshaveonthe
nationwideaverageclaims.

Themanualstatefactorismultipliedbyadjusted2013nationalclaimlevelsasdescribedinthe
previousparagraphtocalculatethemanualpmpmallowedclaimsinthestate.Themanualrate
isblendedwiththebaseperiodrateasdescribedinthecredibilitysectionbelow.

ActuarialMemorandumMissouriFormJGM14.POL.MO

Page7

Themanualratewasadjustedtothe2015pricingperiodusingtheprojectionfactorslistedin
thesectionabove.

7. CredibilityofExperience

Todevelopourfullcredibilitystandard,weconductedastudytoestablishconfidencelevelsat
differentcohortsizes.Inthisstudy,werandomlysampledcohortsfromourinternalblockof
members.Weanalyzed100,000randomlysampledcohortsateachsizetoestablishthevariance
associatedwithacohortofthatsize.Therequiredcohortsizetobeconsideredfullycredible
wassetatthepointwherewewere95%confidentthatclaimswouldfallwithin4%ofour
target.Thisresultsinafullycrediblestandardof58,000membermonthsforexperiencethathas
hadclaimsinexcessof$50,000permemberpermonthlevelpooledacrosstheblock,asused
withinourpricingmethodology.TheUnifiedRateReviewTemplateutilizesunpooledclaims.
Therefore,baseduponthesame95%confidence,thestandardforfullcredibilityontheUnified
RateTemplateis322,000membermonths.

Partialcredibilityisassignedtotheexperienceperioddatabasedupontheclassicalcredibility
formulalistedbelow:
SquareRoot((ExperienceDataMemberMonths)/(FullCredibilityStandard))

Basedupontheabovecredibilitymethodology,ourMissouripooledexperienceasusedwithin
pricingis79%credible.TheunpooledbaseexperienceasusedintheUnifiedRateReview
Templateis0%credible.

Thestatespecificexperiencewasremovedfromthedevelopmentofthemanualrateinorderto
avoidanydoublecountingofthebaseperiodexperience.

GiventhatwedonothavecredibleEHBclaimdatayet,wefeelitisappropriatetoinclude
grandfatheredexperiencewithinourpricingdatainordertodevelopthemostpredictive
estimateoftheaveragemorbidityofthe2015market.Inaddition,pleasenotethatourother
pricingassumptionsweredevelopedonaconsistentbasis.Forexample,wedevelopedour
changeinmarketriskassumptionrelativetothetotalIMcurrentmarket,notrelativetothe
nongrandfatheredcurrentmarket.

SincetheURRTrequiresunpoolednongrandfathereddata,ourpricingapproachwas
incompatiblewiththestandarduseoftheURRT.Therefore,weassigned0%credibilitytothe
unpoolednongrandfathereddatawhichisrequiredintheURRTinordertogivefullcredibilityto
thecredibilitymanualwhichmatchesourpricing.

8. PaidtoAllowedRatio

OurprojectedPaidtoAllowedRatiois65%.

Inour2014pricingdevelopment,theActuarialValue(AV)calculatorprovidedbyHHSproduced

ActuarialMemorandumMissouriFormJGM14.POL.MO

Page8

valuesthatwereveryclosetoourhistoricalpaidtoallowedratiosonanaggregatebasis.
Therefore,wedetermineditwasreasonabletousetheHHSAVcalculatortodevelopestimates
ofthepaidtoallowedratioofour2014insuredpopulation.However,our2013paidtoallowed
ratiowasslightlyhigherthanthevalueproducedAVcalculator,whichisreasonablegiventhat
underlyingdataintheAVcalculatorwasnotupdatedfromtheprioryear.Therefore,weare
accountingforthisdifferencebyincludingabenefitleveragingfactorinthepricingvaluesofour
plans.Thisfactorwillvarybymetallevelduetothedifferingleveragingeffectsbycostsharing
level.Bronzeplanswillhaveahigherleveragingeffectduetohighercostsharingand
conversely,Platinumplanswillhavealowerleveragingeffectduetolowercostsharing.

