28 CA ADC § 1300.77.2
28 CCR s 1300.77.2
Cal. Admin. Code tit. 28, s 1300.77.2
CALIFORNIA CODE OF REGULATIONS
TITLE 28. MANAGED HEALTH CARE
DIVISION 1. THE DEPARTMENT OF MANAGED HEALTH CARE
CHAPTER 2. HEALTH CARE SERVICE PLANS
ARTICLE 9. FINANCIAL RESPONSIBILITY
RISK-BEARING ORGANIZATIONS
This database is current through 06/09/06, Register 2006, No. 23.
s 1300.77.2. Calculation of Estimated Liability for Reimbursements.
(a) Each plan subject to subdivision (b) of Section 1377 shall calculate
the estimate of incurred and unreported claims pursuant to a method held
unobjectionable by the Director. Such method may include a lag study as
defined and illustrated in subsection (c), an actuarial estimate as
defined in subsection (d), or other reasonable method of estimating
incurred and unreported claims. The amount required by Section 1300.77.1
to be accrued in the plan's books and records must equal the estimated
total of all claims incurred but not yet received as of the end of the
month as calculated in working papers, schedules or reports prepared in
support of the unobjectionable lag study, actuarial estimate, or other
method of estimating incurred and unreported claims.
(b) Working papers which support the incurred and unreported claims
calculation shall be maintained as part of the records of the plan. Lag
study working papers shall include a detailed allocation of all claims
received each month to the various months in which the services were
performed. Actuarial estimate working papers must detail all underlying
assumptions and calculations in establishing the actuarial rate. Any other
method used to determine the amount of incurred and unreported claims must
be supported by adequate working papers, schedules or reports which detail
all aspects of the incurred and unreported calculation.
(c) A "lag study" is a schedule which analyzes historical claims
information on an ongoing basis to determine the length of time lag
between the date of service and the date a claim is submitted to the plan
for payment. Such a study distributes all claims received each month in
which the services were performed. An example of a lag study containing
the minimum information necessary to be held unobjectionable by the
Director is as follows:
ABC HEALTH PLAN OF CALIFORNIA SCHEDULE TO CALCULATE HISTORIC PERCENTAGE OF
INCURRED BUT UNREPORTED CLAIMS FOR PRIOR MONTHLY PERIODS WHICH HAVE BEEN
FULLY
OR SUBSTANTIALLY REPORTED JULY 31, 19X2
MONTH CLAIM RECEIVED
Totals
for
Same Months
of
Month 2nd 3rd 4th 5th 6th 7th
Service
Month of Service:
Oct. 19X1 $150 $500 $200 $100 $50 $1,000
Nov. 19X1 220 500 240 110 30 1,110
Dec. 19X1 150 600 300 100 75 $25 1,250
Jan. 19X2 210 750 375 105 60 1,500
Feb. 19X2 230 670 290 85 100 75 1,450
-----------------------------------------------------------
Totals $3,020 $1,405 $500 $315 $100 $6,300
-----------------------------------------------------------
Percentages:
Monthly 15% 48% 22% 8% 5% 2%
Cumulative 15% 63% 85% 93% 98% 100%
Explanatory notes:
1. The above represents the first schedule that is prepared to determine
the incurred and unreported claims for any month following February.
2. The schedule allocates claims as they are received to the month in
which the service was performed. For example, in October, the plan
received $150 of claims which had service dates in October (same month).
Because this schedule begins in October, the $150 amount would be the only
entry which the plan would be able to make in October. In November, the
plan received $220 in claims which had service dates in November (same
month), and $500 of claims which had service dates in October (second
month). In December, the plan received $150 of claims which had service
dates in December (same month), $500 of claims which had service dates in
November (second month), and $200 in claims which had service dates in
October (third month).
3. The schedule indicates that $6,300 in claims were received which had
service dates of October through February. Of this amount, $960 was
received during the month of service (same month), $3,020 in the following
(second) month, $1,405 in the third month, $500 in the fourth month, etc.