Todeterminetheleveragingfactors,weusedaclaimprobabilitydistributionfromthe2012
MillimanHealthCostGuidelinestomodeltheleveragingeffectonourmetalplans.Thefinal
assumptionsareasfollows:

MetalLevel
Leveraging
Bronze
1.035
Silver
1.030
Gold
1.015
Platinum
1.010

TodeveloptheprojectedPaidtoAllowedRatio,weusedourmembershipprojectionto
determinethedistributionofplansbymetallevelin2015.Wethenappliedtheleveraging
factorsbymetalleveltotheactuarialvaluesandaveragedthemtogetatotalprojectedpaidto
allowedratio.Themethodologyofourmembershipprojectionisdescribedinmoredetail
below.

9. RiskAdjustmentandReinsurance

RiskAdjustment:In2014,theACAestablishedaRiskAdjustmentProgramthatwillallowissuers
tosetpremiumsaccordingtotheaverageactuarialriskintheindividualandsmallgroupmarket
withoutrespecttothetypeofriskselectiontheissuerwouldotherwiseexpect.TheACA
establishesastandardquantificationofriskwiththeHCCHHSriskscoringmodel.Untilwegain
furtherknowledgeonthetotalMissourimarketrisk,wearecontinuingtopricetothemarket
averageriskof1.0.Therefore,nomarketwideadjustmentfortheriskadjustmentprogramwas
appliedwhendeterminingthemarketadjustedindexrate.

ReinsuranceRecoveries:Thesmallgroupmarketisnoteligibletoreceivereinsurance
recoveries.

ReinsuranceContributions:TheReinsuranceProgramisfundedbyafeeof$3.67permember
permonth.Wehaveincreasedourexpectedclaimcostswithinourpricingdevelopmentby1.2%
inordertocoverthisfee.Inordertomaintaincompliancewiththerequiredrelativityofprices
byage,wehaveappliedtheadjustmentonamultiplicativebasis.Ouradjustmentfactorwas
developedbydividing$3.67bytheexpectedtotalpermemberpermonthclaimcostsinthe
state.

ActuarialMemorandumMissouriFormJGM14.POL.MO

Page9

10. NonBenefitExpensesandProfit&Risk

ThetablebelowliststheexpectedNonBenefitExpensesandTargetProfitforAssurantHealthin
Missouri.Thepricingloadtocovertheseexpensesisappliedconsistentlyacrossproductsand
plans,asdisplayedintheworkupoftheplanadjustedindexrate.Theseitemsarediscussedin
detailinthefollowingparagraphs.

ExpenseCategory
%ofPremium
GeneralandAdministrative
12.0%
CommissionsandSalesBonus
5.5%
ManagedCareandCostContainment
2.0%
QualityImprovement
0.9%
NetInvestmentIncome
2.0%
Taxes,FeesandStateAssessments
2.4%
ACAHealthInsurerFee
1.7%
FederalIncomeTaxes
1.9%
ProfitandRiskMargin(AfterTax)
1.1%

Total
25.5%

Ourpricedforlossratiois74.5%inMissouri,whichisapproximatelyan80%MedicalLossRatio
asdefinedbytheACA.ThecalculationoftheMedicalLossRatioisshownintheProjectedLoss
Ratiosection.ThefinalpricedforTotalNonBenefitExpensesandProfitis25.5%.

Inaddition,pleasenotethatexpensesforeachfunctionalareawithinthecompanyarerecorded
atanationwidelevel.Expenseassumptionsforastateandproductareallocatedand
representedonapercentofpremiumbasis.Thispercentofpremiumrepresentationof
expensesisconsistentwithouractualtoexpectedlossratiopricingmethodology.

AdministrativeExpenseLoads:GeneralandAdministrativeExpenses:Thiscategoryaccountsfor
theexpensesofadministeringthebusiness,suchasclaimpaymentexpenses.Theassumption
wasderivedfromactualexpensesin2013relativetoactualrevenue.Indevelopingthisexpense
assumption,underwritingexpenseswereadjustedduetothereductionofstaffwithinthe
underwritingfunctionalareathatoccurredinresponsetothe2014marketrules.

CommissionsandSalesBonus:Thisisavariableexpensethatrepresentsthecostofacquiring
business.Ourcommissionschedulesandbonuscampaignswillbesetto5.5%ofpremium.

ManagedCareandCostContainmentExpenses:Thisisavariableexpensethataccountsfor
expensesincurredinordertoreduceclaimscosts,suchasaccessfeespaidtothePreferred
ProviderOrganizationNetworksthatareleasedonbehalfofourcustomers.Thisexpense
assumptionwasderivedfromactualexpensesin2013relativetoactualrevenue.

QualityImprovementExpenses:Thiscategoryaccountsforexpensesincurredinorderto
improvethequalityofhealthcare.QualityImprovementExpensesareaddedtoclaimpayments

ActuarialMemorandumMissouriFormJGM14.POL.MO

Page10

intheMedicalLossRatioCalculation.Thisexpenseassumptionwasderivedfromactual
expensesin2013relativetoactualrevenueandadjustedtoaccountforadditionalQIexpenses
expectedin2015.

NetInvestmentIncome:Thiscategoryaccountsforinvestmentincomeearnedonreservesand
surplus.Thisassumptionwasderivedfromouractualcurrentnetinvestmentincomeratio.

Profit&RiskMargin:Ourtargetedaftertaxmarginforriskandprofitis3%ofpremium.The
pricingloadforthis3%aftertaxmarginisappliedconsistentlyacrossproducts.In2015,weare
expectinga1.1%aftertaxmargin.

TaxesandFees:HealthInsurerFee:$8billionwillbecollectednationallyforthisfeein2014and
$11.3billionin2015.Thefeeisbasedonourshareofthetotalmarketpremium.Itisestimated
thatthisfeewillbe1.7%ofpremium.Furthermore,thisfeeisnotdeductiblefromfederal
incometaxes.

StatePremiumTaxesandAssessments:Thisisestimatedatapproximately2.4%ofpremium
basedupon2013experience.Anadjustmentwasmadetohistoricalexperienceinorderto
reduceanyComprehensiveHealthAssociationassessments.Inaddition,anadjustmentof
approximately0.05%hasalsobeenmadetoaccountforthe$2permemberperyearPCORIfee.
Theminimalimpactofthe$0.08permemberpermonthRiskAdjustmentProgram
administrationfeehasbeenremovedfromthissectionandisincludedintheprojectedrisk
adjustmentperthePartIIIActuarialMemoandCertificationInstructions.

IncomeTaxes:FederalIncomeTaxesareexpectedtobe1.9%ofpremium,calculatedas((3%+
1.7%)X40%),where3%isthepretaxprofitmargin,1.7%isthenondeductibleACAhealth
insurerfeecostand40%isanapproximationofthefederalincometaxrateforAssurantHealth.
Pleasenotethatoureffectivefederalincometaxrateisexpectedtobegreaterthanthe
standard35%duetothenondeductibilityofcertaininternalandexternalsmallgroup
compensation.Thisnondeductiblecompensationisprimarilyincurredwithinnonhealth
insurancelinesofbusinessfromourparentcompany,Assurant,Inc.

ExchangeUserFees:Assurantwillonlyissuebusinessofftheexchangeinthisstatein2015.
Therefore,noexchangeuserfeehasbeenappliedtotherates.

11. ProjectedLossRatio

Theprojectedfuturelossratiofortheperiodof1/1/2015through12/31/2015is74.5%.Our
premiumratewasdevelopedbydividingprojectedincurredclaimsbythepricedforlossratio.

Ourpricedforlossratiois74.5%inMissouri.However,attherequestofHHS,weremovedour
0.6%loadtocoverthecostofnotchargingpremiumforchilddependentsbeyondthree.With
thisadjustment,ourprojectedlossratiois74.9%,whichisapproximatelyan80%MedicalLoss
RatioasdefinedbytheAffordableCareAct.AcalculationoftheprojectedMedicalLossRatio
(MLR)isshownbelow:

ActuarialMemorandumMissouriFormJGM14.POL.MO

MLR

Page11

=(Claims+QualityImprovementExpense)/(PremiumTaxesandFees)
=(A+B)/(DEFG)
=(74.9%+0.9%)/(100%2.4%1.7%1.1%)
=80%

Where:

AisIncurredClaims,netofReinsuranceandRiskAdjustmentTransfers

BisExpensesforImprovementintheQualityofHealthcare

Dispremium
Eisstatepremiumtaxesandotherassessmentsandfees

FistheHealthInsurerFee

GisFederalIncomeTaxes(excludingtaxesonprofitduetoInvestmentIncome)

12. SingleRiskPoolandIndexRate

Thesingleriskpoolreflectsallcoveredlivesforeverynongrandfatheredproduct/plan
combinationforthisstateandmarket.