By converting these amounts to percentages of the total claims, the
schedule indicates that on the average, 15% ($960 P $6,300 =) of all
claims incurred during any month are received in the same month, 48% are
received in the following (second) month, for a cumulative total of 63%
(15% + 48% =) of all claims incurring during any month being received in
the same and second months. By employing these cumulative percentages, the
amount incurred but unreported claims can be estimated as of July 31,
after the claims information for the current but incomplete monthly
periods is analyzed, as illustrated in the following schedule:
ABC HEALTH PLAN OF CALIFORNIA SCHEDULE TO ESTIMATE THE AMOUNT OF INCURRED
BUT
UNREPORTED CLAIMS FOR THE CURRENT BUT INCOMPLETE MONTHLY PERIODS WHICH
HAVE NOT
BEEN FULLY OR SUBSTANTIALLY REPORTED JULY 31, 19X2
MONTH CLAIM RECEIVED
Totals
for
Same
Months of
Month 2nd 3rd 4th 5th 6th 7th Service
Month of Service:
Mar., 19X2 $225 $720 $300 $120 $50
$1,415
April, 19X2 250 700 330 110
1,390
May, 19X2 240 750 350
1,340
June, 19X2 250 775
1,025
July, 19X2 270 270
---------
Total Claims received $5,440
---------
for period March 1
through July 31
COMPUTATION OF INCURRED BUT UNREPORTED CLAIMS AS OF JULY 31
(A) (B) (C) (D) (E)
Claims received as
of July 31 as a
Total claims cumulative Total
Incurred
Month received for each percentages claims to But
unre-
of month of service of total claims be received
ported
Service as of July 31 to be received (B-C) (D-B
)
July $270 (i) 15% $1,800
$1,530
June 1,025 (ii) 63% 1,625 600
May 1,340 (iii) 85% 1,575 235
April 390 (iv) 93% 1,495 105
March 1,415 (v) 98% 1,440 25
February 1,450 (vi) 100% 1,450 0
---------
Total incurred
---------
but unreported
claims as of
July 31
Explanatory notes:
(i) Represents July claims received in July.
(ii) Represents June claims received in June and July.
(iii) Represents May claims received in May, June and July.
(iv)Represents April claims received in April, May, June and July.
(v) Represents March claims received in March, April, May, June and July.
(vi) Represents February claims received in February, March, April, May,
June and July.
(d) An "actuarial estimate" is a calculation of incurred and unreported
claims which is based on adequate and reasonable assumptions with respect
to risk factors and trends which have been found to be applicable to the
plan, such as utilization patterns of the plan's enrollees, the average
benefit which will be payable, the enrollment mix in terms of age and sex
of enrollees and geographic location, actual plan contract experience, and
any other factors reasonably believed to affect the amount of incurred and
unreported claims. Actuarial estimates must be supported by an actuarial
certification, consisting of a signed declaration of any actuary who is a
member in good standing of the American Academy of Actuaries in which such
actuary states that the assumptions used in calculating the incurred and
unreported claims are appropriate and reasonable. If the plan employs an
actuarial study to estimate the amount of the incurred and un-reported
claims, it must compare the actual claims amounts to those estimated, and
make adjustments at least quarterly whenever a 5% difference from actual
experience is noted.
(e) A plan may employ any other unobjectionable alternative method of
estimating the amount of incurred and unreported claims other than the
"lag study" or "actuarial estimate," so long as such alternative method
accurately estimates incurred and unreported claims. For example, a plan
may receive daily reports of actual hospital admissions and referrals,
thereby permitting the plan to compare these reports to the actual
invoices and calculate the estimated amount due hospitals for the
enrollees whose claims had not been received by the plan at that time.
Note: Authority cited: Section 1344, Health and Safety Code. Reference:
Sections 1375.1, 1376 and 1377, Health and Safety Code.
HISTORY
1. New section filed 3-3-83; effective thirtieth day thereafter (Register
83,
No. 10).
2. Change without regulatory effect amending subsections (a) and (c) filed
7-
18-2000 pursuant to section 100, title 1, California Code of Regulations
(Register 2000, No. 29).
28 CA ADC s 1300.77.2
END OF DOCUMENT
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