TheIndexRateistheestimatedtotalallowedclaimspermemberpermonthforallnon
grandfatheredplansforallessentialhealthbenefitswithinthestate.Thisfiguredoesnot
includeadjustmentsforReinsurance,RiskAdjustmenttransfers,orexchangeuserfees.There
arenomaterialcoveredbenefitsinexcessoftheEssentialHealthBenefits.PleaseseeAppendix
Afordetailontheprojected2015IndexRatecalculation.Also,pleaseseetheMarketAdjusted
IndexRateandPlanAdjustedIndexRateExplanationSectionsbelowfordetailsonhowratesare
calculatedrelativetotheIndexRate.Theexperienceusedtodeveloptheprojectedindexrate
includestheexperienceoftransitionalplans.

13. MarketAdjustedIndexRate

TheMarketAdjustedIndexRateiscalculatedastheIndexRateadjustedforallallowable
marketwidemodifiersdefinedinthemarketratingrules,45CFRPart156,156.80(d)(1).
Theseadjustmentsinclude:

Federalreinsuranceprogram
Riskadjustment
Exchangeuserfee

Pleaseseesection9ofthismemoforadescriptionofthereinsuranceandriskadjustment.
Pleaseseesection10ofthismemoforadescriptionoftheexchangeuserfeeadjustment.The
calculationoftheMarketAdjustedIndexRatecanbefoundinAppendixA.

14. PlanAdjustedIndexRate

ThePlanAdjustedIndexRateiscalculatedastheMarketAdjustedIndexRateadjustedforall
allowableplanlevelmodifiersdefinedinthemarketratingrules,45CFRPart156,156.80(d)(2).

ActuarialMemorandumMissouriFormJGM14.POL.MO

Page12

Theseadjustmentsaredescribedbelow.ThecalculationofthePlanAdjustedIndexRatecanbe
foundintheattachedrateexhibits.

ActuarialValueandCostSharing:
o ActuarialValuePleaseseesection17ofthismemoforadescriptiononhow
theactuarialvalueswerecalculated.
o PaidtoAllowedLeveragingFactorPleaseseesection8ofthismemofora
descriptiononhowthepaidtoallowedleveragingfactorwascalculated.
o UtilizationWeexpectthatricherbenefitsin2015willinduceutilizationfor
healthcareservicesthatishigherthantheaverageutilizationwithinourbase
experience.WeassumethatfutureSilverplanswillhaveutilizationthatis3%
higherthanouraveragecurrentexperience,Goldwillbe8%higher,and
Platinumwillbe15%higher.ThesefactorsaretheprescribedHHSinduced
utilizationfactorsusedintheHHSriskadjustmentcalculations.

ProviderNetworkPPOfactorsweredevelopedusinginternalcompanydiscount
experienceinconjunctionwithreporteddiscountsfromthenetwork.Thefactorsreflect
thedifferencefromtheaveragediscountinthestate.

AdministrativeCostsTheadministrativecostfactoristhereciprocalofourprojected
lossratio.Pleaseseesection11foradescriptiononhowourprojectedlossratiowas
calculated.Theadministrativecostsfactorisconstantacrossallplans.

15. Calibration

a. AgeCurveCalibration

TheagecurvecalibrationisusedtoadjustPlanAdjustedIndexRatetoa21yearold.The
agecurvecalibrationiscalculatedas:

1/AverageAgeRatingFactorWeightedbyAgeMembershipSplit

Theaverageageratingfactoristhestandardagecurveweightedbyourmembership
distributioninthestate.Theagecurvecalibrationisapplieduniformlytoallplansandis
demonstratedinAppendixA.

Duringthefilingreviewprocess,theexpectedageshiftbetween2013and2015was
incorporatedintheindexratedevelopment.

b. GeographicFactorCalibration

Theratingareafactorsusedinour2014pricingwereusedinthedevelopmentoffactors
for2015,withtheexceptionofa10%decreaseinRatingArea3.Tocalibrate,wefirst
used2013membershipandbalancedtheoverallstateareafactortoa1.0togetthearea
factorsonthebasisofour2013pricingexperienceperiod.Secondly,weusedthe
projected2015membershipbyratingareaandreweightedtheareafactorsagainto

ActuarialMemorandumMissouriFormJGM14.POL.MO

Page13

determinetheprojectedstateaverage.Theresultingstateaveragefactorinthisstate
was0.990.Thismarketwidecalibrationfactoristhenappliedafterthedeterminationof
theplanadjustedindexratesandthesmallgroupareafactorsaredividedbyitto
calibratethemarketaveragebacktoa1.0.

Thetablebelowshowstheresultingweightedaveragegeographicfactorof1.000forthe
statealongwithrelativityfactorsforeachratingareawithinthestateandtheir
correspondingprojectedmemberdistributions.

Rating
Area

2015SG
Member
Distribution

1
2
3
4
5
6
7
8
9
10
Total

9.0%
19.1%
15.4%
5.8%
13.5%
6.9%
4.5%
13.6%
5.8%
6.3%
100%

2015
Weighted
SGArea
Factors
1.03
1.04
1.01
0.94
0.99
1.09
0.92
0.97
0.95
0.97
1.000

Duringthefilingreviewprocess,thisgeographicshiftbetween2013and2015was
incorporatedintheindexratedevelopment.Thegeographiccalibrationisnow1.0.

16. ConsumerAdjustedPremiumRate

TheConsumerAdjustedPremiumRateisthefinalpremiumrateforaplanthatischargedtoan
individualorfamily.TheConsumerAdjustedPremiumRateisdevelopedbycalibratingthePlan
AdjustedIndexRatetotheagecurveandgeographythenapplyingtheratingfactorsspecifiedby45
CFRPart147,147.102.Theseratingfactorsaredescribedbelow.Theratingfactorscanbefoundin
theattachedrateexhibitfile.

AreaFactorsAreafactorsweredevelopedusinginternalcompanyprediscountedallowed
claimexperience.Inareasthatwerelessthan100%credible,internalexperiencewas
supplementedwithconsultantdata.TheAreafactorisconstantacrossallplansandis
balancedtoequal1.0intotalforthestate,asdescribedabove.
AgeFactorsTheagecurveusedtosettheagefactorsisthestandardagecurvesetbyHHS.
Theagefactorsaresetrelativitytotheprojectedaverageageusedintheagecurve
calibrationabove.
TrendFactorsThetrendfactorsincreasequarterlyatarateof9%annually.Pleasesee
AppendixBforfurtherdetail.

ActuarialMemorandumMissouriFormJGM14.POL.MO

Page14

17. AVMetalValues

TheHHSActuarialValueCalculator(AVC)wasusedtogeneratetheAVvaluesandmetalvalues
forsomeoftheplansinourportfolio.TogenerateAVsfortheplansthatcontainedbenefits
beyondthoseinthecalculator,anacceptablealternativemethodologywasused.The
methodologyusedtodeveloptheseplansAVsisdetailedbelow.

1.MailOrderCopay
Applicableplans:Silver5,Silver8,Gold5,Gold6,Platinum2,Platinum4,Platinum5

MailordercopaysforAssurantHealthplanswillbe3timestheretailRxcopay.TheHHS
actuarialvaluecalculatordoesnotallowfortheusertoinputdifferentdrugcopayvaluesfor
mailorderdrugs.TheprojectedpercentageoftotalscriptsthatAssurantexpectstobemail
orderin2014is12%.Therefore,wearecertifyingthattherewillbenoimpactof3xmailorder
drugcopaysontheactuarialvalue.

2.$500FirstDollarD/X/LBenefit
ApplicablePlans:Silver1,Silver2,Silver3,Silver4,Silver5,Silver6,Silver8,Gold1,Gold2,Gold
3,Gold4,Gold5,Gold6,Gold7,Platinum1,Platinum2,Platinum3,Platinum4,Platinum5

AssurantHealthwillhavemanyplansthathavea$500firstdollarLabandXRaybenefit.In
ordertoevaluatetheactuarialvalueofthisbenefit,anewcontinuancetablehadtobecreated
sincetheHHSAVCcannotcalculatetheimpactoffirstdollarbenefits.

TheclaimcostbasiswasselectedastheactuarialcontinuancetablesoftheHHSAVC.The
continuancetablesoftheHHSactuarialtablesarecomprisedofclaimcostssegregatedby
servicecategory,plusanallowanceforadditionalclaimcostsexpectedfromhighriskpools.

Continuancetableswerebuilttoremovetheadditionalcostofthehighrisktables.Thevalue
addedtothetableswasasetdollaramount,withoutallocationtotheseparateservicecategory
claimcosts.Twoaggregatetableswerebuilt,onereflectingallservicecategoriesandthesecond
reflectingallservicecategorieswithoutLabandXRay,bothofthesetablesexcludingthehigh
riskpooladditionalcosts.

Expectedclaimcostsweredevelopedforeachmetallevelatadeductiblelevelthatgenerates
theprescribedmetalactuarialvalue,withanintegratedmedicalanddrugdeductible.

AcontinuancetableofLabandXRaybenefitswasbuiltfromdatafromMilliman.Thetablewas
adjustedsothattotalclaimcostsofLabandXraybenefitswereequaltotheamountofclaims
forLabandXRaysundereachmetalbenefitlevel.Thecontinuancetablewassplitinto
professionalandtechnicalbytheuseofalevelproportionacrossallaverageclaimlevels.

Thecontinuancetablewasutilizedtoderiveabenefitofa$500firstdollarcoveragebenefit.
Remainingclaimswerethenappliedtothebaseplandeductible.Eachmetalplancontinuance

ActuarialMemorandumMissouriFormJGM14.POL.MO

Page15

tablewasreliedontoderivethisvalue.

Belowarethecalculationsofthe$500firstdollarlabandXraybenefitresultingfromthe
processdescribedabove:

Silver1

Silver2

Silver3

Silver4

Silver5

Silver6

Silver8

ClaimCostofPlanatMetal
Level(a)

$3,108

$3,136

$3,174

$3,209

$2,905

$3,285

$2,995

includesallmedicaland
pharmacybenefits

ClaimCostofPlanatMetal
Level(b)

$2,820

$2,854

$2,897

$2,918

$2,632

$2,988

$2,715

nobenefitsforLabandX
Ray

ValueofLabandXRay(c)

$164

$164

$164

$164

$164

$164

$164

firstdollarbenefits,upto
$500

AdditionalValueofLab
andXRay,appliedagainst
deductible(d)

$163

$166

$163

$167

$154

$170

$158

includesanestimateof
impactofdeductible

NewEstimateofMedical
ClaimCoste=(b+c+d)

$3,148

$3,183

$3,224

$3,249

$2,950

$3,323

$3,037

AdditionalAV(e/a1):

1.30%

1.50%

1.56%

1.23%

1.56%

1.14%

1.41%

ActuarialMemorandumMissouriFormJGM14.POL.MO

Gold1
ClaimCostofPlanatMetal
Level(a)
includesallmedicaland
pharmacybenefits

$3,865

ClaimCostofPlanatMetal
Level(b)

$3,520

ValueofLabandXRay(c)

$171

AdditionalValueofLab
andXRay,appliedagainst
deductible(d)

AdditionalAV(e/a1):

$3,874

0.88%

0.55%

0.47%

0.66%

$213

$3,892

$171

$201

$3,988

$3,934

$3,724

$171

$211

$218

$4,081

$3,521

$171

$171

$213

$3,892

$3,606

0.78%

Gold7

$3,859

$3,546

$171

$201

$3,895

Gold6

$3,962

$3,916

$3,491

$171

$205

NewEstimateofMedical
ClaimCoste=(b+c+d)

$3,521

Gold5

Gold4

$3,852

firstdollarbenefits,upto

$500

Gold3

$3,859

nobenefitsforLabandX
Ray

includesanestimateof
impactofdeductible

Gold2

Page16

$4,107

0.88%

0.65%

ActuarialMemorandumMissouriFormJGM14.POL.MO

Platinum1
ClaimCostofPlanat
MetalLevel(a)

$4,735

includesallmedical
andpharmacybenefits
ClaimCostofPlanat
MetalLevel(b)
nobenefitsforLab
andXRay
ValueofLabandXRay
(c)

$4,320

AdditionalAV(e/a1):

$4,747

0.25%

0.15%

$4,840

$4,769

$5,026

0.14%

$253

$175

$255

$260

$4,758

$4,598

$175

$175

$259

$4,410

$5,015

$4,831

$4,334

$175

$252

includesanestimate
ofimpactofdeductible
NewEstimateof
MedicalClaimCoste=
(b+c+d)

Platinum4 Platinum5

$4,763

$4,324

$175

AdditionalValueofLab
andXRay,applied
againstdeductible(d)

Platinum3

$4,751

firstdollarbenefits,up

to$500

Platinum2

Page17

0.20%

0.22%

3.OneDeductiblePlans
Affectedplans:1DedBronze2,1DedSilver4,1DedGold4

TheOneDeductibleproductdesignconsistsofasinglefamilydeductibleforallmembersofthe
family.ThescopeofthisproductdesignisoutsidethoseallowedbytheHHSAVC.

AcontinuancetablewasselectedthatreplicatedresultsoftheBronzelevelActuarialValues
fromtheHHSAVC,usinganintegrateddeductible.ActuarialValuescalculatedwiththisselected
tablecomparedfavorablywiththeAVscalculatedintheHHSAVC.

ThisBronzelikecontinuancetablewasconjugatedwithitselftorepresenttheexpectedclaims
of2,3,4,5,6,or7membersunderaunifiedfamilydeductible.

ExpectedmemberlevelAVsarethendevelopedfromaninputtedplandesign,foreachof
sevendifferentcontinuancetables.AnaggregateplanlevelActuarialValueisdevelopedfroma
businessweightingbyfamilysize.Thefollowingtableshowsthecalculationoftheaggregate.

ActuarialMemorandumMissouriFormJGM14.POL.MO

Numberof
Members
1
2
3
4
5
6
7

MixofBusiness
73%
10%
6%
6%
2%
2%
1%

AggregateActuarialValue:

Page18

1DedBronze2
59.9%
50.1%
54.1%
57.9%
61.4%
64.6%
67.4%

1DedSilver4
68.3%
62.4%
66.9%
70.4%
73.2%
75.4%
77.1%

1DedGold4
78.6%
73.7%
79.1%
83.1%
86.1%
88.3%
89.9%

58.6%

68.1%

78.9%

TheplanportfolioforAssurantHealthisincludedinAppendixC.ScreenshotsoftheAVcalculationscan
befoundinAppendixD.

18. AVPricingValues

TheAVpricingvaluesincludetheAVs,calculatedasdescribedabove,inadditiontoan
adjustmentforutilizationdifferencesweexpectduetoplancostsharingdesign.Whilewe
understandthedifficultyindifferentiatingincreasedutilizationfromanincreasedriskprofile,
wedofeelitisappropriatetoadjustlowermembercostsharingplansforincreasedutilization.
IntheActuarialValueCalculatorMethodologydocumentreleasedbyHHS,HHSstatesthat
spendingisaffectedbyplandesignthroughinduceddemand,andtheyinturnhaveexplicitly
differentiatedandestimatedtheimpactofinducedutilizationbymetallevel.Aninternalstudy
hasconfirmedthatinducedutilizationisrelevantandsuggeststhattheHHSdefinedinduced
utilizationfactorsmaybeconservative.

Sincewedonthaveenoughcredibilitytodetermineseparateinducedutilizationfactorsfor
eachmetallevel,weareapplyingtheprescribedHHSinducedutilizationfactorsusedintheHHS
riskscoretoourplans.

Theothervaluesusedindeterminingtheplanadjustedindexrateareexplainedinthe
applicablesectionabove.Pleaseseetheattachedrateexhibitsfortheportionofthevaluethat
isduetotheallowedplanmodifiers.

19. MembershipProjections

PleaseseeAppendixEforprojectedexperiencein2015.Ourprojectionof2015membermonths
wasdevelopedbycombiningthefollowingpiecesofinformation:

2014openenrollmentsalesandexpected2015openenrollmentsales
PoliciesthathaverolledtoanACAcompliantplanthrough4/1/2014
PoliciesthatweexpecttorolltoanACAcompliantplanthroughtheendof2015,
includingthosethatmaykeeptheircurrentNonACAcomplaintplanin2014androllto
anACAcompliantplanin2015

ActuarialMemorandumMissouriFormJGM14.POL.MO

Page19

Wemodeledthemembershiponamonthlybasisthroughtheendof2015usingourmonthly
lapseratesbymetallevelandexpectedrolldateforeverypolicywithinthestatethatisnotyet
onanACAcompliantplan.Theexpectedmembercountduring2015foreachmonthisthen
addeduptoarriveatthetotalmembermonthsexpectedin2015.Anydifferencesbetweenthe
currentdistributionofprojectedmembermonthsandcurrentmetallicmembershipdistribution
wouldbeattributedtoanymetallicrollsduringtheyear.

20. TerminatedProducts

NonGrandfatheredpoliciesunderformsTGM.TRT.MOandJGM.TRT.MOwillbediscontinued.
Theseproductsareincludedintheexperienceperioddata.

Inthisstate,policyholdershavetheoptiontocontinuetheirplanunderthePresident's
transitionalmemorandum.Theseproductsareincludedintheexperienceperioddata.

21. PlanType

All2015SmallGroupMedicalPlanswillbePPOplans.

22. WarningAlerts

Adescriptionofthewarningalertsfromtheunifiedratereviewtemplateisbelow:

1. Awarningappearsbecausehistoricalrateincreaseswerenotenteredforourterminated
products.Theinstructionsfortheunifiedratereviewtemplatespecificallystatethatthese
arenotrequired.

19. EffectiveRateReviewInformation

None.

21. Reliance

IndevelopingthisratefilingIrelieduponinformationprovidedbyotherswithinmydepartment,
aswellasoninformationprovidedbyotherdepartmentswithintheorganization.Ihave
reviewedthisinformationforreasonableness,andIconsiderittobereliable.

22. ActuarialCertification

IamamemberoftheAmericanAcademyofActuaries.Tothebestofmyknowledgeand
judgment,

1. Thisratefilingisincompliancewiththeapplicablelawsandregulationsconcerning
premiumratedevelopmentinthisstateandthebenefitsarereasonableinrelationshipto
premiums.

ActuarialMemorandumMissouriFormJGM14.POL.MO

Page20

2. Theprojectedindexrateis:
a. IncompliancewithallapplicableStateandFederalStatutesandRegulations.
b. DevelopedincompliancewiththeActuarialStandardsofPractice.
c. Reasonableinrelationtothebenefitsprovidedandthepopulationanticipatedtobe
covered.
d. Neitherexcessivenordeficient.
3. Theindexrateandonlytheallowablemodifiersasdescribedin45CFR156.80(d)(1)and45
CFR156.80(d)(2)wereusedtogenerateplanlevelrates.
4. Thepercentoftotalpremiumthatrepresentsessentialhealthbenefitsincludedin
Worksheet2,SectionsIIIandIVwerecalculatedinaccordancewithactuarialstandardsof
practice.Tothebestofmyknowledge,thepercentoftotalpremiumthatrepresentsEHBs
is100%.
5. TheHHSAVCalculatorwasusedtodeterminetheAVMetalValuesforallplansshownin
Worksheet2ofthePartIUnifiedRateReviewTemplateexceptforthosedocumentedin
thismemorandum.TheAVvaluesforthosedocumentedinthememorandumwere
developedbasedononeoftheacceptablealternativemethodsandareinaccordancewith
generallyacceptedactuarialprinciplesandmethodologies.

______________
BrentWiskirchen,FSA,MAAA
AssociateActuaryReformPricing
9/2014